The Supreme Court establishes that the arrears of a disability pension must be taxed in personal income tax in the year in which the sentence becomes final, even though the recognition of the benefit has retroactive effects from previous years. In the ruling, the High Court agrees with the Treasury and makes it clear that, when the right to receive that pension was pending a judicial resolution, these amounts are not distributed among the years to which they correspond, but must be attributed to the year in which the judicial resolution is final.
The ruling STS 636/2026 studies the case of a worker from whom Social Security had withdrawn in 2013 an absolute permanent disability that she had been collecting. After going to court, the TSJ of the Valencian Community recognized him in 2018 as having total permanent incapacity for his usual profession, with effect from August 1, 2013. From then on, the INSS paid the arrears and internally distributed the contributions by financial year, but the Treasury understood that, for personal income tax purposes, they had to be declared in 2018, which was the year in which the sentence became final.
The Supreme Court recalls that article 14 of Law 35/2006 functions as a temporary window that establishes in which year each income must enter. The general rule, contained in article 14.1.a), states that work income is attributed to the period in which it is payable by the recipient. Now, the rule itself recognizes an exception, and that is that when an income has not been collected because the determination of the right to receive it or its amount was pending a judicial resolution, article 14.2.a) specifies that these amounts are attributed to the year in which the resolution becomes final.
That is precisely what happens here, since although it may seem strange, in these cases the debate does not only revolve around how much is collected, but also about whether or not the right to a pension existed. And without this prior recognition of the disability, the real possibility of demanding payment does not arise.
Why the Supreme Court does not allow the pension to be distributed over several years
The appellant argued that the amounts should be distributed among the years to which they corresponded, since the ruling had established retroactive effects from 2013. The High Court, however, determined that the retroactive effect of recognition cannot be confused with the tax liability of the income. In a judicially recognized disability pension, the credit remains litigated until the judgment is final, so that the perception of these arrears is connected to article 14.2.a) LIRPF.
The Chamber also differentiates this assumption from that analyzed in other retirement cases. In these situations, the right may exist from the moment the legal age is reached and the administrative act is limited to declaring it. The same does not happen here. In permanent disability, the recognition of the disabling situation is the essential requirement for the pension to arise. In plain language, without a final ruling there was still no demandable rent.
The Supreme Court implicitly admits that declaring accumulated arrears in a single year can increase the tax bill due to the progressivity of the tax. Even so, he emphasizes that the solution is not to distribute them between previous years, but to apply, when appropriate, the 30 percent reduction of article 18.2 LIRPF if the generation period exceeds two years. In fact, the ruling itself states that in this case this reduction had already been applied to the amounts corresponding to 2013, 2014 and 2015.