The Supreme Court establishes that a cashier whose permanent disability pension was withdrawn by Social Security and had to litigate for five years to recover it must pay all arrears to the Tax Agency in a single year, the year in which the sentence became final. The worker, diagnosed with breast cancer and with a pension equivalent to 55% of a regulatory base of 1,022.04 euros, paid 5,436 euros more in her income tax return to the Treasury for the accumulation of five years of pension in a single fiscal year.
According to the ruling STS 636/2026, it all began in June 2012. Social Security recognized the worker, a supermarket cashier, with absolute permanent disability due to the recent diagnosis of cancer in the left breast. A little more than a year later, in July 2013, Social Security reviewed her situation ex officio and declared her not affected by disability after seeing an improvement. He stopped collecting the pension in August 2013.
The cashier appealed. After going through the Social Court and the Superior Court of Justice of the Valencian Community, in May 2018 the courts recognized him as totally permanently incapacitated for his usual profession, with retroactive effects from August 1, 2013. The sentence became final that same year and Social Security paid him the accumulated arrears of the five previous years.
The problem came when the Tax Agency forced the worker to declare all those arrears in the personal income tax for 2018, the year in which the judge recognized the pension. Since personal income tax is a progressive tax, concentrating five years of collections in a single year placed the cashier in a much higher bracket than what would have corresponded to her if she had declared year by year. He appealed against this criterion and requested the return of 5,830 euros plus interest, which included the 5,436 euros extra taxed, without success in any instance.
Why the Supreme Court treats disability and retirement differently
The High Court explains that the recognition of a permanent disability has a constitutive nature, that is, that the right to collect the pension arises with the sentence, not before, even if that sentence has retroactive effects and Social Security pays arrears from a previous date. Until the judge declares the disability, the pension cannot be demanded.
The Supreme Court remembers that in the retirement pension the logic is different. The right to retire exists from the moment the worker reaches the legal age, regardless of whether the resolution comes later, and therefore the arrears can be attributed to the years in which they should have been collected. Incapacity, on the other hand, depends on an administrative body or a judge declaring it after assessing specific medical circumstances, and that is why the arrears are taxed together in the year of finality.
Now, the ruling recognizes that this rule may be unfair with a progressive tax such as personal income tax and recalls the existence of compensation. When the arrears correspond to a period of more than two years, the worker can apply a 30% reduction on the amount taxed. The Tax Agency has already applied this reduction in the case of the cashier, although it did not completely eliminate the extra cost.