A relief intervention from the Ombudsman requesting that retroactive payments from salaries and pensions paid through court decisions be taxed per year rather than in total, to achieve fairer distribution of tax burdens. This initiative was prompted by the case of a ministry employee who received retroactive payments following a court decision and requested a unified income certificate for the total amount. The service responded that the settlement was made according to the court decision, which did not provide for separation by year.
The Ombudsman, however, reminded that both the Income Tax Code and IAPR guidelines explicitly provide that retroactive payments must be allocated to the years they concern, to avoid distortions and unfair burden on taxpayers. Although the Authority recognized the practical difficulties that may exist in the process, it emphasized that taxing the total amount in a single year leads to tax injustice. Following the intervention, the financial service finally proceeded to allocate the amounts and proposed that court decisions should detail amounts by year to avoid similar future problems.
This move is considered significant as it establishes fairness in the taxation of retroactive payments, while simultaneously providing substantial relief to thousands of citizens involved in court decisions.
Retroactive payments and amended tax returns
It is reminded that taxpayers are required to declare any retroactive income by December 31 of each year to avoid related penalties. Those who, for example, received retroactive payments in 2024 from pensions, salaries, agricultural subsidies and court decisions, must submit amended returns by the end of 2025.
The tax resulting from amended returns will be certified with a new clearance and must be paid in full by January 31, 2026. Retirees, however, have the option – after applying to IAPR – to settle the income tax resulting from retroactive amounts in up to 48 interest-bearing monthly installments, within the framework of the permanent settlement.
Tax calculation will be based on the tax scales and solidarity contributions that were in effect in the years to which the amounts relate, after first deducting any income taxes withheld at a 20% rate upon payment. Retroactive payment declarations are submitted electronically through the IAPR platform, with amended returns for each year they concern. For example, retroactive payments made in 2024 but relating to 2022 will be declared with an amended return for tax year 2023.
Retroactive payment amounts appear pre-filled in the corresponding codes, without editing capability by the taxpayer. If someone wishes to modify other elements of their tax return, they must submit a separate amended declaration.
