Woman wins fight for income tax exemption on maternity pay, but law remains unclear

This landmark verdict has come as a result of a woman who successfully sued the fiscal authorities for €3,135 she had paid in income tax, or IRPF, whilst on maternity leave, during which period she earnt a net €11,679.

This case is not new – three years ago, messages going viral online urged new mums to demand a tax refund as they should be exempt from IRPF, but the fiscal authorities issued a statement saying it was not true that women on maternity leave did not have to pay.

But some taxpayers did not think the explanation from the Treasury was sufficient and took their cases to the courts.

Until now, judges had always issued verdicts in favour of the tax office, but a woman from Madrid named Casilda – her surname has not been revealed – appealed to a higher court when she was not satisfied with the decision.

And now, the regional High Court of Justice in Madrid has upheld her appeal.

The confusion comes from a very ambiguous wording within Article 7 of the Law of Income Tax, although according to the union of tax office technicians, GESTHA, exemptions from IRPF have to be 'very tightly justified'.

“Maternity pay is, after all, a replacement for the mother's salary,” said secretary-general José María Mollinedo.

“The idea is that it allows the claimant to live a similar lifestyle to that which she enjoyed whilst working.

“And a blanket tax exemption would go against the principle of progressive taxation – as in, it would be enjoyed by top directors of multi-national companies as well as women on the lowest wages.”

The High Court said the tax office had interpreted Article 7 incorrectly, and ruled Casilda should be given a rebate.

But the tax collection agency says the verdict is 'not in line with the law text'.

The verdict is not open to appeal, meaning the tax office cannot try to counter it in the Supreme Court and overturn Casilda's rebate – but the defendants insist it has not set a legal precedent so it cannot be relied upon for future cases.

How the law actually stands as regards tax duties on women on maternity leave remains unclear, but if all those who had been claiming this appealed to a higher court after losing their initial case, the State would have to pay about €1.3m in rebates.

Although the general workers' union (UGT) urges all mums affected in the last four years – the legal time limit for tax demands or rebates – to apply for their money back, GESTHA warns about women getting their hopes up.

“It's the decision of one court in one region,” insists Mollinedo.

“Before going to the expense of legal action, taxpayers should consult a lawyer first to see how likely they are to succeed.”