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A company has requested clarification on whether a €70,000 compensation payment for the violation of fundamental rights is subject to tax withholding. The Directorate General for Taxes (DGT) has ruled that, as the compensation for non-pecuniary damage was judicially determined, the income is exempt.
This ruling clarifies the tax treatment of legal settlements, confirming that court-ordered compensation for moral or non-pecuniary damages does not constitute taxable income.
The tax team reviews your specific situation.
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