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V0288-22 ·15 February 2022 ·consulta-vinculante Medium impact
Tax

Payment of legal costs does not allow VAT deduction or receiving an invoice in the name of the losing party

A company enquired whether, when ordered to pay legal costs, it could deduct VAT from the opposing party's solicitor and court agent fees and whether it should receive an invoice. The DGT ruled that the payment constitutes compensation without VAT and that the deductibility of the expense for Corporate Tax purposes depends on its documentary justification.

In 6 key points

How it affects those involved

This ruling clarifies that legal costs awarded to the winning party are treated as non-taxable compensation, meaning no VAT can be reclaimed on these payments, and highlights the importance of proper documentation for corporate tax deductions.

Lifecycle

2022-02-15PublishedPublished in the BOE
Official text Based on BOE data (boe.es). Information, not advice.

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This analysis is informational only and does not constitute legal advice or create a client-adviser relationship. BM Consulting.
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