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A taxpayer has enquired whether compensation received for a defective prosthesis following an out-of-court settlement is exempt from Personal Income Tax (IRPF). The Directorate General for Taxes (DGT) has ruled that to qualify for the exemption, the amount must be judicially recognised, which includes settlements subject to judicial intervention.
This ruling clarifies that out-of-court settlements must be formalised through judicial channels to qualify for tax exemptions on personal injury compensation.
The tax team reviews your specific situation.
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