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A civil servant requested the tax treatment of court-ordered compensation following the denial of an extension for reduced working hours leave. The Directorate General for Taxes (DGT) has determined that such an amount constitutes employment income and must be attributed to the period in which the judgment becomes final.
This ruling clarifies that compensation for loss of earnings or financial damage resulting from employment-related legal disputes is classified as employment income for tax purposes, rather than capital gains or other categories, and establishes the timing for tax liability based on the finality of the court ruling.
The tax team reviews your specific situation.
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