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V1414-22 ·16 June 2022 ·consulta-vinculante Medium impact
Tax

Court costs awarded by judgment are capital losses, but legal defence expenses are not

A taxpayer has enquired whether being ordered to pay court costs, along with their own solicitor and procurator fees, affects their Personal Income Tax (IRPF). The Directorate General of Taxes (DGT) has ruled that court costs paid due to a judgment constitute a capital loss, whereas legal defence expenses are considered consumption expenses with no tax implications.

In 6 key points

How it affects those involved

This ruling clarifies the distinction between court-ordered costs and private legal fees for tax purposes, specifically regarding their treatment as capital losses versus non-deductible consumption expenses in Personal Income Tax.

Lifecycle

2022-06-16PublishedPublished 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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