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V2127-20 ·25 June 2020 ·consulta-vinculante Medium impact
Tax

Compensation for construction defects treated as capital gains if exceeding repair costs

A homeowners' association has requested clarification on how to tax compensation received following litigation over construction defects and whether legal fees can be deducted. The Directorate General of Taxes (DGT) ruled that the compensation constitutes a capital gain if it exceeds the cost of repairs, and that procedural expenses cannot be deducted.

In 6 key points

How it affects those involved

This ruling clarifies the tax treatment of compensation for property defects, establishing that any amount exceeding the actual repair costs must be declared as a capital gain, while also confirming that legal costs are not deductible from such compensation.

Lifecycle

2020-06-25PublishedPublished 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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