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V2908-21 ·18 November 2021 ·consulta-vinculante Medium impact
Tax

No capital gains tax applies if material damage compensation is used entirely for repairs

A taxpayer inquired whether compensation for damage to their property is subject to Personal Income Tax (IRPF) and if legal and expert fees can be deducted as capital losses. The Directorate General for Taxes (DGT) ruled that no gain occurs if the amount matches the repair costs, and that legal defence expenses are not deductible.

In 6 key points

How it affects those involved

This ruling clarifies that compensation intended for property restoration does not constitute a taxable capital gain, provided the funds are used for that specific purpose, while also confirming the non-deductibility of legal costs.

Lifecycle

2021-11-18PublishedPublished 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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