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V0013-22 4 January 2022 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · ganancia patrimonial

Refund of advance payments is not a capital gain, while compensatory interest is taxed as such

A taxpayer inquired about the tax treatment of a refund received following a court ruling after a developer failed to complete a property construction. The Directorate General for Taxes (DGT) clarified that the refund of the principal does not constitute a capital gain, but compensatory interest and the award of legal costs may have tax implications.

The question raised

Taxation under Personal Income Tax (IRPF).

The DGT's ruling

The refund of amounts paid to the developer does not constitute a change in net worth if the amounts coincide. The interest from the judgment, being compensatory in nature, is taxed as a capital gain integrated into the savings tax base. Regarding legal costs, the prevailing party may deduct the expenses incurred from the amount received, such that if the compensation equals the expenses, there is no capital gain.

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