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V0158-19 25 January 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · ganancias y pérdidas patrimoniales

Insurance compensation for total vehicle loss does not constitute a capital gain for Income Tax purposes

A taxpayer inquired whether a €4,176.56 compensation payment received following the total loss of their vehicle should be subject to Income Tax (IRPF). The Directorate General for Taxes (DGT) ruled that there is no change in the value of the taxpayer's assets because the compensation serves to offset the loss suffered.

The question raised

Taxation of the compensation in the Personal Income Tax (IRPF).

The DGT's ruling

The compensation for the loss of an asset is computed as a capital gain or loss based on the difference between the amount received and the proportional part of the acquisition value. In this case, the compensation has a compensatory nature that balances the asset situation, substituting the value of the damages suffered. As this equivalence occurs, no variation in the value of the taxpayer's assets is generated.

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