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V0262-18 7 February 2018 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · condena en costas

Recovery of legal costs is not subject to Income Tax if the claimant receives free legal aid

A claimant receiving free legal aid was paid the legal costs by the losing party to pass them on to their court-appointed lawyer. The DGT has ruled that this amount does not affect their personal income tax assessment.

The question raised

Impact of the collection of the award of legal costs on the taxpayer's Personal Income Tax (IRPF).

The DGT's ruling

Although the award of legal costs usually constitutes a capital gain for the prevailing party due to its restorative nature, in this case there is no tax implication. As a beneficiary of free legal aid, the defense costs are not borne by the taxpayer, but by the Public Administrations. Therefore, the amount received and transferred to the lawyer does not generate a tax liability for the interested party.

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