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V0451-24 19 March 2024 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización

Compensation for professional negligence by a lawyer is taxed as a capital gain for Income Tax purposes

A taxpayer inquired whether compensation received from a law firm for negligence in managing a road traffic accident claim is exempt. The Directorate General for Taxes (DGT) ruled that it does not qualify as an exemption for personal injury, but rather as a capital gain.

The question raised

Taxation of the compensation under Personal Income Tax.

The DGT's ruling

Compensation for professional negligence is not an exempt income for civil liability for personal injury, as it repairs economic loss and not physical, psychological, or moral damage. It must be classified as a capital gain pursuant to Article 33.1 of the Personal Income Tax Law. Its quantification is the amount of the compensation and it must be included in the general taxable base.

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