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V0614-16 15 February 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · indemnización

Damages awarded by court ruling are subject to Corporation Tax

A cooperative has requested clarification on whether compensation received for construction defects in its industrial warehouse is tax-exempt. The Directorate General for Taxes (DGT) has ruled that the income must be included in the taxable base during the period in which the court ruling becomes final.

The question raised

Whether the compensation for damages received by virtue of a judicial resolution is exempt from Corporate Income Tax.

The DGT's ruling

Compensations awarded by judicial sentence shall accrue and be included in the tax base of the period in which the sentence becomes final and binding, due to the existence of legal certainty regarding the right to income. There is no exemption provided for this type of income under the regulations. If the sentence is not final because it has been appealed, the income must not be recognized; instead, a liability must be recorded for the amount collected.

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