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V0836-19 23 April 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización

Compensations for civil liability agreed via settlement without judicial intervention are not exempt

Consultants inquired whether compensation received following their father's death in a work accident is exempt from Personal Income Tax (IRPF). The Directorate General for Taxes (DGT) ruled that the exemption does not apply because the amount was neither judicially determined nor calculated using the traffic accident valuation system.

The question raised

Taxation in Personal Income Tax (IRPF) of compensation received, where the amounts have been determined by applying the criteria of the recast text of the Law on Civil Liability and Insurance in the Circulation of Motor Vehicles.

The DGT's ruling

For compensation for personal injury civil liability to be exempt, its amount must be legally or judicially recognized. The judicially recognized amount includes resolutions by judges or intermediate formulas with judicial intervention, such as a judicial settlement. In this case, as it is a settlement agreement without judicial intervention and does not involve a traffic accident, the requirement of a recognized amount is not met.

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