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V0850-24 23 April 2024 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención

Personal injury compensation is not exempt from Income Tax if liability procedures are not followed

A resident in Spain inquired whether compensation received from the Scottish Government for abuse suffered at a school is exempt from Income Tax (IRPF) or if it can be treated as irregular income. The Directorate General for Taxes (DGT) ruled that it is not exempt as it fails to meet procedural requirements, and no reduction applies because it is classified as a capital gain.

The question raised

Whether the exemption regulated in letter q) of Article 7 of the Personal Income Tax Law applies to the compensation received for personal injuries suffered, or whether a reduction is applicable due to its classification as irregular income.

The DGT's ruling

The compensation is not exempt under Article 7.q) of the Personal Income Tax Law because it was not established through the required civil liability procedures. Analogy cannot be applied to extend the exemption. Furthermore, the reduction for irregular income is not applicable because the compensation constitutes a capital gain and not income from activities.

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