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V0866-21 13 April 2021 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización

Compensation for professional liability is taxed as a capital gain for Income Tax purposes

A taxpayer received compensation from an insurer to offset a tax penalty resulting from poor professional advice. The Directorate General for Taxes (DGT) has determined that this amount must be taxed as a capital gain.

The question raised

Question raised: Taxation in the Personal Income Tax (IRPF) of the aforementioned compensation.

The DGT's ruling

The compensation is not exempt because it does not correspond to personal injury, but rather to an economic or patrimonial loss. Furthermore, the reduction for loss of assets does not apply, as the compensation offsets a payment obligation and not damage to an asset. Therefore, it is classified as a capital gain due to the incorporation of money into the estate, calculated based on the full amount of the compensation.

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