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V0954-19 7 May 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización

Personal injury compensation and late payment interest are exempt from Income Tax

A taxpayer has enquired whether compensation for a road traffic accident and interest due to delayed payment are exempt from Income Tax (IRPF). The Directorate General of Taxes (DGT) has ruled that both personal injury awards and late payment interest from the insurer are exempt.

The question raised

Whether the aforementioned compensatory concepts, as well as the interest received by virtue of a judicial sentence due to the accident, are subject to IRPF or are exempt. In the event that any of the compensatory concepts or the interest are not exempt, the criteria for temporal imputation and the method of taxation under IRPF.

The DGT's ruling

Compensations for civil liability for personal injury, in the amount judicially recognized, are exempt income pursuant to Article 7.d) of the LIRPF. Likewise, following the doctrine of the TEAC, compensatory interest for delay in the payment of an exempt compensation is also covered by the exemption.

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