Skip to content
Back to index
V1004-16 14 March 2016 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización

Income tax exemption does not apply to compensation for financial losses from the Administration

A query was raised regarding whether compensation for state liability received from a local council following the annulment of a building permit is exempt from Personal Income Tax (IRPF). The Directorate General for Taxes (DGT) ruled that the exemption does not apply because the compensation covers financial losses rather than personal injury.

The question raised

Whether the exemption set forth in Article 7.q) of Law 35/2006 is applicable to the compensation.

The DGT's ruling

The exemption under Article 7.q) of Law 35/2006 applies only to compensation for personal damages (physical, psychological, or moral). As this is compensation for pecuniary damages to redress economic losses, the exemption is not applicable.

Book your free first meeting