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V1087-20 28 April 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización por responsabilidad civil

Interest for delay on an exempt indemnity is also exempt for Personal Income Tax purposes

The inquirer asks about the taxation of indemnities for personal injury, default interest, and legal costs. The DGT determines that interest on an exempt indemnity is also exempt, but interest on non-exempt concepts is taxed as capital gains.

The question raised

Question posed: Extension of the exemption of indemnity interest corresponding to exempt income to the indemnity for legal costs.

The DGT's ruling

Indemnity interest for delay in the payment of an indemnity exempt for personal injury (Art. 7.d LIRPF) is also exempt. However, interest corresponding to non-exempt concepts, such as compensation for loss of employment, is taxed as capital gains. Finally, the amount received for legal costs constitutes a capital gain due to its restorative nature regarding defense expenses.

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