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V1208-18 10 May 2018 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · renta exenta

Personal injury compensation is exempt, but late payment interest is subject to capital gains tax

A road accident victim asks whether both the compensation and the interest for delayed payment are exempt from Personal Income Tax (IRPF). The DGT rules that while the compensation is exempt income, the interest is not and must be taxed.

The question raised

Taxation under Personal Income Tax of the compensation and the interest.

The DGT's ruling

Compensation for personal injury arising from civil liability is exempt income pursuant to Article 7.d) of the Personal Income Tax Law. Interest for late payment by the insurer is compensatory in nature due to the delay in payment and is therefore not exempt. This interest must be taxed as a capital gain and shall be included in the savings tax base.

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