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V1309-17 29 May 2017 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · condena en costas

Court costs received following a judgment against the Administration are taxed as capital gains

A taxpayer has enquired about the taxation of procedural costs owed by the Administration following a court ruling. The DGT has ruled that this amount constitutes a capital gain due to its restorative nature.

The question raised

Taxation of the amount corresponding to said legal costs in Personal Income Tax (IRPF).

The DGT's ruling

The award of legal costs generates a credit in favor of the prevailing party that functions as compensation. Given its restorative nature regarding defense expenses, the amount received constitutes a capital gain pursuant to Article 33.1 of the Personal Income Tax Law (LIRPF). As it does not derive from a transfer of assets, its amount is the compensatory sum and must be included in the general taxable base.

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