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V1336-19 10 June 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del trabajo

Legal defence costs covered by local councils are not subject to Personal Income Tax for public employees

A municipal architect enquired whether the reimbursement of legal fees and the payment of court representatives by their local council should be subject to Personal Income Tax (IRPF). The Directorate General for Taxes (DGT) ruled that there is no tax implication because the worker derives no specific benefit or profit from these payments.

The question raised

Treatment in Personal Income Tax (IRPF) of legal fees and costs assumed by the city council.

The DGT's ruling

The assumption of legal defense expenses by the Administration, in compliance with the Basic Statute of Public Employees, does not constitute income for Personal Income Tax (IRPF) purposes. As there is no particular utility or benefit for the employee, the taxable event of the tax does not occur. Therefore, they are not considered earnings from employment or benefits in kind.

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