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V1420-18 29 May 2018 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · ganancia patrimonial

Legal and solicitor fees for obtaining compensation do not reduce capital gains

A taxpayer inquired whether they could deduct legal and solicitor fees paid to obtain compensation for property damage. The DGT ruled that these expenses cannot be used to reduce the resulting capital gain.

The question raised

Impact on the Personal Income Tax assessment of the legal fees for lawyers and court representatives incurred to obtain the compensation.

The DGT's ruling

Compensation for pecuniary damages is classified as a capital gain, and its quantification is the amount established in the settlement agreement. Legal costs for lawyers and court representatives cannot reduce said amount as they do not constitute a transfer. Furthermore, these expenses are considered consumption income and do not count as capital losses pursuant to Article 33.1 of the Personal Income Tax Law.

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