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V1482-17 12 June 2017 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · condena en costas

Legal costs awards constitute a capital gain, while own professional fees are not a capital loss

The taxpayer asks whether a legal costs award received is taxable and if their own legal fees can be treated as a capital loss. The DGT rules that the award constitutes a capital gain and that personal legal defence expenses are not deductible as a loss.

The question raised

Impact of the amount corresponding to the award of legal costs on the personal taxation of the taxpayer and the possibility of considering the amount of their own lawyer's fees as a capital loss.

The DGT's ruling

The award of legal costs generates a credit in favor of the prevailing party, which constitutes a capital gain pursuant to Article 33.1 of the Personal Income Tax Law (LIRPF). This gain is included in the general taxable base as it does not derive from the transfer of assets. On the other hand, the payment of fees to one's own lawyers and court representatives does not constitute a capital loss, as it corresponds to the taxpayer's consumption.

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