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V1545-22 27 June 2022 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · estimación directa

Legal costs cannot be deducted as capital losses if they are professional expenses

A professional inquired whether uncollected legal costs after one year could be deducted as a capital loss. The DGT ruled that, as these costs are linked to their economic activity, they must be taxed under the rules for income from economic activities rather than as capital losses.

The question raised

Possible existence of a capital loss for the amount of legal costs not received, considering that more than one year has elapsed since the commencement of the judicial claim for their collection.

The DGT's ruling

Legal defense expenses linked to professional activity are considered business expenses, and their deductibility depends on their correlation with income and their correct temporal allocation. As they constitute income from economic activity, the rule regarding capital losses for overdue and uncollected credits does not apply. Under the direct estimation method based on collections and payments, expenses are deducted when paid, and the reimbursement of legal costs is recognized as income when collected.

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