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V1584-22 30 June 2022 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización

Accident insurance compensation for permanent disability is tax-exempt up to the scale limit

An employee inquired whether compensation received for total permanent disability resulting from an occupational disease is exempt from Personal Income Tax (IRPF). The Directorate-General for Taxes (DGT) ruled that the exemption applies up to the amount determined by the damage assessment system set out in the Law on Civil Liability and Insurance in the Circulation of Motor Vehicles.

The question raised

Taxation of the compensation under Personal Income Tax (IRPF).

The DGT's ruling

Compensation for personal injury arising from an accident insurance contract is exempt from Personal Income Tax (IRPF). However, the exemption only applies up to the amount resulting from the application of the damage assessment system set forth in the Law on Civil Liability and Insurance in the Circulation of Motor Vehicles. In this case, as it is a collective accident insurance, the amount shall be exempt up to said limit.

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