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V1721-18 18 June 2018 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización

Compensation for professional negligence by a lawyer is taxed as a capital gain

A query was raised regarding whether compensation paid by a lawyer's insurance following professional negligence, intended to cover unpaid unfair dismissal compensation, is exempt from tax. The DGT ruled that it is not exempt, as it compensates for financial loss rather than personal injury or the dismissal itself.

The question raised

Question posed: Possible consideration as exempt income of the amount corresponding to the compensation for unfair dismissal not received, whether obtained through an out-of-court settlement or by judgment.

The DGT's ruling

Compensation for contractual civil liability arising from a lawyer's negligence does not constitute exempt income for personal injury or dismissal. As it constitutes an economic loss, it must be classified as a capital gain included in the general tax base. Its quantification shall be the amount determined by the agreement or the judgment.

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