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V1750-24 16 July 2024 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos de actividades económicas

Compensation for cost overruns is taxed as business income, while interest is taxed as general income

A taxpayer inquired about the taxation of compensation for truck cost overruns and its associated interest following a court ruling. The DGT has determined that the cost overrun compensation constitutes business income, whereas the interest is classified as capital gains that form part of the general tax base.

The question raised

"Knowing how to tax the money I will receive from both the cost overrun and the interest."

The DGT's ruling

Compensation for the cost overrun of vehicles used for an economic activity is taxed as income from economic activities, even if the activity is no longer carried out. This income is attributed to the period of accrual, when the judicial resolution becomes final, through direct estimation. Compensatory interest for late payment is classified as capital gains and, following the doctrine of the Supreme Court, must be included in the general taxable base.

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