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V1773-18 19 June 2018 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · condena en costas

Legal costs award constitutes a capital gain to be included in the general tax base

The taxpayer inquired about the taxation of legal costs recovered after winning a lawsuit against a bank. The DGT ruled that this amount is compensatory in nature and constitutes a capital gain.

The question raised

Taxation of the taxpayer under Personal Income Tax.

The DGT's ruling

The award of legal costs is compensation for the attorney and solicitor fees incurred by the prevailing party. Having a restorative nature, it involves the incorporation of a credit or money that constitutes a capital gain pursuant to Article 33.1 of the Personal Income Tax Law. As this gain does not derive from a transfer, it is quantified by the compensatory amount without deduction of expenses. Finally, it must be included in the general tax base in accordance with Article 48 of the Personal Income Tax Law.

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