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V1776-19 11 July 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · ganancias patrimoniales

Damages and compensation taxed as capital gains or exempt income depending on their nature

A taxpayer received judicial compensation for damages following a final court ruling. The DGT analyses the taxation of four distinct concepts: compensation for the settlement amount, loss of profits, moral damages, and legal costs.

The question raised

Taxation in the Personal Income Tax of the taxpayer regarding the aforementioned amounts.

The DGT's ruling

Compensation for the reduction in the settlement amount and loss of profits are capital gains; the former is included in the savings base and the latter in the general base. Moral damages are exempt if their amount is judicially determined. Legal costs received constitute a capital gain that is included in the general base.

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