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V1810-20 8 June 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del trabajo

Reimbursement of legal defence costs by a local council is not subject to Income Tax for public officials under certain conditions

A public official has enquired whether the reimbursement of solicitor and procurator fees, paid by their local council following a dismissed criminal proceeding, should be treated as taxable income for Income Tax purposes. The Directorate General for Taxes (DGT) has ruled that, provided certain legal requirements are met, there is no personal gain or benefit for the official, and therefore no tax implications arise.

The question raised

Consideration of said reimbursement as income for the taxpayer.

The DGT's ruling

The payment of legal defense expenses assumed by the City Council for a public official is not considered earned income, provided that three requirements are met: that the imputation derives from the performance of their duties; that there has been no abuse, excess, or private interests; and that the non-existence of criminal liability is declared due to objective causes (non-existence of the act, lack of participation, or lawful nature). As there is no private benefit, the taxable event for Personal Income Tax (IRPF) does not occur.

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