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V1906-17 18 July 2017 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización por daños morales

Judicially recognized compensation for non-pecuniary damages is exempt from Personal Income Tax (IRPF) withholding

A company inquires whether it must apply IRPF withholding when paying compensation for non-pecuniary damages to an employee following a judicial ruling. The DGT responds that, as it is exempt income, there is no obligation to perform withholding.

The question raised

Issue raised: Subjecting the aforementioned compensation to withholding.

The DGT's ruling

Compensation for civil liability regarding personal damages, in the amount judicially recognized, is exempt pursuant to Article 7.d) of the LIRPF. As it constitutes exempt income, there is no obligation to perform withholding or payment on account in accordance with Article 75.3 of the IRPF Regulations.

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