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V2080-20 23 June 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · ganancias y pérdidas patrimoniales

Payment of legal costs following a court ruling constitutes a capital loss for Income Tax purposes

A taxpayer has enquired whether the payment of legal costs in judicial proceedings affects their Personal Income Tax (IRPF). The Directorate General of Taxes (DGT) has ruled that such payment represents a capital loss that must be included in the general tax base.

The question raised

Impact on Personal Income Tax of the order to pay legal costs.

The DGT's ruling

The order to pay the legal costs of the prevailing party is defined as a loss of assets, as it represents a variation in the value of the estate that does not correspond to consumption. This loss must be attributed to the tax period in which the condemnatory judgment becomes final. Its inclusion is made in the general tax base, in accordance with the limits of Article 48 of the Personal Income Tax Law.

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