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V2313-20 7 July 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · pérdida patrimonial

Refund of undue income via civil liability compensation does not constitute a capital loss

A taxpayer has inquired whether civil liability compensation awarded in a court ruling, which offsets the refund of unduly received income, constitutes a capital loss. The DGT has ruled that it is not a capital loss because the compensation serves to offset the refund of the amount misappropriated.

The question raised

Having included in their Personal Income Tax returns as employment income the amounts received at the time which correspond to the civil liability compensation set in the judgment, the taxpayer inquires about the possible existence of a capital loss.

The DGT's ruling

Civil liability compensation does not constitute a capital loss, as it originates from the refund of illegal perceptions due to misappropriation. To recover the tax impact of having included those amounts as employment income, the taxpayer must rectify the tax returns in which said income was included, pursuant to Article 120.3 of the General Tax Law.

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