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V2602-23 27 September 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · ganancia patrimonial

No capital gains tax applies if insurance compensation matches the cost of home repairs

A taxpayer inquired about the tax treatment of insurance compensation received for damage to their home and whether it could be used for repairs. The DGT ruled that no capital gain arises if the cost of the repairs is equal to the compensation received.

The question raised

Taxation of the compensation received in the event that the taxpayer opts not to use it for the repair of the dwelling, the timeframe for allocating it to the repair, and the possibility of rectifying the tax return in which, if applicable, the compensation received was reflected if it is finally decided to allocate it to the repair of the dwelling.

The DGT's ruling

Compensation for losses in assets generates a capital gain or loss based on the difference between the amount received and the proportional part of the acquisition value of the damaged asset. No gain is calculated if the compensation coincides with the cost of the repair. Legal or architectural fees do not reduce the gain nor are they considered a capital loss. The regulations do not establish a time limit for carrying out the works, although it is recommended to do so within the same tax period.

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