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V2634-24 20 December 2024 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · condena en costas

Legal costs awarded against a taxpayer are considered capital losses for Personal Income Tax purposes

A query was raised regarding whether the payment of legal costs following judicial proceedings can be treated as a capital loss. The Directorate General of Taxes (DGT) has ruled that such awards constitute a capital loss for the party required to pay them.

The question raised

Possible consideration as capital losses in Personal Income Tax (IRPF).

The DGT's ruling

The award of legal costs is not a payment of fees to professionals, but rather compensation to the prevailing party. For the convicted taxpayer, this payment has the tax implications of a capital loss. As it does not derive from a transfer of assets, these losses are integrated into the general tax base as general income.

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