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V3077-23 24 November 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · intereses indemnizatorios

Legal fees cannot be deducted from compensatory interest payments

A taxpayer inquired whether they could deduct legal expenses from interest received following a settlement with a bank. The Directorate General of Taxes (DGT) ruled that these interests constitute capital gains and do not allow for a reduction in their amount through such expenses.

The question raised

Deductibility of legal expenses from the interest to be declared in Personal Income Tax (IRPF).

The DGT's ruling

Compensatory interest for breach of an obligation does not constitute income from movable capital, but rather capital gains. As it does not constitute a transfer, the quantification of the gain is the amount of the interest received. Therefore, pursuant to Article 34.1.b) of Law 35/2006, legal fees cannot be deducted from said amount.

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