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V3097-20 15 October 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · ganancia patrimonial

Repayment of capital and compensatory interest are taxed as capital gains for Income Tax purposes

A taxpayer has enquired about the taxation of a refund for a property that was not delivered, including statutory interest and legal costs following a court ruling. The Directorate General for Taxes (DGT) clarifies that the repayment of capital does not generate a gain, while interest and legal costs are subject to specific tax treatments.

The question raised

Taxation under Personal Income Tax (IRPF).

The DGT's ruling

The refund of amounts paid for the purchase of a dwelling does not constitute a capital gain or loss if there is identity of amounts. Legal interest for breach of contract, being compensatory in nature, is taxed as capital gains included in the savings tax base. Regarding legal costs, the prevailing party may deduct the expenses incurred in the litigation from the amount received to determine the actual capital gain.

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