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V3204-14 28 November 2014 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización

Compensation for professional negligence taxed as capital gain in the general tax base

A taxpayer inquired whether compensation received due to a lawyer's negligence in failing to enforce a judgment against a construction company is exempt from tax. The Directorate General for Taxes (DGT) ruled that it is not exempt, as it pertains to financial loss rather than personal injury.

The question raised

Taxation of compensation in the Personal Income Tax (IRPF).

The DGT's ruling

Compensation for contractual civil liability arising from professional negligence is not exempt on the grounds of not being personal damage (physical, psychological, or moral). It is classified as a capital gain as it alters the composition of the assets, and must be quantified by the total amount received without deductions. As it does not derive from a transfer, it is integrated into the general taxable base.

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