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V3509-20 9 December 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización por responsabilidad civil

Civil liability compensation and interest are exempt from Personal Income Tax (IRPF)

A query was raised regarding the taxation of compensation for medical negligence, including interest and legal costs. The DGT has determined that the compensation and late payment interest are exempt income, whereas legal costs do not generate a capital gain if the expenses incurred are deducted.

The question raised

Taxation under Personal Income Tax (IRPF).

The DGT's ruling

Compensations for civil liability for personal injury with a judicially recognized amount are exempt. Compensatory interest for the delay in the payment of said exempt compensation is also considered exempt. Regarding legal costs, the prevailing party may deduct the expenses incurred in the litigation from the amount received, therefore there will be no capital gain if the compensation covers such expenses. The payment of attorney fees based on a percentage of the compensation is considered consumption income and does not generate capital losses.

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