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V5017-16 18 November 2016 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · indemnización

Accident insurance disability compensation may be exempt from Income Tax

An insured person has enquired whether the benefit received for permanent disability following a work accident is exempt from taxation. The Directorate General for Taxes (DGT) indicates that compensation from accident insurance is exempt, provided that premiums have not been deducted and subject to certain limits.

The question raised

Whether the amount received is exempt from taxation.

The DGT's ruling

Compensation for personal injury arising from accident insurance contracts is exempt pursuant to Article 7.d) of Law 35/2006. This exemption does not apply if the premiums could have reduced the taxable base or been a deductible expense. The exemption is limited to the amount resulting from the application of the damage assessment system of the Law on Civil Liability and Insurance in the Circulation of Motor Vehicles; the excess shall be subject to Personal Income Tax (IRPF).

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