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V5313-16 15 December 2016 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización

Accident insurance disability compensation is exempt from Income Tax up to the legal valuation limit

A self-employed individual inquired whether compensation received for total permanent disability following a work accident is exempt from Income Tax (IRPF). The Directorate General for Taxes (DGT) ruled that while the exemption applies, it is limited to the amount resulting from the damage assessment system set out in the Law on Civil Liability and Insurance in the Circulation of Motor Vehicles.

The question raised

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

The DGT's ruling

Compensation for personal injury arising from accident insurance contracts is exempt from Personal Income Tax (IRPF) pursuant to Article 7.d) of Law 35/2006. However, said exemption is limited to the amount resulting from the application of the damage assessment system incorporated in Royal Legislative Decree 8/2004. To determine the exempt amount, the scoring criteria per injury, the value of the point according to age, and the correction factors established in the annex of said regulation must be followed.

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