Doctrine by topic · DGT Observatory

Restitutive Character: DGT doctrinal evolution

How the DGT's position on this topic has evolved, and the rulings it rests on.

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How the DGT's position has evolved

Refined position High confidence 24 rulings · 2016–2025

Current position

The award for legal costs is considered compensation due to its restitutive character and constitutes a capital gain that is included in the general taxable base. The prevailing party may deduct from the amount received the expenses incurred in the litigation, up to a limit equal to the amount of the award. It is not possible to again deduct legal defense expenses that have already been deducted from employment income.

The DGT has maintained the nature of the award for legal costs as a capital gain, but has introduced clarifications regarding its quantification. Initially, it was considered that the gain was quantified by the compensatory amount itself without a reduction for expenses. Subsequently, the deduction of expenses incurred in the litigation has been permitted to determine the actual gain.

Turning points

  1. V1397-21

    Allows the prevailing party to deduct from the amount received the expenses incurred due to the litigation, without exceeding the amount of the award.

  2. V1485-22

    Establishes that legal defense expenses that have already been deducted from employment income cannot be deducted for the capital gain.

Analysis based on 24 of 24 rulings with a stated position. Updated 24 September 2026.

Rulings on this topic

24
V1977-25 20 Oct 2025

Cost court fines can be treated as a patrimonial loss in IRPF

SG de Impuestos sobre la Renta de las Personas Físicas
condena en costaspérdida patrimonialganancia patrimonialbase imponible generalcarácter restitutorio LIRPF — Ley 35/2006 del IRPF art. 33.1LIRPF — Ley 35/2006 del IRPF art. 45
Affects CompanyExpat · Non-residentIndividual
V1162-25 1 Jul 2025

Judicial costs won are tax-exempt if defence expenses are deducted

SG de Impuestos sobre la Renta de las Personas Físicas
condena en costasganancia patrimonialcarácter restitutoriogastos de defensaindemnización LIRPF — Ley 35/2006 del IRPF art. 33.1LIRPF — Ley 35/2006 del IRPF art. 34.1.b
Affects CompanyExpat · Non-residentIndividual
V1178-20 30 Apr 2020

Court orders for legal costs constitute a capital loss for the losing party

SG de Impuestos sobre la Renta de las Personas Físicas
condena en costasganancia patrimonialpérdida patrimonialcarácter restitutorioimputación temporal LIRPF — Ley 35/2006 del IRPF art. 33.1LIRPF — Ley 35/2006 del IRPF art. 14.1 c)
Affects CompanyExpat · Non-residentIndividual
V1425-19 13 Jun 2019

Recovery of legal costs constitutes a capital gain for the prevailing party

SG de Impuestos sobre la Renta de las Personas Físicas
costas procesalesganancia patrimonialcarácter restitutoriobase imponible generalsentencia firme LIRPF — Ley 35/2006 del IRPF art. 14.1LIRPF — Ley 35/2006 del IRPF art. 33.1
Affects CompanyExpat · Non-residentIndividual
V0639-17 14 Mar 2017

Legal costs awards constitute a capital gain for the prevailing party

SG de Impuestos sobre la Renta de las Personas Físicas
condena en costasganancia patrimonialindemnizacióncarácter restitutoriocrédito LIRPF — Ley 35/2006 del IRPF art. 33.1LIRPF — Ley 35/2006 del IRPF art. 6.5
Affects CompanyExpat · Non-residentIndividual

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