Doctrine by topic · DGT Observatory

Costs Award: 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 57 rulings · 2016–2026

Current position

The award of costs is considered a capital gain due to its restorative nature. The amount constituting the gain is the value of the compensation, allowing the prevailing party to deduct the legal defense expenses incurred in the litigation. This gain is included in the general taxable base.

The DGT's position has moved from considering the capital gain to be the total amount of the award without reduction for expenses (V1773-18), to allowing the deduction of defense expenses (V0666-24). The classification as a capital gain included in the general base is maintained.

Turning points

  1. V0666-24

    Introduces the possibility for the prevailing party to deduct from the amount received the expenses incurred in the litigation to determine the capital gain.

Analysis based on 56 of 57 rulings with a stated position. Updated 19 September 2026.

Rulings on this topic

24
V0884-26 22 Apr 2026

Payment of costs judgment not subject to VAT as it is compensatory

SG de Impuestos sobre el Consumo
condena en costasindemnizaciónbase imponibleprestación de serviciossujeción al impuesto LIVA — Ley 37/1992 del IVA art. 4.unoLIVA — Ley 37/1992 del IVA art. 5.uno
Affects CompanyExpat · Non-residentIndividual
V0827-26 17 Apr 2026

Legal services in public duty not VAT liable or subject to invoicing

SG de Impuestos sobre el Consumo
asistencia jurídica gratuitaturno de oficiocarácter indemnizatoriooperación no sujetaobligación de facturación LIVA — Ley 37/1992 del IVA art. 6LIVA — Ley 37/1992 del IVA art. 78.1
Affects CompanyExpat · Non-residentIndividual
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

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