Doctrine by topic · DGT Observatory

Compensation for Damages: 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 19 rulings · 2015–2025

Current position

Compensation for damages is not exempt under article 7.d) of the LIRPF (Personal Income Tax Law) as it does not compensate for personal injury, but rather for economic loss. According to the latest doctrine, it is classified as a capital gain pursuant to article 33.1 of the LIRPF. In the scope of IVA (Value Added Tax), these amounts do not constitute consideration for a transaction subject to the tax.

The DGT's position has shown an evolution in the tax classification within the IRPF. While in 2016 and 2017 they were mostly classified as income from employment due to their character of substituting remuneration, the most recent ruling (V0890-25) classifies them as a capital gain. The distinction between compensation for services (subject to IVA) and redress for damages (not subject to tax) remains constant.

Turning points

  1. V0890-25

    The classification of compensation for economic loss changes from income from employment to a capital gain according to article 33.1 of the LIRPF.

Analysis based on 19 of 19 rulings with a stated position. Updated 25 September 2026.

Rulings on this topic

19
V0890-25 23 May 2025

Damages compensation is not exempt in IRPF and is taxed as patrimonial gain

SG de Impuestos sobre la Renta de las Personas Físicas
indemnización por daños y perjuiciosganancia patrimonialexenciónresponsabilidad civildaños personales LIRPF — Ley 35/2006 del IRPF art. 7.dLIRPF — Ley 35/2006 del IRPF art. 33.1
Affects CompanyExpat · Non-residentIndividual
V2333-17 14 Sept 2017

Compensation for damages is integrated as a capital gain in the general tax base

SG de Impuestos sobre la Renta de las Personas Físicas
ganancias y pérdidas patrimonialesindemnización por daños y perjuiciosbase imponible generalalteración patrimonialrenta general LIRPF — Ley 35/2006 del IRPF art. 14.1.cLIRPF — Ley 35/2006 del IRPF art. 33.1
Affects CompanyExpat · Non-residentIndividual
V0640-17 14 Mar 2017

Compensation for client base is subject to VAT, whereas damages are not

SG de Impuestos sobre la Renta de las Personas Físicas
indemnización por clientelaindemnización por daños y perjuicioscontraprestaciónrendimientos de actividades profesionalesretención LIVA — Ley 37/1992 del IVA art. 4.1LIVA — Ley 37/1992 del IVA art. 5.1
Affects CompanyExpat · Non-residentIndividual
V0222-17 30 Jan 2017

Compensation for loss of earnings is taxed as employment income

SG de Impuestos sobre la Renta de las Personas Físicas
rendimientos del trabajoindemnización por daños y perjuiciosimputación temporalresolución judicial firmeautoliquidación complementaria LIRPF — Ley 35/2006 del IRPF art. 14.2.a)LIRPF — Ley 35/2006 del IRPF art. 14.2.b)
Affects CompanyExpat · Non-residentIndividual
V0737-15 6 Mar 2015

Damages for reduction of working hours are taxable as employment income

SG de Impuestos sobre la Renta de las Personas Físicas
indemnización por daños y perjuiciosrendimientos del trabajorenta exentaperjuicios económicosrelación laboral LIRPF — Ley 35/2006 del IRPF art. 7.dLIRPF — Ley 35/2006 del IRPF art. 17.1
Affects CompanyExpat · Non-residentIndividual
V0211-15 21 Jan 2015

Compensation for loss of value of a garage is fully taxable as a capital gain

SG de Impuestos sobre la Renta de las Personas Físicas
ganancia patrimonialindemnización por daños y perjuicioscomunidad de propietariospérdida de valoratribución de rentas LIRPF — Ley 35/2006 del IRPF art. 8.3LIRPF — Ley 35/2006 del IRPF art. 33.1
Affects CompanyExpat · Non-residentIndividual

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