The Treasury has cleared up the doubts of the family of an injured party. 

The Deputy Director-General for Financial Operations had responded to a query from a family about whether they should be taxed for compensation received following an accident. It has clarified that the lifetime income received by a traffic accident victim is exempt from personal income tax. It is considered to be a compensable concept and not a gain as such. 

Likewise, the State recalls that the victim will always have the right to benefit from this exemption, regardless of who must pay the damages caused by the accident. However, there is a nuance. The Treasury emphasizes that the amount that seeks to compensate personal damages, that is, psychics, physicists or morals, is exempt. Other compensation items are excluded. These may be property damage.

In addition, the subdirectorate clarified the doubts of the parents of an injured person in 1995, who was later recognized as totally incapacitated by the courts. Three years after the accident, the perpetrator was sentenced to compensate the victim for civil liability. He was obliged to make reparation for the damage caused to the injured party. The judge therefore ordered the person responsible for the accident to pay compensation and an allowance for life to the injured party. 

On the other hand, the insurance company that had to meet this debt entered into a liquidation process and the Insurance Clearing Consortium intervened. Thus, the Treasury clarifies that the tax exemption works no matter who pays it, it should not affect the victim.


B Law & Tax International Tax & Legal Advisors.


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