Do I have to declare accident compensation on my income tax return?

Question

José Manuel Alburquerque · Accepted Answer

For your injuries, usually not. If it is a road traffic accident, what the insurer of the person responsible or the “Consorcio de Compensación de Seguros”, Spain's state insurance compensation fund, pays you under the statutory compensation scale (the “baremo”) is exempt from the “IRPF”, Spain's personal income tax, so it does not go on your tax return. Also exempt is any amount set by a judge and, up to what the scale would give, whatever is agreed with the insurer of the person responsible in mediation or another form of settlement with a neutral third party, if it is signed before a notary. What you receive for damage to the car is not compensation for injuries, although there is almost never anything to declare. Late-payment interest is a different matter and you should ask how it is declared. What is exempt In a road traffic accident, what the insurer of the person responsible pays as calculated under the scale, or what the Consorcio pays when the person at fault had no insurance or cannot be identified. The law on motor insurance expressly states that those amounts are deemed to be set by law for IRPF purposes. This applies to every item under the scale, including what is paid for the earnings you lost. What relatives receive for the death of the victim, under the same rule. What a judge awards for personal injury, in a road traffic accident or any other kind of accident. From 3 April 2025, what the insurer of the person who caused the harm pays under an agreement reached in mediation or by another of the out-of-court dispute resolution methods provided for by law. A neutral third party, such as a mediator, must have taken part in the agreement. It must also be formalised in a public deed before a notary. It is exempt up to the amount that would result from the traffic accident scale. This is useful above all outside traffic accidents, for example after a fall or a dog bite. What you receive from your own personal accident insurance for your injuries, up to what the scale would give, unless the premiums could have been deducted for income tax purposes. Exempt amounts are not included in your income tax return. What may be taxed Anything agreed above the scale without a judge setting it. That difference is not exempt. Outside traffic accidents, a direct agreement with the person responsible or their insurer that does not meet the requirements above, even if the amount was calculated using the traffic accident scale. Before signing it, ask how it will be taxed. What you receive for the car or other damaged belongings. It is not compensation for personal injury, but there would only be a gain to declare if you were paid more than the damaged item cost you, which is unusual. Late-payment interest the insurer pays you for being late. It is not part of the compensation and may have to be declared. Ask how to do so before you file your income tax return.