Compensation derived from civil liability is exempt from IRPF (Personal Income Tax), provided that its amount is legally or judicially recognized. This includes compensation for personal damages, which cover physical, psychological, and moral damages. Examples of moral damages that may be exempt include unlawful intrusions into honor, sexual discrimination, sexual abuse of minors, and violations of fundamental rights. However, property damages are not exempt, such as compensation for professional negligence or for unused rest hours.

In the event of the victim's death, the judicially fixed compensation for the heirs is also exempt from IRPF, even if the death is due to an occupational disease. If the compensation is initially recognized as capital and then converted into periodic income, the capital is exempt, but the income is taxed as annuities or temporary income.

Compensation derived from accident insurance contracts is also exempt, except in cases where the premiums have reduced the taxable base. If the heirs receive the compensation, it is not subject to IRPF but to the Inheritance and Donations Tax (ISD).

Compensation for personal damages caused by the operation of public services is also exempt, provided that the procedures established for the patrimonial responsibility of the administrations are followed.

A practical example illustrates that, in the case of a widow receiving compensation for the death of her husband in an accident, the part corresponding to personal damages is exempt from IRPF and ISD, while the compensation for material damages to the vehicle has a different tax treatment, depending on the ownership of the vehicle. In summary, compensation for personal damages has favorable tax treatment, while property damages must be taxed.

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