Court rules: personal injury compensation taxable
In a recent ruling, the Zeeland-West-Brabant District Court determined that a personal injury payment, even if it arises from a dramatic event such as the MH17 disaster or the Volendam disaster, is not exempt from tax in box 3.
This ruling is relevant for all victims who have received personal injury benefits and are filing income tax returns. The case that led to this ruling concerned a taxpayer (X) who included a personal injury payment in his tax returns for the years 2018 and 2020 in the calculation of his return basis in box 3. The Tax Authorities were of the opinion that the benefit was rightly taxed in box 3 and X did not agree with this.
The court ruled in favor of the tax authorities. The court ruled that the personal injury benefit is an asset and that there is no reason to exclude it from the levy in box 3. This position is in line with previous rulings on this subject.
Consequences for personal injury victims
This ruling means that victims of personal injury must take into account the fact that their benefit may be taxable in box 3. How much tax you have to pay on the benefit depends on the amount of your total assets and the applicable rates in box 3.
Advice from personal injury lawyer
It is important to emphasize that this ruling does not relate to the compensation that personal injury victims receive. The compensation itself is not taxable.
If you have any questions about the tax consequences of a personal injury payment, you can always contact MCJ Advocatuur. As an experienced personal injury lawyer, I can advise you about your specific situation.