2014-01-03 14:09:55

In the case of the property of an enterprise or an individual is damaged, after both parties settle through legal proceedings, only the part of the settlement which is compensating for the damage is not taxable. The rest of the settlement is still taxed as “Other income.” Under the provision of Article 216-1 in Civil Code, the “profit” that is unable to be generated due to the damage, such as the rental income that was originally supposed to be generated from a now damaged house, is deemed as “passive damage” and is not taxable. The part of the settlement related to compensatory damages is not taxable, but the parts which are unrelated to damages should be taxed in accordance to Category 10, Article 14-1 of Income Tax Act and tax should be withheld and filed according to Article 88 and 92 of Income Tax Act.