Evolution in the jurisprudence on directors' remuneration in corporate income tax matters

Marlen Estévez, partner and head of the Litigation, Arbitration and Mediation Department at RocaJunyent, and Pilar Vacas Barreda, partner in the Tax Department at RocaJunyent, have written this article published in the Economist & Jurist newspaper in which they analyse the jurisprudential doctrine that has been applied over the last 16 years, in which numerous rulings have been handed down in relation to directors' remuneration, applying the “link theory”, which argues that the employment relationship of senior management is absorbed by the commercial relationship of the director.

This doctrine, initially applied in the labour sphere, generated uncertainty in the tax sphere, especially evidenced in the Mahou judgments of the Supreme Court. However, recent judicial pronouncements, such as the judgments of June 2023 to March 2024, have clarified the requirements for the tax deductibility of this remuneration, providing greater clarity and legal certainty.

Specifically, the January 2024 ruling establishes that, if the remuneration is provided for in the articles of association and meets general deductibility requirements, it is deductible for corporate income tax purposes, while the March 2024 ruling rejects the automatic application of the link theory in the tax sphere.

Although uncertainty persists as to the interpretation by the inspectorate of these latest case law rulings, it seems that the Supreme Court is providing clarity after more than 15 years of debate.

Access to the full article (available in Spanish)