By Manuel Godia Castillo, Senior Associate, Tax Area.
The Supreme Court, in its judgment 819/2025, of June 25, has upheld the cassation appeal filed against a Corporate Income Tax assessment in which the deduction of allowances paid to directors was denied for not being contemplated in the articles of association.
In line with its most recent doctrine, the High Court reiterates that this type of remuneration cannot be considered a non-deductible gift, provided that it corresponds to an actual service, is correctly accounted for, and is duly accredited.
The case was handled by the Tax Department of Godia Asesores in defense of the affected company, obtaining a favorable resolution after the acquiescence of the State Attorney himself, who recognized that the thesis maintained coincided with the current jurisprudence.
Why Was the Deduction Denied?
Traditionally, the Tax Administration had been automatically applying the so-called “theory of the link” to consider as non-deductible those remunerations paid to members of the administrative body that were not stated in the articles of association. This interpretation gave rise to numerous tax adjustments, sometimes for concepts such as food or travel allowances that have nothing to do with gifts.
What Does the Supreme Court Say about the Deduction of Allowances for Directors?
The Judgment aligns with previous ones (cassations 9078/2022 and 6925/2022) and makes it clear that:
“(…) what are onerous, accounted for, and accredited remunerations cannot be classified as gifts, even if they are not provided for in the articles of association, provided that it does not imply an act contrary to the legal system.”
This reasoning dismantles the idea that the lack of statutory provision automatically implies that the expense is non-deductible.
How Does this Affect Companies?
This resolution does not introduce a new criterion, but reinforces and consolidates the existing one, offering greater legal certainty to companies that remunerate their directors for effective tasks, travel, or representation.
From this interpretation, it can be concluded that:
- Statutory provision is not necessary for certain allowances to be deductible.
- The key is that the expense is real, necessary for the activity, accounted for, and documentarily justified.
- Companies with pending or final settlements based solely on the lack of statutory provision could review their situation in light of this jurisprudence.
Practical Recommendation
It is advisable to review the internal remuneration policies for directors and verify that the allowances are sufficiently justified and documented. In the event of having been subject to a tax regularization for this reason, there are solid grounds for its challenge.