Summary of the conclusions of the Central Economic-Administrative Court (TEAC) on directors’ allowances in its decision dated January 30, 2025
The TEAC has established a unified criterion regarding the application of the tax-exempt allowances regime under Article 9 of the Personal Income Tax Regulations (RIRPF) to company directors and members of the Board of Directors. The main conclusions of the decision are as follows:
1. Applicability of the allowances regime
- The tax-exempt allowances regime under Article 9 of the RIRPF applies only to employees in employment or statutory relationships, that is, where there are elements of subordination, dependence, and working for another party.
- Directors and board members cannot apply this regime when the allowances arise from their role as such, since their relationship with the company is commercial rather than employment-based.
2. Possibility of exemption in certain cases
- If a director or board member performs additional employment functions within the company, the allowances may be tax-exempt, but only if they arise from their employment relationship with the company, not from their role as a director.
- To determine whether an allowance qualifies for exemption, it is necessary to analyze the origin or cause of the payment.
- The doctrine of the Directorate-General for Taxation is reiterated, according to which tax-exempt allowances require a dependent employment relationship.
Final conclusion of the TEAC
The Court unifies its criteria and establishes that directors and board members cannot benefit from the tax exemption for allowances unless such allowances arise from a genuine employment relationship with the company. Otherwise, the allowances must be taxed as employment income and be subject to withholding under Personal Income Tax (IRPF).
Drafted by: Arc Associats
First publication date: March 27, 2025
