The high court of Madrid discusses to Tributos that an administrator without pay can deduct their fees
The legislation is clear. Whoever assumes the tasks of direction and management implied by the position of director or administrator of a company must contribute to the self-employed regime, as dictated by the Social Security regulations. And these fees will be a deductible expense in the personal income tax that corresponds to pay the interested party. The authorities and the justice, however, remain divided on whether this possibility can also benefit the so-called free administrators, those who do not have a remuneration assigned for their work.
The dilemma yields different answers depending on whether the General Tax Office is consulted in favor of allowing this deduction, or the Superior Court of Justice of Madrid, for example, which denies the tax benefit to free administrators.
Thus, although according to the legislation the emoluments obtained by the administrators are taxed as income tax as work performance, and this tax allows them to deduct the fees that they are obliged to pay, the Madrid high court interprets that given the necessary correlation between income and expenses, the deduction is not admissible for unpaid directors. “The deductible nature of an expense is determined by its link with income”, with which “it is precisely this absence of income that prevents the recognition of the deduction concerned.”
The General Directorate of Taxes, however, accepted in a public consultation the possibility that those administrators without assigned remuneration could deduct the quota of the self-employed from the work income “and this type of negative income could result if the consultant does not obtain for this concept full income that exceeds the fees paid ”.
The binding criteria of Tributes, expose from the firm Legal Attic, “Opens the possibility of requesting the return of undue income in relation to the personal income tax returns presented in the last four years”, from 2016 to 2019, despite the opposition of the Madrid courts, which gives air to the free administrator.