Directors' salaries are deductible for Corporate Income Tax purposes, even if not included in the bylaws

For years, the Spanish Tax Agency (Agencia Tributaria) applied a restrictive interpretation on this matter. It considered that directors' fees not expressly stated in the bylaws were non-deductible gratuities, systematically rejecting them. This stance particularly affected SMEs and shareholder-directors, who often faced the rejection of legitimate and necessary expenses for the company’s operations.

A notable example was the Mahou case, in which the Supreme Court sided with the Tax Agency, ruling that directors’ fees had to be expressly stated in the bylaws. That position has now changed.

Key ruling: Supreme Court, Judgment No. 546/2025, of 9 May

With this new ruling, the Supreme Court confirms a significant shift in case law:

• Directors’ salaries are deductible for Corporate Income Tax purposes even if not included in the company bylaws.

• They remain deductible even when the director is a shareholder, including those holding a significant stake in the company.

Furthermore, the Court establishes that, in such cases, it is the Tax Administration that must prove there is a disguised distribution of profits, rather than the taxpayer having to prove the opposite.

Requirements for deductibility

However, it is not enough to simply pay a salary to the director. For the expense to be considered deductible, the following conditions must be met:

• Accounting: The expense must be properly recorded in the company’s accounts.

• Justification: The payment must correspond to actual and effective services rendered by the director.

• Documentation and valuation: The remuneration must be formalised and reasonable in relation to market value and the responsibilities undertaken.

What does this mean for SMEs and shareholder-directors?

This ruling provides clarity and legal certainty for the deductibility of directors’ salaries within corporate structures.
From now on, companies will be able to organise directors’ remuneration with greater confidence, without the risk of deduction being denied due to formal issues such as the absence of statutory provision.

In addition, this approach encourages a more realistic and coherent corporate tax system, avoiding unnecessary burdens for businesses that already meet their accounting and tax obligations.

Do you have questions about how to apply this new interpretation to your company? At Valero Tax Legal, we are here to advise you. info@valerotaxlegal.com | +34 972 697 790 | WhatsApp +34 644 76 97 24 www.valerotaxlegal.com