Find out how the Central Economic-Administrative Court has changed its perspective on the exemption from severance pay for the termination of a director with a special senior management employment relationship.

The Central Economic-Administrative Court (ruling no. 2059/2020, of 18/12/2023) has changed its criteria regarding the exemption under article 7.e) of the LIRPF for severance pay for the termination of a director with a special senior management employment relationship and a commercial relationship with the company. Previously, the mere existence of the commercial link used to lead to the dismissal of the senior management employment relationship and the exemption of the severance payment, following the "link theory".

However, following the recent case law of the Supreme Court and the Court of Justice of the European Union (CJEU), the TEAC establishes that the senior management employment relationship cannot be disregarded on the sole basis of the commercial relationship. This change of criterion affects previous decisions of the TEAC, recognising the applicability of the case law of the CJEU which denies that the commercial relationship absorbs the special senior management employment relationship.

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