Supreme Court Clarifies Combined Roles in Corporate Tax

Deductibility of Remunerations

The recent judgment of the Supreme Court, issued on November 2, 2023, has provided significant clarifications regarding the deductibility in Corporate Tax of the remuneration of a general manager with an executive employment contract, also a member of the board of directors, and a non-shareholder of the company.

Contrary to previous practices, the judgment categorically establishes that these remunerations should not be considered as gratuities but as legitimate compensation for real and effective services under an executive employment contract. The jurisprudence now clearly affirms that these remunerations are deductible in Corporate Tax, provided they are linked to a genuine provision of services.

This decision of the Supreme Court represents a significant shift in the interpretation of the deductibility of remunerations, providing greater clarity and certainty for companies. The judgment reinforces the importance of the real and effective nature of the services provided, dismissing the idea that the combined exercise of functions can negatively impact deductibility.

Furthermore, the judgment addresses the issue of accounting errors and sets an important precedent by concluding that it is not necessary to anticipate the tax effect in cases of errors that should reduce the taxable base of the tax. This additional aspect provides further guidance to companies when dealing with accounting errors and their tax implications.