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V2047-24 25 September 2024 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · pagos basados en instrumentos de patrimonio

Employee incentive plan expenses not deductible at accounting entry

A subsidiary company asks whether expenses for a multi-year employee incentive plan (based on group share value and paid in cash) are deductible under Corporate Income Tax. The DGT concludes that such expenses are not deductible at the time of accounting entry (Art. 14.3.e LIS), but only when the remuneration becomes due to the employee (Art. 14.5 LIS); in this case, both events occur in 2022.

The question raised

Confirm that the expense corresponding to the Multi-year Incentive Plan, which the taxpayer will record on the date of the transaction's execution (presumably in the 2022 financial year) in accordance with Valuation Standard 17 of the PGC, will be deductible for the Taxpayer's Corporate Income Tax.

The DGT's ruling

Personnel expenses arising from payments based on equity instruments settled in cash are not deductible in the period in which they are recorded for accounting purposes (Art. 14.3.e LIS). However, said expense shall be included in the tax base in the period in which the provision is applied or the expense is applied to its intended purpose (Art. 14.5 LIS). Therefore, the expense shall be tax deductible when the employee is entitled to receive the incentive and the remuneration becomes due.

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