Non-executive external directors will tax their remuneration as income from employment

The tax classification of remuneration received by members of boards of directors has been clarified by the Tax Administration. The nature of the position and the personal situation of the recipient do not modify the tax treatment that these amounts must receive under Personal Income Tax (IRPF).

What the DGT has ruled

The Dirección General de Tributos (DGT) establishes that the remuneration of administrators and members of boards of directors is considered income from employment, in accordance with the provisions of article 17.2.e) of the Personal Income Tax Law (LIRPF).

This criterion applies regardless of two factors that could cause doubt in practice:

• The commercial nature of the position held.
• The recipient's status as a retiree, as the activity is compatible with receiving their full pension.

Furthermore, the ruling confirms that the withholding tax rate applicable to these payments must be the specific one for administrators, as provided in article 101.2 of the LIRPF.

What this means for you

If you perform duties as an external director or a member of a board of directors, you should bear in mind that these amounts are not considered income from economic activities or other concepts, but rather income from employment.

For professionals who are already retired, receiving this remuneration does not alter their status as a pensioner nor does it change the tax classification of the income obtained from their work on the board. The compatibility between the pension and the administrative activity does not modify the treatment of the income under the income from employment regime.

What should be done

Companies that make payments to their administrators must ensure the correct application of the specific withholding tax rate for this group in their payrolls or withholding certificates.

For their part, directors must include these amounts in their IRPF taxable base as income from employment. Given the specificity of the applicable regulations, it is necessary to assess the particular situation of each recipient to guarantee compliance with the tax obligations derived from their position.