In a landmark decision, the Supreme Court has upheld the ruling of the Contentious Chamber of the National Court and declared that the compensation paid to Juan Arena for his dismissal as president of Bankinter in 2007 is not tax deductible. The court agreed with the National Court that the evidence presented by Bankinter was insufficient to demonstrate that the expense was appropriately related to the generation of income or results of the company.
The events date back more than 17 years when Arena departed from Bankinter and was replaced by Pedro Guerrero. The compensation included a payment of nearly 14 million euros in addition to stock options, a pension, and other benefits. The Tax Agency began an inspection of the firm’s accounts in 2012, questioning the nature of the compensation provided to Arena.
Bankinter argued that the compensation was for providing strategic advice and not competing with the entity for a certain period. However, the Treasury questioned whether these services were actually carried out and whether they were excessive. The Supreme Court highlighted that the compensation was decided unilaterally by Bank’s Board of Directors and lacked a legal, statutory, or contractual basis.
Juan Arena had a long history with Bankinter Group, serving in various roles before his departure in 2007. The Supreme Court concluded that while Arena may have had some relationship with generating income or business results while at Bankinter, it was not sufficient evidence to justify tax deductions on his compensation package.