The Supreme Court has reached a decision in the legal dispute between Bankinter and the Treasury regarding the tax deductibility of compensation paid to Juan Arena for his dismissal as president in 2007. The court has upheld the ruling of the Contentious Chamber of the National Court, which concluded in 2021 that the payment of 14 million euros, along with stock options, a pension, and other benefits, was considered a “remunerative donation” granted voluntarily. The Supreme Court’s decision, published on April 8, supports the National Court’s assessment that the evidence provided by Bankinter was insufficient to prove that the expense was directly related to the company’s income or results.
The events in question occurred over 17 years ago when Arena’s departure from Bankinter was announced in April 2007. The compensation package negotiated prior to his departure included a payment of almost 14 million euros, indefinite health insurance, as well as other services such as security, secretarial support, and vehicle maintenance. The Tax Agency began an inspection of Bankinter’s accounts in 2012, shedding light on the compensation paid to the former president.
Bankinter argued in 2021 that the generous conditions were agreed upon in exchange for strategic advice, a non-compete clause for two years, and compensation for services provided. However, the Treasury raised concerns about the actual performance of these services and whether they were overly burdensome compared to the duties resulting from the non-compete clause. Despite Bankinter’s appeal to the Supreme Court in October 2022, the court reiterated that the compensation package could not be considered deductible as it was not in line with commercial legislation and was not specified in any statutes or contracts.
The Supreme Court concluded that Bankinter unilaterally decided on Arena’s exit package, which was negotiated as a condition for his resignation as president and advisor. The court highlighted the lack of clarity in the determination of the compensation amount and pointed out that Bankinter did not have a legal obligation to provide such a substantial exit package. The ruling also emphasized that the Board of Directors did not adequately justify the compensation amount, leading to the rejection of the tax deductibility claim by Bankinter.