"NEWS October 24, 2016-The directors ' mandate severance"

Posted by on Oct 24, 2016

The activity of a company director involves the natural right, subjective, perfect and available, to get paid for the work, unless it is stipulated that gratuitousness of any function or concerned unequivocally.

The matter of emoluments payable to Directors is governed by articles 1, paragraph # 2389 and 2364 3), cod. CIV., who attribute specific competence to their determination to shareholders, who can do this in the articles of incorporation or, subsequently, by specifying Assembly.

There are several possible ways of determination of the compensation, which can also be combined together:

  • fixed fee, monthly, quarterly or a one-off;
  • compensation to varying degrees, in proportion to the profits earned or to other parameters, expressly stated and objectively quantifiable, so as to make the administrator share the business risk;
  • attribution of stock options.

It is also increasingly popular corporate practice that provides for administrators, in addition to the normal periodic fee, a severance pay mandated payable upon termination of the relationship with the company.

His payment is not provided for and governed by any rules of law, unlike for severance indemnities (TFR) of employees, regulated explicitly by article 2120 cod. CIV..

The parties are therefore free to determine, with a forecast Office or in the process of resolution of the shareholders, in accordance with the bond of reasonableness and fairness, or of his determination to the economic reality of society, its volumes of income, the activities carried out by the administrator, etcetera.

From a tax perspective, unlike the provisions in accordance with article 95 of the tax code for directors ' fees deductible according on a cash basis, the severance pay mandated all deducted according to the principle of competence, therefore, limits the amount accrued.

In regulating the deductibility of TFM, article 105 article 17, paragraph 1 of the tax code calls) (c) of the tax code, which grants the benefit of separate taxation of TFM in Chief Administrator-earner, provided that entitlement to the allowance arises from the Act of certain date prior to the start of the relationship (e.g. from monomania of the shareholders ' resolution which shows entitlement to the allowance , from the book of shareholders ' meetings, notarial attestation from ritual Administrator notification rules that gives the allowance).

The requirement of certain date provided for by that article is also in order to deduct the condition further provision that the company, in addition to condition in order to receive the separate taxation administrator?

At the point the IRS with 211/E/2008 resolution opted for the most rigid, stating that provisions for TFM, and in General any coordinated and continuous working relationship, are not deductible for expertise from business income, unless the entitlement is not from the earlier Act at the beginning of the relationship, as required by article 17 , comma 1, letter c) of the tax code.

Is therefore contingent upon the deductibility and hence the principle of responsibility, the same rule laid down in article 17 to take advantage, on the part of the recipients of the allowances, separate taxation, namely the existence of an "Act of certain date prior to the beginning of the relationship." In the absence of this requirement, may be brought only deduction allowances paid in the year in which they were actually dispensed.

A different view the Italian Association of professional accountants which, with the norm of conduct 180/2011, in line with the opinion of the majority of the doctrine, argues that limited liability companies that have successfully resolved the severance pay mandate may make a corresponding deductible provision for competence, regardless of when the entitlement arose, without being subject to the extent and under the conditions provided for in article 17 of the tax code.

As regards, however, the tax treatment by the administrator, the legislator, as anticipated, provides for the possibility of placing under separate taxation (in order to avoid progressive taxation of income accrued over several years), provided that the granting of the allowance is the result of an act of a certain date prior to the beginning of the relationship; in the absence of a certain date, the allowance paid to the administrator will be subject to ordinary taxation in the performance of collection thereof.

It might happen upon the occurrence of certain business situations, that instead of setting aside new shares of termination sent, the administrator decides to waive the provision for end of term already set aside in the budget, eliminating its debt. The tax consequences of this situation are different depending on whether the administrator, that has been shelved the TFM, is also a member of the company.

In the case of non-member administrator, any waiver involves the detection of a contingent asset in the company's debt position reversed and no tax consequence by the administrator.

In the case of Associate Administrator, surrender the same to finance a contingent asset only for any part that exceeds its value for tax purposes (article 88, paragraph 4-bis of the tax code); While the social administrator the recent appeal (Ordinance of 1335 26.01.2016) ruled that the amount should be taxed for the c.d. principle of legal collection.

by Bruce Ferreira