February 28, 2025
Executives
Directors’ remuneration: deductible only if they are employees with additional duties
Supreme Court, Labor Section
A company had deducted, for tax purposes, the compensation paid to its directors. The Revenue Agency, considering such costs non-deductible, issued a tax assessment notice. The dispute, after being resolved in favor of the company at the appellate level, reached the Supreme Court.
The Court clarified that the deductibility of compensation paid to directors of capital companies is subject to the actual performance of duties beyond those inherent in the role, and the existence of a genuine employment relationship.
This assessment must not be merely formal but must verify the existence of hierarchical, managerial, and disciplinary authority exercised by another corporate body. In the absence of such elements—as in the case of the chairman of the board or a sole director—the activity performed cannot constitute a subordinate employment relationship, and consequently, the related remuneration is not deductible.
In other words, the compatibility between the role of shareholder-director and that of employee must be assessed based on concrete elements demonstrating the actual existence of hierarchical and managerial subordination.
In accepting the Tax Authority’s claims, the Supreme Court reiterated the view that, under income tax law, one cannot simultaneously be an employee and serve as chairman of the board or sole director of a capital company. It follows that a person holding the position of board chairman is prohibited from performing subordinate work within the same company; similarly, if a shareholder is a board member, it is necessary to verify whether there is, in practice, a parallel employment relationship based on the exercise of managerial, hierarchical, and disciplinary powers over that individual.
March 6, 2025
Law No. 104/1992
Dismissal of a worker using leave for a hospitalized disabled relative is lawful
Supreme Court, Labor Section
A worker challenged his dismissal in court for alleged abuse of the leave provided under Law No. 104/1992.
The Court of Appeal dismissed the claim, finding that during the three days of disputed leave, the disabled relative was hospitalized in a healthcare facility, and the worker spent only a very limited amount of time visiting them.
The Supreme Court likewise rejected the worker’s claim, stating that hospitalization of the disabled relative in a facility ensures continuous medical assistance, making it equivalent to hospital care. According to the Court, such a situation, as explicitly provided by law, excludes entitlement to paid daily leave.
Based on these grounds, the Supreme Court dismissed the employee’s appeal and confirmed the legitimacy of the dismissal.
March 9, 2025
Working hours, leave, and permits
Holiday pay must include ordinary variable allowances
Supreme Court, Labor Section
A railway engineer brought a case seeking the inclusion, in his holiday pay, of the variable part of his daily professional usage allowance and the allowance for being away from his place of residence. The claim was rejected in the first and second instance, but the Supreme Court upheld the worker’s appeal.
The Court clarified that, in line with the jurisprudence of the European Court of Justice, the right to annual paid leave requires the maintenance of normal pay, including components regularly received during the employment relationship. Otherwise, the worker might be discouraged from exercising their right to rest.
The Court emphasized the need to verify whether the contested pay elements are closely linked to the duties performed. In this case, the connection was acknowledged for both the allowance for being away from home—typical for a railway engineer without a fixed base—and the variable part of the professional allowance, which was regularly received during work periods. Both should therefore be included in holiday pay, calculated on an annual average.
