How do you pay the compensation received by a lawyer that ceases as a business partner?

The TSJ Valencia points out that the amount a lawyer receives, as a member of a company, which is terminated early by agreement of the Board, is taxed as a result of economic activities, without it being possible to apply the reduction for irregularity.

A lawyer, partner of a company between 2007 and 2010, ceases early by agreement of the Board, and in accordance with the statutes of the merchant receives compensation of 280,000 euros.

When the IRPF is settled, the taxpayer declares the compensation as work income and applies the reduction for irregularity of 40% (currently of 30%).

The Administration, dissatisfied with the qualification of the returns, turns the corresponding liquidation, which is first resorted to administratively and subsequently through litigation.

After analyzing the facts, the Court concludes:

1º.– That the relationship that unites the appellant, capitalist partner, with the mercantile one, lacks the notes of alienation and dependence of the labor relationship:

– all the professional partners of the company are obliged to finance the operations of the company and to have the necessary material means that facilitate the total dedication and availability for the professional attention of the affairs of the company and its clients;

– the remuneration for the services provided consists, on the one hand, of a fixed remuneration and, on the other hand, on a variable remuneration, for which quantification must take into account the professional performance, that is, the contribution to the generation of the results of the signature.

Therefore, the taxpayer performs a service provision that must be qualified for the purposes of the IRPF as an economic activity.

2º.– Irregular returns are those yields that have been generated and produced over various tax periods, but that have not been subject to retribution at the time, either because these were latent yields or because they were not liquid or liquidable when they occurred.

In the specific case, the activity developed in the immediate past for the firm is not being reimbursed, but indemnifying the cessation in it for the future.

Therefore, it is not possible to defend the existence of a generation period, since the right to receive compensation arises at the moment of termination (“ex novo”) and as a consequence of the agreement of the Board of partners, which is the one unilaterally decides it.

STSJ Comunidad Valenciana Contentious-Administrative Chamber. EDJ 2018/692315