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A company owned by a local council has enquired whether donating its rural properties to the council allows for patronage exemptions and tax deductions. The Directorate General for Taxes (DGT) ruled that the transaction does not constitute a donation by way of liberality, but rather a distribution of own funds to the shareholder.
This ruling clarifies that transfers of assets from a company to its sole shareholder are treated as distributions of equity rather than charitable donations, thereby disqualifying them from tax benefits related to patronage.
The tax team reviews your specific situation.
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