Corporate restructuring refers to operations that materially modify a company's corporate structure, assets or liabilities to improve efficiency, adapt to new circumstances or prepare for a divestment. In Spain, restructurings taking the form of mergers, demergers, asset contributions or share exchanges can access the tax neutrality regime of Articles 76 to 89 of the Corporate Income Tax Act (LIS), deferring taxation on latent gains until a subsequent transfer.
In practice
What Is Corporate Restructuring in Spain
Corporate restructuring encompasses any operation that substantially modifies the corporate or asset structure of a company: from a simple asset contribution to a newly incorporated subsidiary to a complex cross-border merger. Typical motivations include separating business lines, preparing for a sale, admitting new investors, succession planning or simplifying holding structures.
The FEAC Tax Neutrality Regime
Spain’s most important tax framework for restructurings is the FEAC regime (from the Spanish initials for mergers, demergers, asset contributions and share exchanges), contained in Chapter VII of Title VII of Law 27/2014 (Arts. 76-89 LIS). This regime allows deferring the latent gains that arise in the operation, so that the assets and shareholdings transferred carry over their original tax values.
Operations that can access the regime include:
- Mergers (absorption or consolidation)
- Demergers (total or partial)
- Business branch contributions (autonomous set of assets and liabilities)
- Special non-monetary contributions of shareholdings
- Share exchanges (acquiring control through own-share delivery)
- Global transfers of assets and liabilities
Planning and Risk
The FEAC regime requires a valid business purpose (Art. 89.2 LIS). The AEAT may challenge the deferral if it concludes the sole purpose of the restructuring was tax savings. Documenting the business rationale, a business-purpose memorandum and, for material transactions, an advance tax ruling (Art. 88 LGT) are essential tools for securing the position.
Restructuring in M&A Transactions
In M&A transactions, pre-closing restructuring is common: the seller may reorganise the group to carve out assets being sold, or the buyer may integrate the target through a post-closing merger. Both operations can benefit from the FEAC regime if correctly structured and executed.