Spain's special tax neutrality regime for mergers, demergers, business unit contributions and share swaps, contained in Articles 76-89 of the Corporate Income Tax Law (LIS), which allows corporate tax to be deferred rather than paid immediately on restructuring operations.
In practice
The FEAC regime — acronym for Fusiones, Escisiones, Aportaciones de Activos y Canje de Valores (Mergers, Demergers, Business Contributions and Share Swaps) — is the set of Spanish Corporate Income Tax (IS) rules contained in Chapter VII of Title VII of Law 27/2014 (Articles 76-89 LIS) that governs certain business restructuring operations.
Core principle: tax deferral, not exemption
The fundamental concept of the FEAC regime is tax neutrality: when a qualifying operation takes place, the unrealised gains embedded in the transferred assets or shares are not taxed immediately. Instead, they are deferred — transferred to the balance sheet of the receiving entity at their original tax basis — and only taxed when those assets or shares are eventually sold outside the special regime.
This is a deferral mechanism, not a permanent exemption. The tax will eventually be paid, but the timing is controlled by the taxpayer rather than triggered by the restructuring.
The 7 qualifying operations
The FEAC regime covers seven types of operation:
- Merger (fusión propia): absorption of one company by another, or creation of a new company by two or more combining entities, with the absorbed companies dissolving without liquidation
- Full demerger (escisión total): dissolution without liquidation and block transfer of all assets to two or more beneficiary companies
- Partial demerger (escisión parcial): transfer of one or more autonomous business units to one or more beneficiaries, while the demerging company retains at least one business unit
- Business unit contribution (aportación de rama de actividad): transfer of an autonomous business unit in exchange for shares of the receiving entity, without dissolution of the contributing company
- Special non-monetary contribution (aportación no dineraria especial): transfer of shares that grant or complete a majority stake in the target company
- Share swap (canje de valores): acquisition of a majority of shares in a target company in exchange for own shares
- Global transfer of assets and liabilities (cesión global de activo y pasivo): block transfer by a wholly-owned subsidiary in liquidation to its sole parent
Key requirement: valid commercial rationale
The most critical requirement of the FEAC regime is the valid commercial rationale (motivo económico válido) under Article 89.2 LIS. The anti-avoidance clause excludes operations whose principal objective is tax fraud or evasion. In practice, the Spanish Tax Agency (AEAT) requires that the restructuring be driven by genuine commercial reasons — rationalisation, succession planning, separation of activities for a partial sale, or similar — rather than by the desire to avoid tax. The business rationale must be documented in a memorandum prepared before the operation is executed.
AEAT notification requirement
Under Article 96 LIS, the restructuring must be notified to the AEAT within three months of registration in the Commercial Register. The notification includes the description of the operation, the tax values of the transferred elements and the business rationale justification.
Related terms: Merger and Absorption | Holding Company Tax
Related service: FEAC Tax Restructuring in Spain