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V0014-17 3 January 2017 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · régimen especial de fusiones

Mergers for valid economic reasons may qualify for special regime and dividend and income exemptions

A query was raised regarding whether a merger by absorption of a wholly-owned subsidiary can apply the special tax neutrality regime and if the economic reasons are considered valid. The DGT ruled that if the merger is carried out in a commercial context for valid economic reasons, it may qualify for the regime, and that dividends and income from the transfer could be exempt provided the requirements of Article 21 of the LIS are met.

The question raised

Whether the proposed merger operation could qualify for the special tax regime regulated in Chapter VII of Title VII of the Corporate Income Tax Law. And whether the economic reasons can be considered valid for the purposes of applying the aforementioned special regime.

The DGT's ruling

Merger by absorption operations of a wholly owned company may qualify for the special regime if they are carried out in a commercial context and comply with the LIS. Valid economic reasons, such as the rationalization of activities, allow for the use of the regime, provided it is not for the purpose of obtaining a tax advantage. Dividends and positive income from the transfer of holdings shall be exempt if the requirements regarding the percentage of participation and the holding period set forth in Article 21 of the LIS are met. In the case of holdings acquired in a merger, the acquisition date of the transferring entity is maintained.

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