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V0192-14 28 January 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · condonación de créditos

Forgiveness or capitalisation of a loan between subsidiaries of the same group does not generate tax income under specific conditions

A company inquired whether the forgiveness or capitalisation of a participative loan, which is recorded in accounts as income or equity, has tax consequences. The DGT responds that if both companies are indirectly 100% owned by the same parent, the transaction does not generate taxable income or expenses.

The question raised

In the event that, by application of accounting regulations, company A would have to reflect in its individual accounting result income due to the partial forgiveness / capitalization of the participating loan by company D, such income shall not be considered income for tax purposes.

The DGT's ruling

When the forgiveness or capitalization of a credit occurs between a lender and a borrower indirectly 100% held by the same company, no taxable income is generated for the borrower. This is because the operation reflects the conversion of an existing credit right into equity, where the market value coincides with the contractual obligation. Any potential accounting impairment of the credit has no tax implications in this scenario. If the participation is less than 100%, the treatment applies only to the proportional part of said participation.

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