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V0320-16 27 January 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · préstamo participativo

Interest on profit-sharing loans between group companies may qualify as exempt dividends

The Directorate General for Taxes (DGT) has addressed whether interest from profit-sharing loans between companies within the same group can be treated as exempt dividends. The DGT ruled that they can, provided the loan was granted after 20 June 2014 and does not result in a deductible expense for the paying company.

The question raised

Whether the income to be received by the consulting entity as a consequence of granting the aforementioned participating loan to Y can be legally conceptualized as a dividend or profit share for the purposes of Article 21.2.2º of the Corporate Income Tax Law.

The DGT's ruling

The returns on participating loans are dividends or profit shares exempt if three conditions are met: that the loan was granted after June 20, 2014, that the entities belong to the same group pursuant to Article 42 of the Commercial Code, and that the distribution does not generate a tax-deductible expense in the paying entity.

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