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V0417-18 19 February 2018 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · fusión por absorción

Economic grounds for merger to centralise management and reduce costs deemed valid

A query was raised regarding whether a merger by absorption between two holding companies constitutes valid economic grounds under the Corporate Income Tax Act (LIS). The Directorate General for Taxes (DGT) ruled that centralising management, reducing costs, and strengthening financial position are valid grounds, even if the absorbed company holds tax losses or tax credits.

The question raised

Whether the reasons for which the merger subject to this consultation is intended to be carried out can be considered valid economic reasons under the terms required by Article 89 of the LIS.

The DGT's ruling

The operation may qualify for the special regime if it is carried out within a commercial scope and complies with Article 76.1 of the LIS. The reasons of centralizing management, eliminating duplicate structures, and improving financing capacity are considered valid economic reasons. The existence of tax loss carryforwards or tax credits in the absorbed company does not invalidate the regime if the predominant purpose is not the exploitation of said benefits. Tax loss carryforwards may be offset following the requirements and limitations of Articles 26, 84, and the 16th transitional provision of the LIS.

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