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V0456-16 5 February 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · deterioro de valor

Reversal of impairment is not taxable if it was not tax-deductible

A query was raised regarding whether the reversal of a provision for tax loss carryforwards in a merger should be taxed and how it affects the subsequent transfer of the shareholding. The DGT ruled that the reversal should not be included in the tax base if the impairment was not deductible, in order to prevent the double use of losses.

The question raised

1. Whether the reversal of the provision made by A on C under the individual regime, which corresponds to tax loss carryforwards lost in the merger of B with C pursuant to Article 90.3 of the consolidated text of the Corporate Income Tax Law in force in the year of the merger (2009), should not be included in the tax base of A and consequently constitutes income that should not be taxed.

The DGT's ruling

The reversal of the impairment of an equity interest must not be included in the tax base if the impairment was not tax-deductible, thereby preventing the double use of tax loss carryforwards. In the event of the transfer of an interest in a company that leaves the tax group, the resulting negative income shall be reduced by the portion corresponding to tax loss carryforwards already offset within the group. The adjustment for this reduction must be made in the individual tax base of the transferring entity.

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