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V0515-23 6 March 2023 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
IP · exención

Dividends equivalent to profits from share transfers for wealth tax exemption

The consultant asks whether profits from selling shares in a company can be treated as dividends to exclude certain assets from economic activity. The DGT responds that, under a finalist interpretation, such profits are considered dividends if the conditions of the holding company are met.

The question raised

Whether the profit that entity "A" has recorded accounting-wise as a consequence of the transfer of holdings in entity "B" could be assimilated to the distribution of dividends by the latter entity and, consequently, whether assets whose acquisition price does not exceed the amount of the aforementioned profit would not be considered non-business assets to economic activities in the fiscal year in which the transfer occurs and in the following 10 fiscal years, under the terms established in Article 4.Eight.Two a) of the Wealth Tax Law.

The DGT's ruling

Income derived from the transfer of holdings in entities is assimilated to dividends for the purposes of Article 4.Eight.Two.a) 2 of the LIP, provided that the investee entity obtains at least 90% of its income from economic activities and the requirements for the management of the holding are met. This allows assets whose acquisition price does not exceed the amount of the profits obtained from the transfer (in the current year or the previous 10) to not be computed as non-business assets. Regarding the business use of assets such as treasury or funds, these may be considered business assets if they are necessary for the activity, which must be assessed on a case-by-case basis.

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