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V0609-22 23 March 2022 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · personalidad jurídica

Controlling a legal entity does not mean its assets belong to the controller

A taxpayer queried whether controlling a foundation in Curaçao with its own legal personality meant that contributed assets remained theirs and distributions did not constitute transfers. The DGT ruled that controlling an entity does not nullify its legal personality or the ownership of its assets, except in cases of fraud or abuse.

The question raised

Whether, for Spanish tax purposes, according to the described characteristics configuring the foundation, the contribution of assets made by the taxpayer to the foundation should not be recognized for Spanish tax purposes and whether, in line with the above, it is understood that, for the purposes of the Spanish tax legal system, the assets contributed to the Foundation remain the property of the taxpayer, given that the taxpayer retains, according to the taxpayer's statement, powers inherent to the legal ownership of the assets that form part of its assets and, therefore, the distributions made by the Foundation in favor of the Taxpayer should not be considered transfers from the foundation to the taxpayer.

The DGT's ruling

The fact that a person holds control over an entity with legal personality and decides the destination of its assets does not imply that the contribution of assets is not an irrevocable legal transfer. Control does not allow for the attribution of the entity's assets to the person who controls it, as this would deny the legal personality of the entity. The doctrine of piercing the corporate veil does not allow for the automatic denial of legal personality, but is limited to cases of abusive or fraudulent use to the detriment of third parties acting in good faith. The Administration may apply the institutions of simulation or conflict in the application of the rule to qualify the true nature of the acts.

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