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V0850-14 26 March 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · fusión por absorción

Merger of an inactive company may qualify for special regime if valid economic reasons exist

A holding company has enquired whether a merger by absorption of an inactive subsidiary can qualify for the special merger regime. The DGT has ruled that inactivity does not preclude the regime, provided the transaction is driven by valid economic reasons and is not solely for tax advantages.

The question raised

Whether the application of the special regime under Chapter VIII of Title VII of the Recast Text of the Corporate Income Tax Law is appropriate for the proposed operation, and whether the alleged reasons are considered economically valid for these purposes.

The DGT's ruling

If the merger is carried out under the Structural Changes Law and complies with Article 83.1 of the Recast Text of the Corporate Income Tax Law, the special regime may be applied. The inactivity of the absorbed company does not invalidate the regime if the operation is justified by reasons such as group reorganization, rationalization of activities, or administrative simplification. The regime shall not apply if the primary objective is tax fraud or evasion.

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