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V0924-14 2 April 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · etve

Exemption for transfer of shares in ETVE on non-resident subsidiary profits

A Spanish company (A) asks whether it can apply the exemption under Article 21 of the TRLIS to the profit from the sale of its share in an ETVE (E), which holds direct and indirect shares in non-resident entities. The DGT confirms that the exemption can be applied to the portion of the profit attributable to shares in non-resident entities that meet the conditions of Article 21, whether the share is direct or indirect.

The question raised

1) Whether entity A, as a resident shareholder in Spain of entity E, may benefit from the application of the exemption provided in Article 118.2 of the recast text of the Corporate Income Tax Law (TRLIS), regarding the income obtained from the transfer of shares in company E. In particular, whether the exemption provided in Article 21 of the aforementioned legal text is applicable to that portion of the income that corresponds to value differences attributable to holdings in non-resident entities in which E participates both directly and indirectly, provided that all entities comply with the requirements established in the aforementioned Article 21 of the TRLIS.

The DGT's ruling

The company may apply the exemption provided in Article 21 of the TRLIS to the portion of the income from the transfer of the ETVE that corresponds to value differences attributable to non-resident entities in which the ETVE participates directly or indirectly, provided that the requirements of said article are met. Regarding the implicit capital gains of the ETVE, the portion corresponding to foreign subsidiaries that meet the requirements of Article 21 shall be exempt, while the remainder shall be subject to taxation. This distinction may be made using a reasonable criterion based on the proportion of implicit capital gains in the non-resident entities relative to the total.

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