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V0936-14 2 April 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IP · exención

Whether bank balances are considered business assets for Wealth Tax exemption is a matter of fact

An entity has requested clarification on whether bank balances consisting of sinking funds and voluntary reserves from its business activities can be treated as business assets for the purpose of Wealth Tax exemption. The Directorate General of Taxes (DGT) indicates that while bank balances can potentially be considered business assets, it will not rule on this specific case as it constitutes a matter of fact.

The question raised

The question is raised whether or not the mentioned bank balance, which covers the amount of the amortization funds and Voluntary Reserves arising from the business activity of the consulting entity, is considered a business asset.

The DGT's ruling

Royal Decree 1704/1999 allows that, for the exemption from Wealth Tax on holdings in entities, assets representing the holding in equity or the transfer of capital to third parties, such as bank balances, may be considered business assets. However, the DGT does not resolve whether in this particular case the balance meets said requirements, as the assessment of the facts is the responsibility of the management bodies.

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