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V1077-14 14 April 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · cesión gratuita

Free transfer of shares by a local council does not generate Corporation Tax income

A local council transfers shares in water communities to its wholly-owned subsidiary free of charge. The DGT has ruled that, as these are not linked to a specific activity, they are considered shareholder contributions and do not generate taxable or accounting income.

The question raised

Whether the taxpayer is required to settle any type of tax with the Tax Agency as a result of the transaction carried out.

The DGT's ruling

The transaction is classified as a contribution by the sole shareholder as the shares are not associated with a specific activity of public interest. Therefore, it does not constitute an accounting or tax income for Corporate Income Tax. Regarding Transfer Tax, the transaction is subject to tax as a shareholder contribution that does not involve a capital increase, but it is exempt.

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