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V1114-14 16 April 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · capitalización de deudas

Capitalisation of credits does not generate taxable income in the receiving company

A company in liquidation inquired whether capitalising its parent company's debts to offset losses would generate taxable or deductible expenses. The DGT responds that the receiving entity will not include income in its tax base as a result of the operation.

The question raised

If, in the case of the contribution of credits to offset losses by its parent company, given that it is a 100% shareholder-company relationship and there is no difference between the tax valuation of the credit between the lender and the borrower, the referred contribution should not generate any tax income or expense in the Corporate Income Tax of the consulting entity.

The DGT's ruling

The entity receiving the credit that carries out a capital increase or an increase in equity for the amount of the existing debt shall not include income in its tax base, regardless of whether there is an accounting gain. For the shareholder, the difference between the amount of the capital increase and the tax value of the capitalized credit, if any, shall be included. Furthermore, the limitation on the offsetting of negative tax bases shall not apply in the tax period of the entity's dissolution.

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