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V1151-16 22 March 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · bonificación

Land sales ineligible for 99% Corporation Tax relief

A public entity, wholly owned by a City Council, sought clarification on whether land sales resulting from budgetary stability regulations could benefit from the 99% Corporation Tax relief. The Directorate-General for Taxes (DGT) ruled that this relief applies exclusively to income derived from the provision of specific public services and does not extend to the transfer of real estate.

The question raised

Whether the income derived from the disposal of land by the applicant in 2014, as a consequence of state budgetary stability regulations, corresponds to any of the municipal public services listed in section 2 of Article 25 and in section 1, letters a), b), and c) of Article 36 of the LRBRL.

The DGT's ruling

To apply the 99% reduction to the gross tax liability, both subjective requirements (wholly public capital company) and objective requirements (income derived from the provision of public services listed in the LRBRL) must be met. The reduction applies solely to income arising from the provision of said services. The transfer of real estate does not constitute the provision of a public service; therefore, the income obtained from this operation is not subject to the reduction.

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