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V1484-18 30 May 2018 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · escisión parcial

Special demerger regime applicable if branches of activity possess economic autonomy and valid motives

A company enquired whether its partial demerger project, intended to separate real estate activities from commercial ones, could qualify for the special regime under the Corporate Income Tax Act (LIS). The Directorate General for Taxes (DGT) ruled that if the operation meets commercial requirements and the parties constitute autonomous branches of activity with valid economic motives, the special regime is applicable.

The question raised

Question posed: Possibility of the projected spin-off operation qualifying for the special tax regime regulated in Chapter VII of Title VII of Law 27/2014, of November 27, on Corporate Income Tax, and whether the economic motives can be considered valid for the purposes of applying the special regime.

The DGT's ruling

To apply the special spin-off regime, the segregated assets must constitute an autonomous economic unit (line of business) and the transferring entity must maintain another line of business. The autonomy of the line of business requires a distinct business organization that allows it to operate by its own means. Furthermore, the operation must not have the primary objective of tax fraud or evasion, and must be motivated by valid economic reasons such as the restructuring or rationalization of activities.

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