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V1561-19 25 June 2019 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · fusión por absorción

Merger by absorption may qualify for special Corporate Tax regime if valid economic reasons exist

A company has consulted whether its merger by absorption can apply the special Corporate Tax regime and if the stated reasons are valid. The DGT indicates that the transaction may qualify for said regime if carried out for commercial purposes and based on real economic reasons, and that the existence of tax loss carryforwards does not invalidate the application of the regime.

The question raised

1. Whether the described transaction may qualify for the tax regime provided for in Chapter VII of Title VII of Law 27/2014, of November 27, on Corporate Income Tax and whether valid economic reasons exist.

The DGT's ruling

To apply the special merger regime, the transaction must be carried out within a commercial scope pursuant to Law 3/2009 and comply with Article 76.1 of the Corporate Income Tax Law. The existence of tax loss carryforwards does not preclude the regime if the merger strengthens the equity position of the resulting entity and its primary purpose is not the exploitation of said tax losses. Reasons of organizational and financial efficiency could be valid, although their validation depends on the facts. The acquiring entity subrogates into the tax loss carryforwards of the transferor within the limits of the law.

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