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V1640-20 27 May 2020 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · escisión parcial

Partial demergers require segregated assets to constitute autonomous business lines to qualify for special tax regime

A taxpayer inquired whether a partial demerger of its engineering activity could qualify for the special regime under the Corporate Income Tax Act (LIS) and if valid economic reasons exist for such a move. The Directorate General of Taxes (DGT) stated that for this to apply, the segregated assets must constitute business lines with their own organisation, and that the alleged reasons could be valid if substantiated as factual.

The question raised

Question posed: Whether the described operation 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

In order for a partial spin-off to benefit from the special regime, the segregated assets must constitute business lines, understood as economic units capable of operating by their own means with a differentiated organization of material and human resources. This autonomy must exist within the transferring entity prior to the operation. Furthermore, the operation must not have fraud or tax evasion as its primary objective, and must be based on valid economic reasons such as the restructuring or rationalization of activities.

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