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V1684-14 2 July 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · escisión total

Total split may qualify for special tax regime if commercial requirements and valid economic motives are met

A parent company asks whether its proposal for a total split may benefit from the special tax regime. The DGT responds that such a regime may apply if the operation complies with the commercial requirements for a total split and is carried out for valid economic reasons, not merely tax purposes.

The question raised

Whether the described operation may qualify for the special tax regime under Chapter VIII, Title VII of the Recast Text of the Corporate Income Tax Law approved by Royal Legislative Decree 4/2004, of March 5.

The DGT's ruling

To apply the special spin-off regime, the operation must comply with the concept of total spin-off under the Law on Structural Modifications. If the partners receive shares in the beneficiary entities in proportion to their previous holding, it is not necessary for the assets to constitute business lines. Furthermore, the operation must respond to valid economic reasons and must not have the primary objective of obtaining a tax advantage.

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