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V1685-14 2 July 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · régimen especial de fusiones

Mergers by absorption may qualify for special tax regime if valid economic reasons exist

A business group has enquired whether its restructuring through mergers can benefit from the special regime for Corporate Income Tax. The Directorate General for Taxes (DGT) responds that this is possible provided the operation serves genuine economic purposes rather than purely tax-driven ones, and further details the treatment of tax loss carryforwards.

The question raised

Whether the application of the special regime of Chapter VIII of Title VII of the consolidated text of the Corporate Income Tax Law is appropriate for the proposed operations. And whether the alleged reasons are considered economically valid for these purposes.

The DGT's ruling

Merger operations may qualify for the special regime of the TRLIS if they meet the requirements of commercial law and are carried out for valid economic reasons, such as the rationalization of activities or the improvement of competitiveness. The utilization of negative tax bases does not invalidate the economic reason if the entities are operational and maintain their activity. The negative tax bases of the absorbed entities are transferred to the absorbing entities, but they must be reduced by the positive difference between the value of the contributions and the book value, always avoiding the double compensation of the same loss.

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