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V1763-19 10 July 2019 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · escisión parcial

For a partial spin-off to be tax-wise valid, the segregated assets must constitute an autonomous business activity

A company asked whether the segregation of real estate and debt from a sports centre could be considered a business activity for a partial spin-off. The DGT replied that there must be a previously established, distinct organisation of material and human resources.

The question raised

Whether the real estate and the debt associated with its acquisition, in addition to the remaining elements, assets and liabilities, and personnel associated with the described sports center, constitute a line of business for the purposes of the definition of partial demerger set forth in letter b) of the second section of Article 76 of the Corporate Income Tax Law.

The DGT's ruling

A line of business requires a set of assets that form an autonomous economic unit capable of operating by its own means. This requires a distinct business organization, with its own material and human resources, which allows for the identification of a habitual and continuous economic activity prior to the demerger. Furthermore, the operation must respond to valid economic reasons and must not have tax advantage as its primary objective.

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