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V1825-18 22 June 2018 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · escisión parcial

Partial and subsequent financial split of a non-resident entity may qualify under the special tax regime if economic grounds exist and activity branch requirements are met

A company asks whether a partial split and a subsequent financial split of a non-resident entity may benefit from the special corporate tax regime. The DGT responds that this is possible if the activity branch requirements are satisfied and the operation is not primarily aimed at obtaining tax advantages.

The question raised

Possibility that both the first and the second projected spin-off operations may qualify for the special tax regime regulated in Chapter VII of Title VII of Law 27/2014, of November 27, on Corporate Income Tax. In particular, whether the alleged economic reasons can be understood as sufficient for the purposes of the provisions of Article 89.2 LIS. That is, whether it can be understood that valid economic reasons exist for the application of the regime.

The DGT's ruling

To apply the special spin-off regime, the segregated assets must constitute an autonomous economic unit (line of business) and the spun-off entity must maintain another line of business or majority holdings. In the case of a financial spin-off, the segregated assets must consist of majority holdings and the spun-off entity must maintain majority holdings in other entities or a line of business. Finally, the operation must not have the primary objective of tax fraud or evasion, and must be carried out for valid economic reasons such as the restructuring or rationalization of activities.

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