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V1888-19 18 July 2019 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · fusión por absorción

Mergers of operating companies may qualify for special Corporate Tax regime if valid economic reasons exist

A real estate leasing company intends to absorb another company with tax loss carryforwards to simplify its structure. The DGT indicates that the transaction may apply the special merger regime if carried out for valid economic reasons and not solely for tax purposes.

The question raised

Whether the special regime of Chapter VII of Title VII of the Corporate Income Tax Law would be applicable to the proposed transaction.

The DGT's ruling

The application of the special merger regime requires that the transaction be carried out within a commercial scope and comply with the requirements of Article 76.1 of the Corporate Income Tax Law. The fact that the absorbed company has tax loss carryforwards does not prevent the application of the regime if both are operating companies and the merger has valid economic motives, such as the rationalization of activities. However, the offsetting of such tax losses shall be subject to the limits of Article 84 of the Corporate Income Tax Law.

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