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V2173-14 6 August 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · régimen fiscal especial

Special merger tax regime applicable if valid economic reasons exist beyond mere tax advantages

A real estate group entity has enquired whether its merger operation can qualify for the special tax regime. The DGT has ruled that this is possible provided the operation meets both commercial and tax requirements, and is carried out for valid economic reasons rather than solely to obtain a tax advantage.

The question raised

Question posed: Whether the described transaction 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 merger regime, the transaction must comply with the provisions of the Law on Structural Modifications and Article 83.1 of the TRLIS. The regime shall not apply if the primary objective is tax fraud or evasion, or if it lacks valid economic motives such as the restructuring or rationalization of activities. The existence of tax loss carryforwards in the absorbed companies does not prevent the application of the regime if the activities are maintained and the financial situation is strengthened. The acquiring entity is subrogated into the right to offset said losses within the limits of Article 90.3 and the forty-first transitional provision of the TRLIS.

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