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V2217-14 8 August 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · exención por doble imposición económica

Economic reasons for relocating a business unit to Switzerland may qualify for dividend exemption

A company asks whether the reasons for moving its Travel Retail unit from Spain to Switzerland constitute valid economic grounds for applying the international double taxation exemption. The DGT states that the stated reasons may be considered valid, although their truth is a factual issue that must be proven.

The question raised

Whether the reasons set forth constitute an economic viewpoint, a sufficient justification of the rationality of the consulting Group's conduct, and are classified as valid economic reasons for the purposes of Article 21 of the Recast Text of the Corporate Income Tax Law approved by Royal Legislative Decree 4/2004, of March 5. Therefore, whether the exemption to avoid international economic double taxation would be applicable to dividends that, if applicable, the Swiss subsidiary might distribute, as well as any potential foreign-source income derived from the transfer of securities representing its equity.

The DGT's ruling

The economic reasons indicated by the applicant may be deemed valid and constitute sufficient and rational justification for relocating the tax residence from Spain to Switzerland. However, the reality of said reasons is a matter of fact that must be proven by the taxpayer before the audit and investigation bodies. Provided that the requirements of Article 21 of the TRLIS are met, the exemption on dividends from the Swiss subsidiary and on foreign-source income from the transfer of securities would be applicable.

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