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V2370-24 19 November 2024 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · condonación de deuda

Debt forgiveness and property contributions between related companies do not generate expenses or income for CIT (except property valuation)

A company forgives a debt owed by another and contributes a property to its own equity, with both companies sharing the same shareholders. The DGT analyses the effects on CIT, IRPF, VAT, and ITPAJD of these transactions between group companies.

The question raised

In relation to the forgiveness of the loan, what are the effects of the operation on the Corporate Income Tax of the two entities and on the Personal Income Tax?

The DGT's ruling

In Corporate Income Tax, the forgiveness of debt between dependent companies does not generate an expense for the donor nor income for the debtor, as it is understood as a distribution and contribution of equity. In the contribution of real estate, the donor company must include in its tax base the difference between the market value and its tax value. In Personal Income Tax, these operations do not produce effects for the partners as they are external to the loan or the contribution. In VAT, the transfer of an isolated real estate asset is subject to the tax, although it could be exempt if it is a second delivery. In Transfer Tax on Property Transfers and Documented Legal Acts, the operation is subject to tax but exempt as a contribution by partners.

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