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V2568-17 10 October 2017 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · fusión por absorción

Special merger regime applicable if valid economic reasons exist and no fraud is intended

A business group has enquired whether the merger by absorption of two companies with tax loss carryforwards can qualify for the special Corporate Tax regime, and its impact on VAT, Transfer Tax, and Stamp Duty. The Directorate General for Taxes (DGT) responds that this is possible provided the transaction is driven by valid economic reasons and is not intended to commit fraud, allowing for the subrogation of tax bases subject to certain limits.

The question raised

1) Whether the described transactions may qualify for the tax regime provided for in Chapter VII of Title VII of Law 27/2014, of November 27, on Corporate Income Tax and whether valid economic reasons exist.

The DGT's ruling

The transaction may qualify for the special merger regime if it is carried out for commercial purposes and complies with Article 76.1 of the LIS. The reasons for simplification and rationalization of the structure are considered valid economic reasons pursuant to Article 89.2 of the LIS. The existence of tax loss carryforwards does not prevent the application of the special regime if the predominant purpose of the merger is not their exploitation. The absorbing company is subrogated into the right to offset such losses within the limits set by the regulations.

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