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V2578-14 1 October 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · capitalización de créditos

Capitalisation of credits generates no taxable income or expense for the debtor entity

The DGT responds that the conversion of debt into equity through exercise of a purchase option constitutes a mere reclassification of debt into shareholders' funds, generating no taxable income or expense.

The question raised

1) Whether the capitalization of receivables that would occur as a consequence of the exercise of the purchase option by financial entities, and subsequent to the same, would not result in the consideration of any tax income or expense in the tax base of the Corporate Income Tax for the taxpayer.

The DGT's ruling

The capitalization of receivables shall be valued in the debtor entity at the amount of the capitalized debt, without generating income in its tax base, regardless of whether an income is recognized for accounting purposes. The transferring entity shall include the difference between the amount of the capital increase and the tax value of the capitalized receivable. In a global analysis, the operation reflects the conversion of an existing credit right into equity for an equivalent amount between the parties.

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