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V2667-20 17 August 2020 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · escisión parcial

Requirements for applying the special spin-off regime: business line, financial spin-off and valid economic reasons

A multinational company has enquired whether it can benefit from the special spin-off regime under the Corporate Income Tax Act to segregate a business line and a majority stake in another company. The Directorate General for Taxes (DGT) indicates that the transaction may qualify for the regime if it is proven that the transferred assets constitute a business line or if it is a financial spin-off that meets the legal requirements.

The question raised

Existence of valid economic reasons to apply the special tax regime provided for in Chapter VII of Title VII of Law 27/2014, of November 27, on Corporate Income Tax.

The DGT's ruling

For the partial spin-off of a line of business, the segregated assets must constitute an autonomous economic unit and the demerged entity must maintain another line of business or majority holdings. In a financial spin-off, the segregated assets must be a majority holding and the demerged entity must maintain majority holdings in other entities or a line of business. The application of the special regime requires that the operation's primary objective is not tax fraud or evasion, but rather valid economic reasons.

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