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V2750-14 13 October 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · condonación de crédito

Debt forgiveness between dependent companies does not generate income for the companies or their shareholders

A query was raised regarding whether the forgiveness of a debt between two companies held by the same shareholders generates income for the entities or for the individual shareholders. The DGT determines that there are no tax implications for Corporate Tax for the companies involved, nor for Personal Income Tax for the shareholders.

The question raised

Whether the proposed operation generates any type of income in the commercial entities, or in their individual shareholders.

The DGT's ruling

In Corporate Income Tax, the creditor company does not generate an expense as its equity decreases, and the debtor company does not generate income as its equity increases. For Personal Income Tax, the forgiveness of a loan between companies does not produce effects for individual shareholders, as they are external to the loan made between the two entities.

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