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V2755-14 14 October 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · régimen especial de fusiones

Corporate mergers may qualify for the special regime if valid economic reasons exist

A real estate development company inquires whether a merger intended to unify management and reduce costs is economically valid for the application of the special regime under Corporate Income Tax. The DGT responds that, provided the transaction meets commercial and tax requirements, the alleged reasons are valid and the objective is not considered to be the exploitation of tax loss carryforwards.

The question raised

Question posed: Whether the application of the special regime under Chapter VIII of Title VII of the Recast Text of the Corporate Income Tax Law is appropriate for the proposed transaction, and whether the alleged reasons are considered economically valid for these purposes.

The DGT's ruling

To apply the special merger regime, the transaction must be carried out within a commercial framework and comply with Article 83.1 of the TRLIS. Valid economic reasons, such as the rationalization of activities, permit the use of the regime, provided the purpose is not merely tax advantage. The existence of tax loss carryforwards in the absorbed company does not invalidate the regime if the merger strengthens the equity position of the resulting company. The offsetting of such losses shall be subject to the limits set forth in Articles 90.3 and DT 41 of the TRLIS.

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