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V2786-14 15 October 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · escisión parcial

Partial demergers and reverse mergers may qualify for special tax regime if commercial requirements and valid economic reasons are met

A query was raised regarding whether a partial demerger of a business line, a financial demerger, and a reverse merger can apply the special regime for Corporate Income Tax. The DGT indicates that, provided they meet commercial and tax requirements and are driven by economic motives, they may benefit from the regime.

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 partial spin-off of a line of business, financial spin-off, and reverse merger operations, and whether the alleged motives are considered economically valid for these purposes.

The DGT's ruling

The partial spin-off of a line of business requires that the segregated assets constitute an autonomous economic unit and that the transferring entity maintains another line of business. For a financial spin-off, the entity must segregate majority holdings while maintaining other holdings or a line of business. A merger may qualify for the regime if it is carried out within a commercial context and complies with Article 83.1 of the Recast Text of the Corporate Income Tax Law. Motives of restructuring, risk isolation, or business unit management are considered economically valid, provided that the primary purpose is not tax advantage.

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