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V2896-17 13 November 2017 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · sicav

Merger of Spanish and Luxembourgish SICAVs may qualify for special regime if valid economic reasons exist

A Spanish SICAV has queried whether its merger with a Luxembourgish entity can qualify for the special merger regime and if its motives are considered economic. The Directorate General for Taxes (DGT) indicates that the regime could apply provided that the acquired assets are not assigned to a permanent establishment in Spain and the primary purpose of the transaction is not tax advantage.

The question raised

1. Whether the aforementioned operation may qualify for the special tax regime under Chapter VII of Title VII of the LIS and whether the reasons stated may be considered valid economic reasons for the purposes of the provisions of Article 89.2 of the LIS.

The DGT's ruling

The merger operation may qualify for the special regime under Chapter VII of Title VII of the LIS if it is carried out within a commercial scope and complies with Article 76.1 of the LIS. If the acquiring entity is a non-resident, the income shall be included in the tax base if the elements are not linked to a permanent establishment in Spain. The reasons of reducing formalities, improving liquidity, changing management companies, or seeking a harmonized regulatory framework are considered valid economic reasons pursuant to Article 89.2 of the LIS. If both the absorbing and the absorbed companies are taxed at 1%, the rule of linear generation of income under Article 77.1 does not apply.

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