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V3022-17 20 November 2017 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · régimen especial de fusiones

Special merger regime may apply if valid economic reasons exist for the transaction

A parent company intends to absorb its subsidiary to simplify its structure and improve solvency. The DGT rules that the special merger regime is applicable provided the transaction is driven by valid economic reasons and its primary purpose is not to obtain a tax advantage.

The question raised

Whether the proposed transaction is subject to the special regime established in Chapter VII of Title VII of Law 27/2014, of November 27, on Corporate Income Tax.

The DGT's ruling

The special merger regime does not apply if the main objective of the transaction is tax fraud or evasion, or if it lacks valid economic reasons. Reasons such as structural simplification, rationalization of activities, or improvement of solvency may be considered valid. The existence of tax loss carryforwards in the absorbed company does not prevent the application of the regime, provided that the activities are maintained and the transaction does not seek to liquidate activities.

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