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V3089-14 13 November 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · doble imposición interna

Potential application of internal double taxation and profit reinvestment deductions

A company enquired whether it could apply the internal double taxation deduction to the undistributed profits of transferred shares, and whether the reinvestment deduction could also be applied. The DGT ruled that both are applicable, but they are incompatible with each other regarding the same portion of income.

The question raised

1. Whether it may apply in the future the deduction to avoid internal inter-corporate double taxation to the income obtained from the transfer of shares representing 50% of the share capital of company A, in the portion corresponding to the undistributed net profits obtained during the periods in which the consulting entity held more than 5% of the participation.

The DGT's ruling

The entity may apply the deduction for internal double taxation (Art. 30.5 TRLIS) to the net increase in undistributed profits generated during the period of ownership. Regarding the reinvestment deduction (Art. 42 TRLIS), this shall be applied to the portion of the income obtained from the transfer that has not given rise to the double taxation deduction. The amount of income for the reinvestment deduction shall not include the portion that has given rise to the right to the double taxation deduction.

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