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V3141-16 6 July 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · exención

Exemption on the transfer of shares may apply if uninterrupted holding requirements are met

An entity inquired whether it could apply the exemption under Article 21 of the Corporate Income Tax Act to income derived from the transfer of its shareholding in a company. The Directorate General for Taxes (DGT) indicates that for this to apply, the entity must have held both its direct and indirect shareholdings uninterruptedly for more than one year.

The question raised

Whether the application of the exemption under Article 21 of the Corporate Income Tax Law is appropriate to the income received by the consulting entity derived from the transfer of its participation in Y.

The DGT's ruling

The exemption for the transfer of shares requires compliance with the requirements of paragraph 1 of Article 21 of the LIS. If the investee entity derives more than 70% of its income from similar income, the exemption requires the taxpayer to maintain an indirect participation that meets the percentage or acquisition value requirements. In this case, the entity must have held, uninterruptedly for more than one year, both its direct participation in the entity and its direct and indirect participation in second-level entities.

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