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V3210-20 27 October 2020 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · escisión total

Total demergers may qualify for special Corporate Tax regime if carried out for valid economic reasons

A family business has enquired whether its project to undergo a total demerger into four separate entities—aimed at specialising activities and facilitating generational succession—can benefit from the special Corporate Tax regime. The Directorate General for Taxes (DGT) indicates that, provided the requirements of proportionality and valid economic motives are met, this regime could apply, along with its corresponding effects on Personal Income Tax, Transfer Tax, Stamp Duty, and Inheritance and Gift Tax.

The question raised

Whether the described transaction could qualify for the tax regime provided for in Chapter VII of Title VII of Law 27/2014, of November 27, on Corporate Income Tax.

The DGT's ruling

The transaction could qualify for the special regime under the Corporate Income Tax Act if it is carried out within a commercial scope and the partners receive shares on a proportional basis. It is not necessary for the assets to constitute business branches if the allocation is proportional. The application of the regime requires that the transaction does not have fraud or tax evasion as its primary objective, but rather valid economic motives such as restructuring or rationalization. The alleged economic motives could be valid, although their classification is a matter of fact.

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