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V3283-14 9 December 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · entidades de tenencia de valores extranjeros

Spain cannot tax the dissolution of a Portuguese entity unless the transferor is a Spanish resident, except in cases of immovable assets

A Spanish company asked whether the dissolution of a entity in Madeira would be taxable in Spain, as the entity held shares in a Spanish company with immovable property in Spain. The DGT states that, generally, Spain has no taxing power over the transfer of shares if the transferor is not a Spanish resident, except in specific cases involving immovable property.

The question raised

1. Whether the ex officio dissolution of entity D by the authority of the Autonomous Region of Madeira will be taxed in entity I, given that it has filed tax returns for the 2008 to 2012 fiscal years with an Internal Revenue Service tax number and an employer number and has been the owner of the former since 2008.

The DGT's ruling

Spain cannot tax the dissolution of the Portuguese entity because the taxpayer is not a party to the transaction. Regarding the transfer of shares of the Spanish company, the Convention with Portugal and the one with the USA prevent taxation in Spain as it is not the country of residence of the transferor, unless the indirect holding exceeds 25% or the assets consist primarily of real estate in Spain. In the latter case, Spain could tax the income if the assets of the Spanish company are predominantly real estate.

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