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V3290-20 5 November 2020 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · fusión inversa

Reverse mergers may qualify for tax neutrality if valid economic reasons exist

A query was raised regarding whether a reverse merger between two companies can benefit from the tax neutrality regime under the Corporate Income Tax Act (LIS). The Directorate General for Taxes (DGT) indicates that the transaction may qualify for this regime provided it meets commercial and tax requirements, and that the economic motives are valid and not primarily intended to achieve a tax advantage.

The question raised

1. Whether the reverse merger operation between companies S and A indicated may qualify for the tax neutrality regime provided for in Chapter VII of Title VII of Law 27/2014, of November 27, on Corporate Income Tax, considering that the economic reasons presented are valid.

The DGT's ruling

To benefit from the special merger regime, the transaction must be carried out in a commercial context and comply with Article 76.1.a) of the LIS. The economic reasons presented could be considered valid, although they must be assessed alongside the existence of tax loss carryforwards. The presence of these losses does not invalidate the regime if the predominant purpose of the transaction is not their exploitation and the activities are maintained.

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