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V3768-16 8 September 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · exención

Requirements for exemption from Corporate Tax on share transfers (Art. 21 LIS)

A consultancy and investment firm asks whether profits from the sale of shares in two entities (E and U) are exempt. The DGT responds that exemption is possible if the percentage ownership, fiscal residency, and non-patrimonial entity requirements are met.

The question raised

Whether the consulting entity may apply the exemption under Article 21 of the Corporate Income Tax Law in relation to the income obtained from the transfer of its holdings in the described entities.

The DGT's ruling

The exemption under Article 21 of the LIS applies if at least a 5% stake is held uninterruptedly during the previous year. For non-resident entities, there must be a double taxation treaty with an exchange of information or taxation abroad of at least 10%. The exemption shall not apply to the portion of income that is not an increase in undistributed profits if the participated entities are considered equity entities.

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