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V4139-15 28 December 2015 · SG de Fiscalidad Internacional Criterion in force
IRNR · capitalización por compensación de créditos

Bond-to-share conversion via credit compensation capitalisation may be exempt from IRNR under specific conditions

The DGT determines that debt restructuring involving bond exchange for loans followed by capitalisation of those loans into shares constitutes a single conversion operation, and that non-resident profits could be exempt if conditions in Law 13/1985 are met.

The question raised

Analyzing the operation as a whole, as a global debt restructuring process necessarily executed in two steps, whether the tax value of the loans received in the exchange must necessarily coincide with the value of the shares received in the capitalization, so that no income will be generated for the Bondholders by reason of the capitalization.

The DGT's ruling

The granting of loans in exchange for bonds for subsequent capitalization is a single operation of converting bonds into shares. These earnings could be classified as income from movable capital due to the transfer of equity. If the bonds meet the requirements of the second additional provision of Law 13/1985, the income obtained by non-residents without a permanent establishment would be exempt in Spain.

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