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V4903-16 11 November 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · exención de dividendos

Shares lent out by a subsidiary count towards the parent company's indirect holding if Art. 21.2.3º LIS requirements are met

A company has requested a ruling on whether shares of a subsidiary that have been lent to a financial institution count towards determining its indirect holding in a third company for the purposes of the dividend exemption. The DGT has ruled that they do count, provided the requirements of Article 21.2.3º of the Corporate Income Tax Act (LIS) are satisfied.

The question raised

Confirmation that the shares of A assigned in loan by H to the financial institution, whereby the borrowing entity undertakes to deliver to H the amount of the dividends or profit shares arising from the shares assigned in loan and H maintains the accounting record of the assigned shares, must be taken into account to determine the indirect participation of X in A, for the purposes of applying the exemption regime of Article 21 of the Corporate Income Tax Law.

The DGT's ruling

To apply the exemption provided in Article 21.1.a) of the LIS, the securities held by the lending entity in a company shall be taken into account to determine the minimum indirect participation of the parent company, provided that the requirements of Article 21.2.3º of the LIS are met. These requirements are: to maintain the accounting record of the securities, to prove that the dividend has been received by the other contracting entity or an entity within the same group, and to comply with the required holding period and percentage conditions.

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