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V4998-16 17 November 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · fusión por absorción

Mergers by absorption may qualify for special tax neutrality if valid economic reasons exist

A parent company has requested a ruling regarding the tax treatment of a restructuring aimed at absorbing a subsidiary with negative net equity. The Directorate General for Taxes (DGT) examines whether the merger can be tax-neutral, the treatment of income arising from the extinction of a participating loan, and the offsetting of tax loss carryforwards.

The question raised

Alternative 1:

The DGT's ruling

Merger by absorption may qualify for the special tax neutrality regime if carried out for valid economic reasons and not for the purpose of fraud or tax advantage. The income from the extinction of a participating loan in the absorbing company is not covered by the special regime and forms part of its individual tax base. Said income must not be eliminated when determining the tax base of the tax group as it is an internal operation of financial assets. The subrogation of the negative tax bases of the absorbed company is possible under the special regime, respecting the limits of Article 84 of the LIS.

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