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V5070-16 22 November 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · gastos financieros

Interest expenses on intra-group loans for share acquisitions may be deductible if valid economic reasons exist

A company has requested a ruling on whether interest expenses from an intra-group loan, used by another group entity to acquire its shares, are deductible. The DGT has determined that, as this constitutes a restructuring resulting from a third-party acquisition, valid economic reasons can be demonstrated.

The question raised

Whether the proposed transaction has valid economic reasons for the purposes of the limitation provided for in letter h) of Article 15 of the Corporate Income Tax Law in relation to the financial expenses derived from the intra-group loan to be granted to H (which will form part of the same tax group as the requesting entity).

The DGT's ruling

Financial expenses arising from debts with group entities intended for the acquisition of holdings are not deductible, unless valid economic reasons are proven. Debt restructuring following an acquisition from third parties is considered a valid economic reason. In this case, the allocation of debt in a homogeneous manner and under conditions analogous to those of third parties allows for the deductibility of financial expenses.

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