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V5103-16 25 November 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · diferencia de fusión

Merger differences are not reduced by tax losses arising from freedom of depreciation

A company inquired whether the tax-deductible difference under the 27th transitional provision of the Corporate Income Tax Act should be reduced by tax losses corresponding to permanent differences. The Directorate General for Taxes (DGT) ruled that if such losses are due to freedom of depreciation, the reduction must not be applied to prevent double taxation benefits.

The question raised

Question raised 1. Whether the tax-deductible difference referred to in the twenty-seventh transitional provision of the Corporate Income Tax Act (formerly Article 89.3 of the recast text of the Corporate Income Tax Act) should only be reduced by the amount of negative tax bases corresponding to permanent differences.

The DGT's ruling

The amount of the tax-deductible difference under the twenty-seventh transitional provision of the CIT Act shall not be reduced by negative tax bases corresponding to the freedom of amortization applied by the absorbed entities. Since the freedom of amortization does not alter the amount of the merger difference, no double utilization of losses would occur. Therefore, the reduction provided for in the last paragraph of section 1 of said provision is not applicable in these cases.

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