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V5442-26 6 August 2026 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · neutralidad fiscal

Potential application of tax neutrality in a merger by absorption of a wholly-owned subsidiary

A parent company has enquired whether the merger by absorption of its subsidiary, which is facing economic difficulties, can qualify for tax neutrality. The Directorate General for Taxes (DGT) has ruled that this is possible provided that all commercial and legal requirements are met, and that the existence of tax loss carryforwards does not, in itself, invalidate the regime.

The question raised

Whether the proposed merger operation could apply the tax neutrality regime provided for in Chapter VII of Title VII of Law 27/2014, of November 27, on Corporate Income Tax, as well as whether valid economic reasons exist for its application.

The DGT's ruling

If the operation is carried out within a commercial scope and complies with Article 76.1 c) of the LIS, it may benefit from the tax neutrality regime. The absorbing company shall subrogate into the negative tax bases of the absorbed company subject to the limits set forth in Articles 84.2 and the sixteenth transitional provision 7.b) of the LIS. The existence of negative tax bases does not invalidate the regime if the merger strengthens the activity and its predominant purpose is not their exploitation or if it is part of a liquidation plan. The regime shall not apply if the primary objective is tax fraud or evasion.

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