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A local council, as the sole shareholder of a company, is considering receiving a donation of its rural properties. The DGT has ruled that the transaction does not constitute a donation due to the absence of 'animus donandi', but is instead a distribution of equity (reserves, share premium, or capital).
Question posed - What would be the tax treatment in Corporate Income Tax for the donor corporation and what would be the resulting tax cost?
Profit-making transfers from a company to its shareholder are not donations, but rather distributions of equity. As they do not constitute a pure and simple donation, the tax incentives of Law 49/2002 do not apply. The city council, as a local entity, is exempt from Corporate Income Tax pursuant to Article 9.1 of the LIS. Regarding the ITPAJD, the transaction is exempt under the documented legal acts modality.
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