Acquiring companies may subrogate into the negative tax bases of the transferred business line

In business reorganization operations subject to the special regime for the contribution of business lines, the management of accumulated losses is a determining factor for the tax efficiency of the operation. The Directorate General of Taxes (DGT) has specified the treatment of pending negative tax bases to be offset in these scenarios.

What the DGT has ruled

The tax authority establishes that the acquiring entity has the possibility of subrogating into the negative tax bases of the transferring company, provided that an essential condition is met: that said bases were specifically generated by the business line being transferred. The objective is to ensure that the tax benefit remains linked to the economic unit that originated it.

In those cases where it is impossible to determine with certainty which specific activity generated the negative tax bases, the DGT admits the application of a proportional distribution criterion. To this end, the market value or the book value of the transferred asset set may be used in relation to the total assets of the transferring company.

What it means for you

For companies performing contributions of business lines, this criterion allows for greater predictability in the tax planning of the reorganization. If the operation is carried out under the special regime provided for in Law 27/2014, the entity receiving the activity does not lose the right to offset the losses of the transferring company, provided that the origin of the losses can be proven or the aforementioned proportional distribution method is applied.

What should be done

In the event of an operation of this type, it is necessary to conduct a prior analysis of the traceability of the negative tax bases. It is fundamental to have documentation that allows for the identification of which part of the losses corresponds to the business line subject to transfer. If direct identification is not viable, a calculation based on the book or market values of the assets must be prepared to justify the proportional distribution before the Tax Administration.