Companies cannot use partial demergers to segregate real estate without independent management

Tax neutrality in partial demerger operations requires compliance with strict requirements regarding the nature of the assets being transferred. Not every segregation of assets allows access to the special regime for Corporate Income Tax (IS).

What the DGT has ruled

The Directorate General of Taxes (DGT) has determined that, for a partial demerger to be tax-neutral, the segregated assets must constitute a line of business. This concept is defined as an autonomous economic unit capable of functioning by its own means.

To meet this requirement, regulations demand a differentiated business organization that possesses its own material and human resources. In the case analyzed, the DGT concludes that if real estate assets (such as industrial warehouses) are solely used for the company's main activity and do not have separate management and organization, their segregation cannot be classified as a line of business under the terms of Article 76.4 of Law 27/2014.

What this means for you

If your company intends to carry out a partial demerger to apply the tax neutrality regime, it is not enough to simply transfer the ownership of real estate assets to another company. If these assets lack an organizational structure, dedicated personnel, and the material resources that allow them to operate independently from the main activity, the operation will not be considered a partial demerger for Corporate Income Tax purposes.

This implies that the transfer of such real estate could fall outside the special regime, losing the tax neutrality benefits provided for in Chapter VII of Title VII of the Corporate Income Tax Law.

What should be done

Companies seeking to execute these types of operations must ensure that what is being segregated is an economic unit with its own organization. It is necessary to verify that the assets intended for transfer possess a differentiated management structure and sufficient resources to function autonomously from the demerging company.