Companies selling non-related shares will use accounting results

The valuation of social share transfer operations is a critical point in determining the taxable base for Corporate Income Tax (IS). Recently, the Dirección General de Tributos (DGT) has specified the applicable criteria when the operation is not carried out between related parties.

What the DGT has ruled

The inquiry raised whether, in the presence of contractual restrictions or agreed price formulas, the market value criterion provided for in the Corporate Income Tax Law (LIS) should be applied. The binding body has determined that, if the transfer is not carried out between related persons or entities as established in Article 18.2 of the LIS, the application of the market value rule is not appropriate.

In these cases of non-relatedness, the income derived from the transfer of shares must be included in the taxable base according to the accounting result obtained, applying the corresponding tax adjustments. The DGT emphasizes that determining market value is a matter of fact that must be proven by the taxpayer when required by regulations.

What this means for you

For companies that operate with shares in other entities, this criterion establishes a clear distinction between operations with related parties and operations with independent third parties:

• Operations with related parties: The obligation to observe market value remains to avoid tax adjustments.
• Operations with third parties (non-related): The value of the operation will be the accounting result, without the need to adjust the price to market value, provided that the requirements of accounting and tax regulations are met.

This implies that the existence of price formulas or complementary agreements in sale and purchase contracts does not automatically mandate the application of market criteria if the relatedness scenarios provided for in the law do not occur.

What should be done

In the event of a possible transfer of shares, it is necessary to:

• Verify the existence of a relationship between the transferor and the acquirer according to Article 18.2 of the LIS.
• Ensure that the accounting result of the operation is correctly reflected and subject to the relevant tax adjustments.
• Assess the contractual documentation supporting the price to guarantee the legal certainty of the operation.