Contributions of business lines may prevent the recognition of capital gains

The application of the special tax neutrality regime in asset contribution operations is a determining factor for managing the tax impact in corporate reorganizations. The Dirección General de Tributos (DGT) has specified the scenarios in which these operations may be exempt from the recognition of capital gains.

What the DGT has resolved

The ruling analyzes the feasibility of the regime provided for in the Corporate Income Tax Law (LIS) under two different scenarios:

• Contribution of a business line: Tax neutrality may be applied as long as the contributed assets constitute an autonomous economic unit capable of carrying out operations independently.
• Contribution of assets: If it is not a complete business line, the regime will be applicable if the contributor meets two concurrent requirements: holding at least 5% of the capital of the acquiring company and having maintained accounting in accordance with the Commercial Code since, at least, the fiscal year prior to the operation.

In both scenarios, the company receiving the assets maintains the original tax values and acquisition dates of the goods, thus preventing the operation from generating an immediate tax impact.

What it means for you

For the business owner, this criterion allows for the transfer of assets or a business unit without the operation being considered a sale that requires taxation on the difference between the market value and the book value. This preserves the entity's liquidity by avoiding the need to face the payment of capital gains at the time of the contribution.

For the acquiring company, the consequence is the continuity of the tax base of the received assets, which allows for the management of depreciation and future transfers based on the historical values of the assets.

What should be done

Before proceeding with a reorganization, it is necessary to verify the nature of the assets to be transferred. If the intention is to contribute isolated elements, it must be confirmed that the minimum shareholding percentage and the seniority in complying with accounting regulations are met. The correct classification of the operation as a business line or as a contribution of assets will determine compliance with the requirements of the LIS.