Cooperatives with mixed tax rates cannot act as dominant entities in a tax group

The possibility of fiscally consolidating a group of companies under the direction of a cooperative faces a significant operational limit following the Tax Administration's recent interpretation of current regulations.

What the DGT has ruled

The Directorate General of Taxes (DGT) has determined that, for an entity to be considered dominant in a tax group according to Article 58 of the Corporate Income Tax Law (LIS), the subsidiary entities that are subject to a different tax rate than that of the representative entity cannot be part of said group.

In the case analyzed, the cooperative presented a regime of different rates for its cooperative and extra-cooperative results. This duality in the application of the tax prevents the cooperative from acting as the dominant entity of a group that includes commercial companies subject to the general tax rate. Consequently, the integration of these companies into a tax consolidation regime is excluded due to the lack of homogeneity in the applicable rates.

What this means for you

If your business structure includes a cooperative as a parent or head company, the configuration of its economic activity is decisive for tax consolidation. If the cooperative carries out activities that involve the application of differentiated tax rates (as occurs with the distinction between cooperative and extra-cooperative income), it will not be able to exercise fiscal dominance over other commercial companies taxed at the general rate.

This criterion limits tax planning options for business groups seeking consolidation to optimize their tax burden, especially when the controlling entity has the legal nature of a cooperative with special regimes.

What should be done

In the face of a group structure that includes cooperatives, it is necessary to evaluate the nature of the results they obtain and the tax rate that applies to them. The homogeneity of tax rates between the dominant entity and its subsidiaries is an indispensable requirement for the application of the tax consolidation regime. The composition of the group and the compatibility of the tax regimes of each entity must be analyzed before opting for tax integration.