Non-proportional total demergers require the creation of autonomous business lines

The application of the special regime for mergers, demergers, and asset contributions requires strict compliance with technical requirements that guarantee tax neutrality. Recently, the Dirección General de Tributos (DGT) has specified the necessary conditions for a non-proportional total demerger to qualify for this treatment.

What the DGT has resolved

The tax authority has determined that, for a non-proportional total demerger to benefit from the tax neutrality regime, the segregated assets must constitute business lines as provided in Article 76.4 of the Corporate Tax Law (LIS).

This criterion implies that the division of assets and liabilities is not enough; each set of segregated assets must represent an autonomous economic unit. To comply with this precept, it is decisive that each block is capable of functioning on its own and that a distinct business organization exists. Likewise, the prior identification of these sets within the transferring entity is fundamental to validate the operation.

What it means for you

If your company is planning a total demerger where shareholders receive shares in a proportion different from the original one, compliance with the autonomy of the business lines is a sine qua non condition to avoid the taxation of the operation.

The lack of an independent organizational structure for each segregated asset could disqualify the operation from the special regime, causing the transfer of assets to be considered an ordinary sale subject to Corporate Tax. The key lies in the operational capacity of each resulting unit.

What should be done

In an operation of this nature, it is necessary to perform a technical analysis of the transferring entity's structure. It must be verified that:

• Each block of segregated assets has the human and material resources necessary for its independent management.
• There is a clear and prior differentiation of the economic units within the organization.
• The segregation of assets and liabilities responds to a real economic unit and not to a mere accounting division.

Given the technical complexity of these operations, it is fundamental to assess the specific situation of the company to ensure compliance with current regulations.