Tax neutrality in mergers by absorption under Royal Decree-Law 5/2023

The application of tax neutrality in business concentration operations has undergone relevant regulatory changes. Recently, the feasibility of applying this regime to mergers by absorption has been analyzed in accordance with the provisions introduced by Royal Decree-Law 5/2023 and Law 27/2014 on Corporate Tax (LIS).

What the DGT has resolved

The inquiry addresses the possibility of merger by absorption operations qualifying for the tax neutrality regime. The criteria focus on the application of current regulations to prevent the transfer of assets from generating immediate tax effects that alter the taxable base of the entities involved.

What it means for you

For companies, this scenario allows for the execution of merger processes without the capital gains derived from the transfer of assets being incorporated into the Corporate Tax (IS) taxable base. This implies that the tax values of the assets remain intact in the acquiring entity, preserving the continuity of the future tax burden.

Regarding the shareholders of the transferring entity, the regime ensures that no income is incorporated from the attribution of values from the acquiring entity. This provides a structure of fiscal continuity that avoids the emergence of tax contingencies at the time of the corporate reorganization.

What should be done

Given the complexity of the applied regulations, it is necessary to analyze each merger operation individually. It must be verified that all requirements demanded by Law 27/2014 and the provisions of Royal Decree-Law 5/2023 are met to guarantee access to tax neutrality. Correct documentation of the operation is fundamental to prove the continuity of tax values before the Tax Administration.