Total spin-offs may qualify for tax neutrality under the LIS

The restructuring of companies through the total spin-off of their assets and liabilities is a corporate management tool that requires strict compliance with regulations to avoid unexpected tax burdens. Recently, the Dirección General de Tributos (DGT) has specified the conditions under which these operations may maintain their tax neutrality.

What the DGT has ruled

The tax administration has indicated that, if a total spin-off is carried out in accordance with Royal Decree-Law 5/2023 and satisfies the requirements established in Article 76.2.1º a) of the Corporate Income Tax Law (LIS), the operation may qualify for the special tax neutrality regime provided for in Chapter VII of Title VII of the aforementioned law.

Under this assumption, the following effects occur:

• Income generated by the transferring entity will not be integrated into its taxable base.
• Shareholders will not have to integrate income into their taxable base for the receipt of the new holdings.
• The elements received by the beneficiary companies will maintain their original tax values and seniority.

However, the DGT warns that this regime will not be applicable if it is determined that the main objective of the operation is tax fraud or evasion, in accordance with the provisions of Article 89.2 of the LIS.

What it means for you

For companies, this criterion allows for business division processes to be carried out without generating immediate taxable capital gains, facilitating the reorganization of groups or assets. Shareholders also benefit, as the transfer of holdings to the new entities does not constitute a taxable event, preserving the continuity of tax values.

What should be done

Given the importance of the economic substance of the operation, it is necessary to ensure that the spin-off responds to legitimate commercial or management motives. The correct application of the regulations of Royal Decree-Law 5/2023 and compliance with the requirements of the LIS are fundamental to prevent the Administration from qualifying the operation as a tax evasion measure. It is recommended to assess each case individually to confirm that the proposed structure complies with all legal precepts.