Voluntary contributions to equity and their impact on the acquisition value

Determining the acquisition value of company shares is a critical element for calculating capital gains or losses in Personal Income Tax (IRPF). A recent ruling from the Directorate General of Taxes (DGT) clarifies the tax treatment of voluntary contributions made to a company's equity.

What the DGT has ruled

The DGT has ruled that voluntary contributions made to a company's equity, provided they are made without the right to a refund or consideration, must be integrated into the acquisition value of the shares. As this improvement in the value of the shares occurs, the taxpayer must distinguish between two separate components at the time of transfer:

• The portion corresponding to the original acquisition of the shares.
• The portion corresponding to the improvement produced by the voluntary contribution.

The difference between the respective acquisition prices (including the improvement) and the transfer price is what will determine the capital gain or loss subject to taxation in accordance with Law 35/2006.

What this means for you

If you are a shareholder in a company and have made capital contributions without receiving direct consideration or the right to a refund, your acquisition cost is not solely the price initially paid for the shares. These contributions increase the book value of your investment. This adjustment is relevant to avoid an incorrect calculation of the taxable base should you decide to sell your shares in the future.

What you should do

It is necessary to maintain a detailed record of all contributions made to the company to correctly break down the acquisition value against the transfer value. Since the distinction between the original acquisition and the improvement is mandatory to determine the capital result, having documentation that proves these operations is fundamental for the correct settlement of IRPF.