As we commented in the previous post of Special Tax Regime in Company Restructuring (Part I), the special or tax neutrality regime applies to mergers, demergers and exchanges of securities provided that they are carried out on the basis of valid economic reasons and allows the taxation of the transactions to be deferred with respect to the income generated for corporate income tax purposes.
However, it is necessary to analyse what implications these restructuring operations may have on other taxes that are also affected.
Municipal capital gains tax (IIVTNU) on restructuring operations
Firstly, if the entity transferring the restructuring operation is the owner of a property that is transferred, is municipal tax on the increase in value of urban land (IIVTNU), known as municipal capital gains tax (plusvalía municipal) payable?
The second additional provision of the Corporate Income Tax Law regulates the IIVTNU regime in business restructuring operations, establishing that no municipal capital gains tax is due on the transfer of urban land when it derives from restructuring operations. to which the special tax scheme under consideration applies, except where land is contributed which does not form part of the branch of activity)
This means that in a subsequent transfer of the land, the date of acquisition for the purposes of calculating this municipal tax will be the date of the original acquisition in the transferring entity.
VAT
As far as indirect VAT taxation is concerned, the question arises as to whether the transfer of assets, although exempt from corporate income tax as we have seen, is subject to VAT.
Article 7 of the VAT Act provides that the transfer of an autonomous economic unit is not subject to VAT.
It is important to understand and analyse what a "autonomous economic unit"The VAT Act expressly mentions that this definition is different and independent of the tax regime that may be applicable for the purposes of other taxes.
In short, it is a set of tangible and intangible assets which form part of the business assets of the taxable person, provided that "...".constitute an autonomous economic unit capable of engaging in a business or professional activity by its own means"This excludes an autonomous transfer of goods or sale of stocks.
The key, therefore, as the Directorate General for Taxation has held, is the fact that the combination of tangible (and intangible) elements is sufficient and allows "...".the performance of a given economic activity, or a set of activities, or a set of activities". And this, even if that activity is only one part of a larger undertaking from which it has been carved out.
This shows that it is possible that a given restructuring operation does apply the tax neutrality regime of Chapter VII of Title VII of the Corporate Income Tax Act but may nevertheless be subject to VAT if it is not an autonomous economic unit.
Transfer Tax and Stamp Duty
And as regards Transfer Tax and Stamp Duty (ITP-AJD), it can be summarised as follows:
- Restructuring operations under the Corporate Income Tax Act, are not subject to corporate actions.
- And, they are exempt under the Stamp Duty and Transfer of Property for a consideration.
Therefore, Nor does it have any tax effects for the purposes of ITP-AJD.
Summary of taxation of restructuring operations
In short, if a restructuring operation of the kind analysed in our previous post is to be carried out, and provided that it is based on a valid economic reason and, furthermore, it can be considered as an autonomous economic unit for VAT purposes, the transaction would not have any tax implications for corporate income tax, VAT or ITP-AJD and would not accrue municipal capital gains tax, in case of existing real estate on the transferred lot
In any case, given the complexity of this type of restructuring operation and the need to ensure the correct execution and fiscal justification of each step to be taken, we always recommend that get advice in advance from lawyers specialising in commercial and tax law.The two areas go hand in hand in these operations.
After all, the operation needs to be approached technically and temporally considering the implications of both areas.
