B Law & Tax
11 September 2023

Tax advisor: Tributes analyzes the Personal Income Tax taxation of the sale of a client portfolio

During 2023, the Directorate General of Taxes has issued several opinions on how the sale of a client portfolio is taxed in the IRPF and the rules for allocating the deferred payments received in exchange. For example, through binding consultations such as V1871-23 (June 28, 2023), V1674-23 (June 13, 2023), V0716-23 (March 24, 2023) and V0377-23 (February 21, 2023).

In all these consultations, it is emphasized that the portfolio of clients related to the activity, such as that of an insurance broker or a lawyer, is considered an asset linked to that activity, as established in article 29.1 of the LIRPF. Since it is a linked asset, the sale of the portfolio generates a capital gain or loss, which is calculated in accordance with article 28.2 of the LIRPF. In summary, as concluded in consultation V1871-23 (June 28, 2023), “the capital gain on the sale of the client portfolio is calculated in accordance with article 34.1, a), of Law 35/2006, i.e. as the difference between the acquisition values (which in this case would be zero, unless it was previously acquired from a third party) and the acquisition value (which in this case would be zero, unless it was previously acquired from a third party)”.

Considering the above, with regard to the time allocation of payments, article 14.1.c) of the Personal Income Tax Law (LIRPF) establishes that “capital gains and losses will be recorded in the tax period in which the change in equity occurs”. However, when payments are received over several years, recourse can be had to the provision of Article 14.2.d) of the LIRPF, which states the following:

“(d) In the case of transactions with deferred payments, the taxpayer has the option of proportionally allocating the income obtained in such transactions as the corresponding payments become due. Operations with deferred payments are considered to be those in which the price is received, totally or partially, in several successive payments, provided that the period from the delivery or disposition until the maturity of the last payment is greater than one year.

If promissory notes or other similar documents have been used to structure the payment in a transaction with deferred payments and these documents are transferred before maturity, the income will be allocated to the tax period in which the transfer was made.

This rule shall not apply to operations related to life or temporary annuity contracts. When goods and rights are transferred in exchange for a life or temporary annuity, the capital gains or losses for the beneficiary will be allocated to the tax period in which the annuity is established.”

Consequently, a taxpayer who sells a portfolio of clients may choose to apply this special rule if the period between the sale and the last payment is longer than one year.

B Law & Tax International Tax & Legal Advisors.

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