02 November 2023

Tax neutrality regime. A change of criteria regarding the requirements for its application.

The Directorate General of Taxes (hereinafter, “DGT“) modifies its perspective regarding the application of the tax neutrality regime in corporate restructurings. It now holds that the regularization of tax advantages pursued will only be allowed when it is conclusively demonstrated that the operation had as its main purpose tax fraud or tax evasion, and is not related to tax deferral, which is inherent to that regime, except in situations where the operation has been carried out for the sole purpose of obtaining such tax advantage.

The main purpose of the tax neutrality regime provided for in articles 76 and subsequent articles of the Corporate Income Tax Law (hereinafter, “CIT Law“) is that in certain restructuring transactions, as defined in said law, the tax component does not act either as an incentive or as an obstacle to their implementation. 

In particular, this regime allows such operations to be carried out at no tax cost, both in terms of direct and indirect taxation, postponing such taxation. 

For these purposes, it should be taken into account, as stated in Article 89.2 of the CIT Law, that: “The regime established in this chapter shall not apply when the main purpose of the transaction carried out is tax fraud or tax evasion. In particular, the regime shall not apply when the transaction is not carried out for valid economic reasons, but merely for the purpose of obtaining tax advantages.”

In this sense, the existence of valid economic motives (e.g. administrative simplification and reduction of administrative costs, succession planning, etc.) has always been, in practice, an indispensable requirement when analyzing the possibility for a restructuring operation to benefit from the application of such special tax regime. 

However, in its recent Binding ruling V2214-23, dated July 27, the DGT has modified its approach in relation to the analysis of the existence of a purely tax advantage when carrying out such corporate restructuring operations. 

In particular, according to the DGT, the tax advantage generated as a consequence of the restructuring operation should only be eliminated when it is proven that the operation had as its main purpose tax fraud or tax evasion, which is different from the simple deferral in the taxation of unrealized capital gains. The latter, according to the DGT, is inherent to this special regime.


In view of the DGT’s new approach, valid economic motives are not an essential requirement for the application of the restructuring tax regime. The absence of such motives simply creates a iuris tantum presumption that the operation could have had as its main purpose tax fraud or tax evasion, with the tax administration having the burden of proving that the main purpose of the operation was tax fraud or tax evasion in the corresponding verification and inspection procedures.

That being said, and without prejudice to the fact that the existence of valid economic motives is not a conditio sine qua non for the application of the tax neutrality regime, from a practical perspective, it is advisable to ensure the existence of economic motives that support the transactions in question.


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