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The Spanish General Directorate of Taxes (GDT) has recently issued a binding ruling.
The ruling clarifies the exemption from Corporate Income Tax for the transfer of shares in entities that have obtained the necessary permits for commencing their activities – even if they have not yet materialised their operations.
This decision marks a change in the approach taken by the GDT. Of course, it will also have significant implications for businesses involved in such transactions.
The ruling by the GDT centers around a consulting entity (A) that held a 100% stake in another entity (S) engaged in online gaming licenses.
Although entity (S) had not commenced its economic activity, it had acquired all the required administrative licenses, incurring substantial expenses in the process.
The value of these licenses exceeded 50% of entity (S)’s asset value. Entity (A) intended to transfer its entire shareholding in entity (S) to an unrelated entity.
The GDT was asked to confirm whether the tax exemption under Article 21.3 of the Corporate Income Tax Law applied to the positive income generated from this transfer.
The GDT concluded that as long as entity (S) had organized itself, either independently or using its own or third-party resources, for the purpose of engaging in the production or distribution of goods or services, entity (A) could avail the exemption under Article 21 of the Corporate Income Tax Law.
This ruling reference is CV 0863/23.
This ruling signifies a departure from a previous binding ruling, CV 2265/21, issued by the GDT in 2021.
In that ruling, the GDT had held that the transfer of 100% shares in an entity that owned land undergoing permit processing for the installation of a solar plant was not exempt from Corporate Income Tax, as the economic activity had not materially commenced.
However, it is worth mentioning that the tax authorities of Navarra had already deviated from this approach, deciding in a similar case that the exemption should indeed apply.
The recent ruling by the GDT is a positive development for businesses seeking clarity on the Corporate Income Tax exemption. It brings reassurance and aligns with the correct interpretation of the law.
Nevertheless, it is crucial to evaluate each case individually, considering the specific circumstances and ensuring proper declaration of all economic activities performed up until the point of the share transfer.
The Spanish General Directorate of Taxes has taken a significant step in clarifying the application of the Corporate Income Tax exemption in these circumstances.
Theruling marks a departure from a previous stance and provides much-needed clarity for businesses engaging in such transactions.
As always, careful consideration of each case’s particulars is essential to ensure compliance with tax regulations.
If you have any queries about corporate income tax on transfer of shares or Spanish tax matters in general, then please do get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.
Draft legislation has been approved by Thailand’s cabinet paving the way for the introduction of a Financial Transactions Tax (“FTT”).
The tax will apply to securities traded on the Stock Exchange of Thailand (“SET”).
This does away with a tax exemption that has been in place for over three decades.
Assuming that it ultimately finds its way onto the statute book, it is envisaged that it will apply to transactions starting from April 2023.
As alluded to above, the sale of securities through SET has been exempt from specific business tax since the end of 1991. The rationale was that this would stimulate trading on the secondary market and providing a shot in the arm for the domestic economy.
The FTT essentially acts to repeal this exemption. It is an indirect, transactional tax imposed on income from the gross receipts from share disposals.
Broadly speaking it will be those that are selling securities who will be liable for FTT.
However, the draft law also requires brokers to withhold FTT from the share sales income and to pay these amounts to the Revenue on behalf of the seller.
It is anticipated that the new FTT tax will be introduced in two phases.
These phases are as follows:
| Which phase? | Rate of FTT (inc local tax) | Expected date of commencement |
| Phase one | 0.055% x gross income from share disposals | With effect from April 2023 |
| Phase two | 0.11% x gross income from share disposals | With effect from January 2024 |
The FTT will apply to the following:
Some persons are specifically exempted.
If you have any queries relating to the new Thailand Financial Transactions Tax or tax matters in Thailand more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article