Tax tip! Tax Deferral Regimen
The Spanish tax neutral regimen applies to restructuring transactions such as mergers, spin-offs, special contributions-in-kind, share for share deals among others and it is based on the tax regime of the EU Merger Directive. The application of this tax regime allows entities and individuals involved in the reorganization transaction to defer the taxation. As a general rule, under this regime, asset transfers carried out through such transactions do not have any tax implications (either from a direct, indirect or other Spanish tax perspective) for the parties involved (transferor, beneficiary and shareholder) until a subsequent transfer takes place that is not protected by this regime.
As an anti-abuse clause, it does not apply when the transaction has as its main purpose tax evasion or tax avoidance.
But, did you know there is another restriction which does not permit the application of this system when the transaction is not done for valid economic reasons? Irrespective of whether or not the main purpose is not tax evasion or tax avoidance.
Even if the transactions does not have as its main objective fraud or tax evasion, the operation must be carried out for valid economic reasons, such as the restructuring or rationalization of the activities of the entities involved in the operation, rather than mere purpose of obtaining a tax advantage.