4 October, 2012

Spanish Tax Authorities criteria on the tax implications of cost reductions

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Spanish Corporation tax Law provides a tax-free restructuring system, following the EU Directive 2009/133/EEC, which is applicable to mergers, spin-offs, asset contributions, share for share transactions and changes of domicile of a European Entity or a European Co-operative entity from one Member State to another European Union Member State.

As informed in a previous post, the reason of this special regime is that taxation must have a neutral role, neither slowing down nor stimulating the decision taking of companies about their reorganization processes.

However, when these transactions are purely tax-driven; that is to say, when their purpose is achieving a tax advantage and they are not supported by any other economic reason, such special tax-neutrality system does not apply.

In the current economic context, it is very common to find groups of companies that try to save up administrative and management costs by reducing their number of entities and concentrating activities.

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