The DGT rules on the transitional regime for the taxation of shares with an acquisition value of more than 20 million euros

Shares acquired before 2021 that represented a stake of at least 5% and had an acquisition value exceeding €20 million cannot benefit from the transitional regime for the exemption of dividends.

In binding consultation V0886-24 dated April 23, 2024, the Directorate General for Taxation (DGT) establishes that if prior to January 1, 2021 the investments simultaneously met the two alternative requirements of article 21.1.a) of the Corporate Income Tax Law (LIS) (ownership percentage of at least 5% and acquisition value of more than 20 million euros), but after that date only the second requirement was met, the transitional regime provided for in the fortieth transitory provision of said law would not be applicable.

In the fiscal years commenced until December 31, 2020, the exemption and deduction for international double taxation on dividends or shares in profits and income derived from the transfer of shares in the capital or equity of an entity were applicable provided that the percentage of direct or indirect shareholding was at least 5%, or that the acquisition value of the shares was greater than 20 million euros.

With effect from January 1, 2021, the concept of significant shareholding included in art. 21.1.a) LIS was modified, eliminating the possibility of applying this exemption to cases in which the acquisition value of the shares was greater than 20 million euros. As a result, the exemption has been limited to those cases in which the direct or indirect shareholding in the capital or equity is at least 5%.

However, the LIS provides for a transitional regime for holdings that do not reach 5%, if the acquisition value was greater than 20 million euros and the shares were acquired in tax periods beginning before 2021. In this sense, this transitional regime allows the application of the exemption with respect to holdings of less than 5% if they comply with the rest of the requirements set forth in art. 21 LIS for tax periods commencing between 2021 and 2025.

Consequently, the transitional regime of DT 40 of the LIS is applicable only to those shares that had an acquisition value of more than 20 million euros, but did not reach the 5% holding percentage. Thus, taxpayers who before the amendment made in 2021 met both requirements (5% or more of shares and acquisition value) are in a more unfavorable situation than those who met only the requirement relating to the acquisition value of more than 20 million euros.