Tax neutrality regime and FEAC

Executive Summary

In recent years, the Tax Inspectorate has been conducting campaigns to review transactions involving the transfer of shares in operating companies to holding companies by family groups. The usual administrative practice has been to analyse whether there are valid economic reasons for applying the special tax neutrality regime and, if not, to refuse its application, requiring the individual to pay tax on the entire capital gain in the financial year in which the contribution was made and attributing to the individual the dividends received by the holding company to which the shares were contributed.

However, the recent doctrine of the Central Economic-Administrative Court (TEAC) clarifies that the adjustment should not necessarily attribute the entire capital gain in the financial year of the contribution, but should be limited to the tax advantage actually obtained and at the time it materialises; that is, the abusive advantage is only eliminated when it arises.

Since 2024, the TEAC has issued several rulings on the application of the tax neutrality regime to non-monetary contributions of shares. These rulings confirm the refusal to apply the regime in cases lacking valid economic reasons, but specify the correct way to regularise the transaction. Among others, notable are the rulings of 22 April 2024 (RG 6448/2022 and 6452/2022) and 27 May 2024 (RG 6513/2022 and 6550/2022) and, more recently, the rulings of 24 June 2025 (RG 5240/2022 and 5242/2022), relating to the contribution of shares to a family holding company by the members of a married couple.

Finally, the Supreme Court will assess in appeal proceedings the scope of the anti-abuse clause and, in particular, whether the application of the exemption on dividends under Article 21 of the Corporate Income Tax Law (LIS) should be understood as a tax advantage.

Regulatory context

The special tax neutrality regime provided for in the LIS allows for the deferral of taxation on capital gains derived from certain corporate transactions, when there are valid economic reasons and the transactions are not primarily aimed at obtaining tax advantages.

The interposition of a holding company applying the tax neutrality regime allows two tax advantages to be obtained: (i) no taxation on the unrealised capital gain between the acquisition value of the shares and their current value and (ii) a reduction in the effective tax rate on dividend distributions to 1.25%; that is, if the holding company did not exist and the aforementioned dividends were transferred to the individual shareholder, they would be taxed at the progressive rates of the savings tax base (19%-30%).

Article 89.2 of the Corporate Income Tax Law establishes that the special tax regime shall not apply when fraud or abuse is detected, authorising the Administration to regulate the tax advantage obtained.

Criterion of the TEAC

The TEAC confirms that the contribution of shares to a holding company with accumulated reserves may conceal a tax objective of deferral or exemption of dividends. In such cases, the tax authorities may reclassify the transaction and tax the initially deferred capital gain.

However, the TEAC clarifies that the adjustment should not allocate the entire capital gain in the year of the contribution, but should be modulated according to the actual realisation of the tax advantage, for example, through dividends received on pre-existing reserves.

The TEAC clarifies that expectations of future profits or returns do not constitute a tax advantage, since until the sale of shares or the actual distribution of dividends takes place, no income subject to regularisation is obtained.

In addition, the TEAC introduces nuances regarding the accounting and monitoring of the FEAC: it must faithfully reflect the equivalence between the book and tax values of the assets contributed, so that subsequent distributions (dividends) cannot be used to avoid regularisation.

Practical impact for Businesses and Groups

Intragroup restructuring: the economic cause and accounting-tax consistency must be thoroughly documented.

Holding company structures: attention must be paid to transactions involving accumulated reserves and possible dividend distributions immediately after the contribution.

Accounting-tax coordination: the FEAC must be correctly maintained to avoid subsequent adjustments.

Tax planning: the transaction must be justified in terms of organisational efficiency, internationalisation or the streamlining of structures, and must assign real functions to the holding company.