Tax neutrality regime for contributions to a family holding company

The TEAC and the DGT rule that contributions to holding companies, in the context of family tax planning, must be made with a correct economic motivation and not only to produce tax advantages.

The Directorate General of Taxes (DGT) in Consultation V2214-23 of 27 July 2023 and, more recently, the Central Economic-Administrative Court (TEAC) in Resolutions 6513/2022 and 6550/2022, of 27 May 2024, have issued relevant criteria on this issue. In their decisions, they have highlighted the importance of examining the purpose and economic effects of the contributions to holding companies. The rulings underline that for a transaction to benefit from the tax neutrality regime, it must be motivated by legitimate economic reasons and not exclusively by the pursuit of tax advantages.

In the field of family tax planning, it is common for family groups to transfer their shareholdings in operating companies to holding entities in order to benefit from the tax neutrality regime provided for in Law 27/2014, of 27 November, on Corporate Income Tax (IS). The regime allows these contributions to be made without generating an immediate tax burden, provided they are justified by valid economic reasons beyond mere tax optimization.

The tax authorities tend to question those transactions which, in their view, are carried out for the sole purpose of obtaining tax advantages, without a solid underlying economic justification. This tax approach is based on anti-abuse rules, which seek to prevent holding entities from being used exclusively as tax planning vehicles without real economic substance.

In this context, family holding entities should be cautious to ensure that their contribution transactions have a clear and documented economic rationale. Thus, although contributions to holding entities can be made by family members, they should not be used as a vehicle for tax planning without real economic substance. Although contributions to holding entities can be an effective instrument in family tax planning, their implementation must be done with careful analysis and proper economic rationale in order to avoid potential tax contingencies.

See Consulta DGT V2214-23 of 27 July 2023 and Resoluciones TEAC 6513/2022 and 6550/2022, of 27 May 2024.