Jurisprudential bodies have ruled in the field of tax advice in the face of the health crisis situation
The economic and social impact caused by COVID-19 has caused companies to have to buy shares or reduce their capital to avoid an imbalance in equity.
Before them, the various bodies in the field of jurisprudence have ruled on the main aspects of tax advice to take into account during this period of health crisis. More specifically, it has been analyzed whether the two operations mentioned above should be rated:
- Independent operations: On the one hand, there would be the acquisition of shares / shares in treasury stock and on the other, a reduction in capital in the company by amortization of the shares / participations previously acquired, without refund of contributions.
- A single operation: the objective is the reduction of capital with return of contributions to the partners.
On the other hand, the Tax on Onerous Property Transmissions and Documented Legal Acts (ITPAJD) is closely related to this issue. In fact, the regulations that cover said tax establish that capital reductions are subject to the corporate operations modality at a tax rate of 1%. In addition, this tax base will have to be formed by the real value of the goods and rights delivered to the partners, without any deduction of expenses and debts..
Regarding TEAC, on November 16, 2017, it issued a resolution establishing that the sale of shares or treasury shares in an operation independent of the agency. Therefore, it will be subject but exempt for the purposes of the ITPAJD. Regarding the capital reduction of companies due to the redemption of shares acquired, it is an operation subject and not exempt from ITPAJD. However, since its tax base is void, a refund of contributions would not be carried out.
Finally, it should be remembered that TEAC affirms that these two operations are two different and independent legal acts. Therefore, taxpayers must not assume that there has been a purpose other than that demonstrated by documents in which this issue is formalized.
B Law & Tax
International Tax & Legal Advisors.