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Form 200. Corporate Income Tax Declaration 2019

4.2.49 Codes 02182 and 02183 exemption on income obtained from the transfer of securities by resident entities (Article 21.3 LIS)

Article 21.3 of the LIS establishes that the positive income obtained from the transfer of participation in an entity will be exempt when the following is met:

  • The requirement provided for in letter a) of article 21.1 of the LIS on the day on which the transmission occurs.

  • Additionally, in cases of transfer of shares of non-resident entities, the requirement provided for in letter b) of article 21.1 of the LIS must be met in each and every one of the years of holding the share.

Partial exemption

  • In the event that the requirement provided for in letter b) of article 21.1 of the LIS is not met in one or more of the years of holding the participation, the exemption provided for in this section will be applied in accordance with the following rules:

    • With respect to that part of the income that corresponds to a net increase in undistributed profits generated by the participating entity during the time of holding the participation, that part that corresponds to the profits generated in those years in which the requirement established in letter b) of article 21.1 of the LIS is met will be considered exempt.

    • With respect to that part of the income that does not correspond to a net increase in undistributed profits generated by the participating entity during the time of holding the participation, it will be understood to be generated in a linear manner, unless proven otherwise, during the time of holding the participation, considering exempt that part that proportionally corresponds to the holding in the years in which the requirement established in letter b) of article 21.1 of the LIS has been met.

  • In the case of the transfer of participation in the capital or equity of an entity resident or non-resident in Spanish territory that, in turn, participates in two or more entities in respect of which only one or some of them meet the requirements set forth in letters a) or b) of article 21.1 of the LIS, the exemption provided for in this section will be applied in accordance with the following rules:

    • With respect to that part of the income that corresponds to a net increase in undistributed profits generated by the indirectly participated entities during the period of holding the participation, that part of the income that corresponds to the profits generated by the entities in which the requirement established in letter b) of article 21.1 of the LIS is met will be considered exempt.

    • With respect to that part of the income that does not correspond to a net increase in undistributed profits generated by the indirectly participated entities during the time of holding the participation, that part that is proportionally attributable to the entities in which the requirement established in letter b) of article 21.1 of the LIS has been met will be considered exempt.

      The part of the income that is not entitled to exemption under the terms set out in article 21.3 of the LIS will be included in the tax base, having the right to the deduction established in article 31 of the LIS, if its application is appropriate, provided that the necessary requirements are met. However, for the purposes of the provisions of letter a) of article 21.1 of the LIS, only the effective amount paid abroad for a tax of an identical or similar nature to this Tax will be taken, for the part that proportionally corresponds to the income that is not entitled to the exemption corresponding to those years or entities for which the requirement established in letter b) of article 21.1 of the LIS has not been met, in relation to the total income obtained from the transfer of the participation.

Negative income

Negative income derived from the transfer of participation in an entity, in respect of which any of the following circumstances apply, will not be included in the tax base:

  1. That the requirements established in article 21.3 of the LIS are met. However, the requirement regarding the percentage of participation or acquisition value, as applicable, will be deemed to have been met when it has been reached at any time during the year prior to the day on which the transfer takes place.

  2. In the case of participation in the capital or equity of entities not resident in Spanish territory, the requirement established in letter b) of article 21.1 of the LIS is not met.

In the event that the requirements indicated are partially met, in accordance with the terms established in article 21.3 of the LIS, the provisions above will be applied partially.

Negative income derived from the transfer of participation in entities in which none of the circumstances provided for in the previous point occur will be included in the tax base, with the following special features:

  1. In the event that the participation had been previously transferred by another entity that meets the circumstances referred to in article 42 of the Commercial Code to form part of the same group of companies with the taxpayer, regardless of the residence and the obligation to prepare consolidated annual accounts, said negative income will be reduced by the amount of positive income generated in the previous transfer to which an exemption or deduction regime had been applied to eliminate double taxation.

  2. The amount of negative income will be reduced, where applicable, by the amount of dividends or profit shares received from the participating entity from the tax period that began in 2009, provided that the aforementioned dividends or profit shares have not reduced the acquisition value and have been entitled to apply the exemption provided for in article 21.1 of the LIS.

Assumptions of non-application of the exemption

The exemption provided for in article 21.3 of the LIS will not apply:

  1. That part of the income derived from the transfer of participation, direct or indirect, in an entity that is considered a patrimonial entity, according to article 5.2 of the LIS, that does not correspond to an increase in undistributed profits generated by the participating entity during the time of holding the participation.

  2. That part of the income derived from the transfer of participation in a Spanish or European economic interest group, which does not correspond to an increase in undistributed profits generated by the participating entity during the period of ownership of the participation.

  3. To income derived from the transfer of the holding, direct or indirect, in a company that meets the requirements established in article 100 of the LIS, provided that at least 15% of its income is subject to the international fiscal transparency system that is regulated in said article.

When the circumstances indicated in letters a) or c) of this section are met only in one or some of the tax periods of holding the participation, the exemption will not apply with respect to that part of the income referred to in said letters that proportionally corresponds to those tax periods.

Settings

In relation to the Exemption on income obtained from the transfer of securities, regulated in article 21.3 of the LIS, the following adjustments must be made:

  1. Resident entities

    Regarding the income obtained from the transfer of shares in resident entities, the amount of positive income obtained from said transfer that is exempt by complying with the requirements of article 21.3 of the LIS must be included in key [02183] "Exemption on income obtained from the transfer of securities by resident entities (art. 21.3 LIS)" on page 12 of form 200, completing, where applicable, the corresponding breakdown boxes.

    In key [02182] "Exemption on income obtained from the transfer of securities by resident entities (art. 21.3 LIS)" on page 12 of form 200, filling in, where applicable, the corresponding breakdown boxes, the amount of negative income obtained from the transfer of shares in resident entities that are not included in the tax base because they meet the requirements of article 21.3 of the LIS or because they do not meet the requirement of letter b) of article 21.1 of the LIS must be included.

  2. Non-resident entities (See codes 02184 and 02185)

Common note on the exemptions of article 21.3 of the LIS

The exemption provided for in article 21.3 of the LIS will not apply:

  1. To the income distributed by the public regulation fund of the mortgage market.

  2. Income obtained by Spanish and European economic interest groups and by temporary business associations, when at least one of their partners is a natural person.

  3. To income from foreign sources that the entity includes in its tax base and in relation to which it chooses to apply, if applicable, the deduction established in articles 31 or 32 of this Law.