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Practical manual for Income Tax 2019.

Example: Distribution of the share premium and capital reduction with return of contributions in securities not admitted to trading

Example:

Mr. RGM In 2009, he acquired 300 shares in the company “Max, SA”, which is not listed on the stock exchange, for a total amount of 3,000 euros. On October 15, 2019, as a result of the capital increase that the aforementioned company carried out the previous year, it received an issue premium of 2 euros per share.

The share capital of the entity "Max, SA" in the last financial year closed prior to the date of distribution of the bonus was made up of 2,500 shares with a nominal value of 10 euros, and there were reserves established for an amount of 2,500 euros, of which 1,250 euros corresponded to unavailable reserves.

Solution:

  • Equity Value

    • Share capital (2,500 shares) x 10): 25,000.00
    • Total reservations: +2,500.00
    • Reservations not available: –1,250.00
    • Value of equity of company “Max, SA”: 26,250.00
    • Value of Equity corresponding to the shares of Don RGM (10.5 euros x 300 shares) (1): 3,150.00

  • Taxation limit

    • Equity value of shares: 3,150.00
    • Purchase value of shares: 3,000.00
    • Positive difference: 150.00

  • Taxation of the issue premium

    • Issue premium (300 shares. x 2 ): 600,00
    • Limit: 150.00

  • Amount taxed as income from movable capital (2): 150.00

  • Excess that reduces the acquisition value (3): 450,00

Notes to the example:

(1) The value of the company's equity per share will be 10.5 euros [the result of dividing the value of the company's equity for the last financial year closed prior to the date of the distribution of the bonus by the total number of shares in said company, that is, 26,250.00 euros / 2,500 shares].(Back)

(2) It will be the positive difference between the value of the equity corresponding to the shares and the acquisition value of the latter, since the return on movable capital to be computed in these cases is limited to the aforementioned positive difference and is not subject to withholding.(Back)

(3) It will be determined by the excess between the positive difference between the equity value corresponding to the shares and the acquisition value of these and the amount of the premium received, that is, 450 euros (600 – 150). As a result of the above, the new acquisition value of the shares will be 2,550 euros (3,000 – 450).

If the taxpayer subsequently obtains dividends or shares in the profits of the same entity in relation to these shares, the amount of these, with the limit of the returns on movable capital previously computed by the distribution of the issue premium as a result of the aforementioned difference between the acquisition value and that of the equity, will also reduce the acquisition value of the shares.(Back)