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Practical VAT manual 2023.

Subjective requirements

The special regime for groups of entities may be applied by entrepreneurs or professionals who are part of a group of entities. A group of entities is considered to be one formed by a dominant entity and its dependent entities, which are firmly linked to each other in the financial, economic and organizational orders, provided that the headquarters of economic activity or permanent establishments of each and every one of them are located in the territory of application of the tax.

Linking:

  • "financial link" shall be deemed to exist when the dominant entity, through a stake of more than 50 percent in the capital or voting rights of the group entities, has effective control over them.

  • An economic link will be considered to exist when the entities of the group carry out the same economic activity or when, by carrying out different activities, they are complementary or contribute to the realization of the same.

  • "Organizational link" will be considered to exist when there is a common address in the group entities.

    It shall be understood, unless there is proof to the contrary, that a parent company that fulfills the requirements of a financial relationship also fulfills the requirements of a financial and organisational relationship.

No business or professional can simultaneously form part of more than one group of companies.

be one that meets the following requirements:

  1. It has its own legal personality. The permanent establishments located in the tax's territory of application can also have the condition of parent company.

  2. That it has effective control over the group's entities, through a direct or indirect participation of more than 50 percent in the capital or voting rights.

  3. Said stake must be maintained throughout the calendar year.

  4. That it is not dependent on any other entity established in the territory of application of the tax that meets the requirements to be considered dominant.

Provided that these requirements are met, a commercial company that does not act as an entrepreneur or professional may also be considered a dominant entity.

dependent entity is considered to be one that is established in the territory of application of the tax and in which the dominant entity has a direct or indirect participation of at least 50 percent of the capital. Said stake must be maintained throughout the calendar year.

Subsidiary entities that lose such status are excluded from the group of entities with effect from the liquidation period in which such circumstance occurs.