Skip to main content
Practical Manual of Companies 2020.

Exemption of income obtained in the cases of art. 21.3 LIS other than the assignment of securities of resident and non-resident entities in Spanish territory

article 21.3 of the LIS establishes that the positive income obtained in the event of liquidation of the entity, separation of the partner, merger, total division or partial, capital reduction, non-monetary contribution or global transfer of assets and liabilities, will be exempt when:

  • 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 that must be met in each and every one of the years of ownership of the participation.

Partial exemption

This exemption can also be partially applied in the same way that we have indicated in the case of the exemption on income obtained in the transfer of securities of resident and non-resident entities in Spanish territory.

Special rules

In the following cases, the application of this exemption will have the following specialties:

  1. When the participation in the entity had been valued in accordance with the rules of the special regime of Chapter VII of Title VII of this Law and the application of said rules had determined the non-integration of income into the tax base of this Tax, or the Tax on Non-Resident Income, derived from:

    • The contribution of participation in an entity that does not meet the requirement of letter a) or, totally or partially at least in some financial year, the requirement referred to in letter b) of section 1 of this article.

    • The non-monetary contribution of other assets that differ from holdings in entities' own capital or funds.

    In this case, the exemption will not be applied on the transferor's deferred income as a result of the operation, unless proof is provided that the acquiring company has integrated this income in its gross tax base.

  2. When the participation in the entity had been valued in accordance with the rules of the special regime of Chapter VII of Title VII of the LIS and the application of said rules had determined the non-integration of income into the personal income tax base, derived from the contribution of participations in entities.

    In this case, when such holdings are subject to a transfer in the two years following the date on which the operation took place, the exemption will not be applied to the positive difference between the fiscal value of the shares received by the acquiring company and the market value at the time of the acquisition, unless proof is provided that the natural persons have transferred their holdings in the company during the aforementioned period.

Negative income

Negative income generated in the event of extinction of the investee entity will be tax deductible , unless it is a consequence of a restructuring operation.

In this case, the amount of the negative income will be reduced by the amount of the dividends or participation in profits received from the investee entity in the ten years prior to the date of extinction, provided that the aforementioned dividends or participation in profits have not reduced the acquisition value and have been entitled to the application of an exemption or deduction regime for the elimination of double taxation, for the amount thereof.

Filling in form 200

In relation to the exemption on income obtained in cases of article 21.3 of the LIS other than the transfer of securities, the following adjustments must be made:

  1. Resident entities

    • Regarding the income obtained in the event of liquidation of the entity, separation of the partner, merger, total or partial division, capital reduction, non-monetary contribution or global transfer of assets and liabilities of resident entities, it must be included in the box [02187] «Exemption on income obtained in the cases of art. 21.3 LIS other than transfers of securities of resident entities» on page 13 of form 200, the amount of positive income obtained in these cases that are exempt for complying with the requirements of article 21.3 of the LIS.

    • In box [02186] «Exemption on income obtained in the cases of art. 21.3 LIS other than transfers of securities of resident entities» on page 13 of form 200, the amount of negative income obtained in the cases of article 21.3 of the LIS other than the transfers of shares of entities must be incorporated residents who are not included in the tax base.

  2. Non-resident entities

    • Regarding the income obtained in the transfer of shares of non-resident entities, it must be included in box [02189] «Exemption on income obtained in the cases of art. 21.3 LIS other than transfers of securities of non-resident entities» on page 13 of form 200, the amount of positive income obtained in these cases that are exempt for complying with the requirements of article 21.3 of the LIS.

    • In box [02188] «Exemption on income obtained in the cases of art. 21.3 LIS other than transfers of securities of non-resident entities» on page 13 of form 200, the amount of negative income obtained in the cases of article 21.3 of the LIS other than the transfers of shares of resident entities that are not included in the tax base.