Spain: Central Economic-Administrative Court clarifies position on the adjustment to be made following the exclusion of non-monetary contributions from the tax neutrality regime

In two new decisions dated June 24, 2025 (5240/2022 and  5242/2022) regarding non-monetary contributions of shares to holding companies, in relation to which the right to apply the tax neutrality regime had been denied, Central Economic-Administrative Court (TEAC) clarified its position on how to make the related adjustment, as determined in its decisions of April 22 (May 2024 newsletter), May 27 (6513/2022), and December 12, 2024 (5937/2024 and 6543/2024) (December 2024 - January 2025 newsletter). It concluded as follows:

• If no tangible or intangible assets (such as goodwill) with unrealized capital gains to be realized immediately and foreseeably at the time of the non-monetary contribution are identified, placing future income from the business contributed to that company under the umbrella of the holding company cannot be considered abusive. Therefore, the distribution to the holding company of the potential capital gain obtained on the transfer of those assets cannot be equated with a distribution of distributable reserves existing before the contribution.
• The logic of the regime requires the amount of the capital gain deferred by the contributing partner to be coordinated with the tax value of the acquisition of the received shares, meaning that the value of the transferred shares will increase as that deferred capital gain is taxed, i.e., as undistributed income before the contribution is distributed. 
      
  However, the TEAC clarified this in a decision dated November 19, 2024 (8869/2021) and pointed out that the holding company should not modify the tax value of the shares received from the operating company (which would be the same value as those shares had for the contributor), because the value of these shares decreases by the amount of the distributed dividend, which itself prevents future tax on that amount.