Restructuring operations: Creating a holding company and ensuring the subsequent distribution of dividends is not considered fraudulent

The TEAC seeks to alter three significant aspects, namely:

Dividend distributions made by subsidiaries to the parent company (Holding) are intended for tax savings and should be interpreted as if they were destined for the individual shareholder.

Nothing could be further from the truth. This assertion would undermine all European regulations applied to date. Dividend distributions to the holding company, provided they meet the legal requirements, should remain 95% exempt (previously 100% until 2021). Otherwise, the movement of capital between companies for reinvestment in the business sector would not be possible and would be penalised. 

The interpretation that these distributions are being made to individual shareholders is a legal absurdity; wealth tax regulations already address such scenarios. If we meet the requirements, there should be no doubt about the exemption. 

These requirements generally include:

• Owning at least 5% of the subsidiary's shares; 
• holding these shares for more than 12 months; and 
• ensuring that the subsidiary engages in an economic activity rather than merely managing assets.

There should be no time limit for reviewing future dividend distributions because the deadlines for reviewing the operation should begin when the dividends are distributed.

Apparently, the current obligations to carry out transactions at the notary, submit a special declaration to apply the special regime to the tax agency, and settle the corresponding tax at the relevant community tax office are insufficient. On top of this, the tribunal proposes that the time limit for reviewing the operation should be indefinite, or that the four-year period should start when the taxpayer undertakes any action with the company that may yield a tax benefit. This is, quite frankly, outrageous.

Establishing the holding company is the first step in fraud, as the taxpayer is preparing for future embezzlement when distributing dividends.

This approach essentially labels everyone as fraudsters, disregarding the principle of the presumption of innocence. It implies that the taxpayer must prove they are not defrauding, as they are pre-emptively considered criminals simply for establishing the holding company.

Clearly, this perspective lacks legal grounds. However, the authorities argue it is the taxpayer who must demonstrate valid economic reasons and assert their rights.

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Jesús Ruíz Ballesteros is the Founder and Director of Ruiz Ballesteros. Holding an undergraduate degree in business and finance, a master’s in taxation, and a degree in law, Jesús is an innovative entrepreneur and an expert in the Spanish taxation system, international taxation and corporate commercial law. He is also the developer of Paxtum, the first legal app in Spain. In 2018, Jesús Ruíz Ballesteros was awarded the Cruz Blanca for Civilian Merit by the Ministry of the Interior of Spain.