Exemption to avoid double taxation of capital gains: Requirements

The DGT indicates that the requirement of one year of seniority, it is understood fulfilled if its assets are formed by participations in entities that do comply with it.

An operating holding agrees to the transfer of the entities that form a division of the group with a US entity. For these purposes, as a mechanism the interposition of a newly constituted entity is established, to which the holding company contributes the entities that belong to the division that is going to be transferred, which are all wholly owned by the holding company for several years. . Before the passing of one year, the holding transmits the stake in the newly constituted entity, generating a capital gain that comes from the increase in value attributable to the shares of the entities received in the contribution and that make up the division that is transferred.

It is considered if the exemption to avoid double taxation of capital gains is applicable.

The DGT considers that one of the requirements to apply the exemption is that the percentage of participation in the transferred entity is at least 5% and that it has been owned uninterruptedly during the year prior to the transmission. In the specific case, the participation percentage is met, but the participation is transmitted in a period less than one year after its incorporation. However, the shares held by the investee are owned by the group with more than one year.

Thus, the General Management considers that since the participation in the contributed entities has been held for several years by the mercantile group, it is reasonable that the requirement of holding tenure of the participation can be understood as fulfilled, so if the rest are fulfilled of requirements, the exemption to avoid double taxation of capital gains is applicable.