Withdrawal of a cooperative member with return of capital: Taxation

The DGT points out that the reduction of capital of a cooperative derived from the cancellation of one of the cooperative members with the return of his contributions, constitutes a taxable event of the corporate operations modality, so the member must proceed to file form 600, or that which, as the case may be, has been established by the referred community by virtue of its regulatory competencies.

A member of a cooperative intends to withdraw from the cooperative and exercise his right to the return of the contributions to the capital stock, both the obligatory ones to acquire the status of member and the voluntary ones, without any increase in the member’s assets resulting from this operation. With respect to the capital reduction that takes place when the shareholder leaves the company and is fully reimbursed for his mandatory contribution to the capital stock, three questions are raised and answered by the General Management.

Is such capital reduction subject to ITP and AJD and, if so, who is subject, the partner or the partnership?

The DGT considers in its reply that the incorporation of companies, the increase and decrease of their capital stock and the dissolution of companies are corporate transactions subject to ITP and AJD, so that the company is obliged to pay the tax as a taxpayer, in the incorporation of companies, capital increase, transfer of the effective address or registered office and contributions of the partners that do not entail an increase of the capital stock.

In the dissolution of companies and reduction of capital stock, the partners, joint owners, co-owners, co-proprietors or participants are liable for the assets and rights received.

Law 20/1990, on the Tax Regime of Cooperatives, establishes a system of tax benefits, distinguishing between cooperatives that can be classified as protected or specially protected.

For the purposes of this Law, protected cooperatives are considered to be those entities which, regardless of the date of their incorporation, comply with the principles and provisions of the General Law on Cooperatives or of the Cooperative Laws of the Autonomous Communities having jurisdiction in this matter and do not incur in any of the causes set forth in Article 13 of the aforementioned Law.

Protected cooperatives are exempt from ITP and AJD with respect to the following acts, contracts and operations:

– The acts of incorporation, capital increase, merger and spin-off.

– The constitution and cancellation of loans, including those represented by debentures.

– Acquisitions of goods and rights that are integrated into the education and promotion fund for the fulfillment of its purposes (L 20/1990 art.33.1.a., b. and c.).

The same Law establishes that the following types of first degree protected cooperatives will be considered specially protected and will be able to enjoy the tax benefits:

• Worker cooperatives.
• Agricultural cooperatives.
• Community land cooperatives.
• Sea cooperatives.
• Consumer and user cooperatives.

These cooperatives, in addition to the benefits mentioned above, exemption for the acquisition operations of goods and rights destined directly to the fulfillment of their social and statutory purposes.

Therefore, applied to the present case, the capital reduction constitutes a taxable event under the corporate operations modality, and the shareholders, for the assets and rights received, are liable to pay the tax.

Is the capital reduction exempt?

The DGT replies that the exemption established in article 33 of Law 20/1990, of December 19, 1990, on the Tax Regime of Cooperatives (EDL 1990/15524), to which article 45.I.B.15 of the Revised Text of the ITP and AJD refers, refers exclusively to certain corporate transactions in which the condition of taxpayer falls on the cooperative society, without reaching, therefore, the case now being examined in which the society reduces capital, the taxpayer being the member and not the cooperative entity.

Is it necessary for the partner or partnership to file a liquidation form (600).

Given that the operation in question is subject to the tax, without exemption, the partner must proceed to the self-assessment of the tax as established in Article 51 of the Revised Text of the tax and 98.1 and 101.1 of its Regulations, approved by Royal Decree 828/1995, of May 29, 1995.

Therefore, the shareholder must proceed to file the corresponding form 600 with the competent Autonomous Community or the one that, as the case may be, has been established by the referred community by virtue of its regulatory competences.