Fiscal Alert: Hacienda intensifies surveillance on family businesses and their restructuring

Today, elEconomista has published an article warning of a potential wave of massive tax inspections targeting family businesses, especially those that have undergone corporate restructuring processes. This situation has intensified following recent rulings by the Central Economic-Administrative Tribunal (TEAC), which allow indefinite control of operations carried out under the tax neutrality regime.

The analysis, written by Eva Díaz and featuring contributions from Carlos Muñoz, a partner at CIM Tax & Legal, delves into how TEAC has enabled the tax authorities to review corporate reorganizations continuously and without a time limit, particularly those involving dividend distributions. According to TEAC's new criteria, if a corporate restructuring is carried out with the aim of obtaining tax benefits, the company may be required to regularize unrealized capital gains at the time of the restructuring in proportion to the dividends distributed.

Carlos Muñoz highlights that TEAC's new approach could lead to increased scrutiny by the Tax Agency, which may open inspection proceedings as dividends are distributed, rather than waiting for subsidiaries to be sold. Although restructuring operations are typically undertaken to facilitate the creation of larger companies and their international expansion, the tax authorities may interpret these actions as strategies to avoid taxes.

In this context, the article also addresses how this change in criteria could impact dividends distributed from a subsidiary to a holding company. TEAC rulings, which consider such distributions to represent undue tax savings, require that the corresponding capital gains be regularized. This implies that, over time, the tax authorities could continue to monitor restructuring operations and demand tax adjustments as dividends are distributed, with no time limitation.

The uncertainty generated by this ongoing scrutiny places family businesses in a delicate position. For more details, you can read the full article here.

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