For the amounts received, the partner who leaves the company must pay 1% ITP in the form of corporate transactions.
For the amounts received, the partner who leaves the company must pay 1% ITP in the form of corporate transactions. In addition, he/she must also pay personal income tax or corporate income tax, depending on whether he/she is an individual or another company.
If a partner wishes to leave the company, one of the options is that the rest of the partners buy his shares. However, this may not be feasible if it requires the disbursement of amounts that the partners do not have. It is therefore common to resort to a capital reduction: the company redeems the shares of the departing partner and pays him the amount at which they were valued.
Property Transfer Tax (ITP)
Subject to ITP
The reduction of capital is subject to the ITP in its modality of corporate operations, which implies that it is not exempt from this tax. In general terms, the partner who separates from the company must pay 1% of the amount received as capital reduction.
Individual partner (Personal income tax)
General case
When an individual partner receives amounts derived from the capital reduction, he/she must pay tax on his/her Personal Income Tax (IRPF). In this sense:
- The part of the refund corresponding to the profits generated since the acquisition of the shareholding is considered as income from movable capital and is included in the personal income tax savings base.
- The excess of the refund over these profits reduces the acquisition value of the shares.
- Any additional excess is taxed again as income from movable capital.
Separation of partners
If the capital reduction involves the total separation of the partner, the profits obtained are considered capital gains attributable to the savings base of the IRPF.
Partner legal entity (IS)
95% exemption
When the partner who leaves the company is a partnership, it must pay Corporate Income Tax (IS) on the profit obtained. However, a 95% exemption applies if certain requirements are met:
- The partner must hold at least a 5% interest in the company prior to the capital reduction.
- Such shareholding must have been held uninterruptedly for at least one year.
In summary, corporate transactions have important tax implications that the partners must consider, both in Personal Income Tax and Corporate Income Tax. It is essential to have specialized advice to properly manage these tax aspects.
For further information, please contact Tax Advisory
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