Corporate Tax and Photovoltaic Plants. Criterion changes

The Arnaut Fiscal & Legal and Ideo Legal offices have provided the necessary reflection in the binding consultations before the General Directorate of Taxes on Corporate Tax and photovoltaic plants, turning around what was expressed by the same in binding consultation (V2265-21 ) with respect to the application of the exemption of article 21 of the Corporate Tax Law (LIS) –exemption on the sale of shares by entities subject to Corporate Tax–.

This fact takes on special relevance as it has a full impact on one of the strategic and most thriving sectors of the moment: renewable energies.

Which shows once again that it is necessary to present the facts very well in the consultations, since otherwise the answers will not be judging the reality of economic activity.

In the article published in the Cinco Días newspaper, our collaborating partners from the Ideo Legal firm, Javier Martín Fernández and Jesús Rodríguez Márquez, describe the results of various binding consultations carried out before the General Directorate of Taxes on the subject.

“Our country is carrying out an important effort to implement solar energy and reduce our dependence on fossil fuels. To this end, companies dedicated to the promotion of solar parks have developed a business model based on the constitution of vehicle companies (SPVs), which process and promote photovoltaic projects. In short, they act as a holding company for the latter, since they own 100% of their capital.

The activity of the SPVs and all their resources and means are part of the promotion phase. In no case is it constituted by the construction, production and marketing of electrical energy, which will be carried out by the third investor who acquires its shares.

The SPVs lack their own personal means to carry out their activity. This is due to the fact that, in the development of the projects, the choice is made to outsource all the work, which is carried out by the holding company and the rest of the suppliers that have previously been selected and validated by it.

It is common for the holding company to sell the shares of the SPV, once the projects they develop have been granted access rights to the electrical grid for the installation of an electrical generation plant, and are pending resolution, for example. part of the different Public Administrations, the files that allow it to begin construction, start-up and operation.

Therefore, the value of the shares is contingent, precisely due to the impossibility of knowing the result of said files. In general, it is made up of a fixed part, which ranges from a minimum non-refundable initial amount to a maximum depending on the installed power that is finally granted to the installation; and for a variable part, which is normally specified based on the cost of the interconnection lines, the bonuses made by the local administrations and that affect their taxes, as well as the final cost of the leased land on which the park is located. solar, among others.

The determination of the fixed price of the shares occurs after the resolution, by the Administration, of the legalization files for the facilities. Different payment milestones on account of the fixed price are independently established in the share sale contract, which coincide with certain moments, although it is also common for a part to be deferred until the start-up of the plant. Solar photovoltaic.

Based on this scheme, the General Directorate of Taxes (DGT), in its response to a binding consultation dated July 26, 2023 (V2200-23), resolves three issues. The first, if the SPVs are considered property entities for the purposes of the provisions of art. 5.2 of Law 27/2014, of November 27, on Corporate Tax (LIS). The second, if the exemption provided for in art. 21 of the LIS, to capital gains derived from the transfer of shares. Finally, what would the temporal imputation of the income derived from the latter be like.

Regarding the first, the conclusion reached by the management center, modifying its previous doctrine, is that “they carry out the activity of promoting or developing photovoltaic solar parks… so these entities would not be considered patrimonial, since their elements would be affected by the development of an economic activity”, which must be proven by any means of proof admitted by law.

Regarding the second, it considers that the positive income derived from the transfer of the shares is exempt in the terms provided in art. 21 of the LIS, to the extent that the requirements established in section 1 are met and, additionally, none of the assumptions in section 5 are incurred.

Finally, the part of the income that corresponds to the fixed part of the agreed price forms part of the tax base in the tax period in which its accrual occurs, regardless of its collection date. And, with regard to the variable, it must be analyzed whether, at the time of the transfer, the contingent price can be determined, with the best estimate, in which case the income will be considered accrued at that price. If this is not possible, uncertain futures that affect the determination of the price are attributed to the tax period in which the events occur, which will be normal in this type of operations.

Without a doubt, the change in criteria is due to the fact that the tax instrument is not a brake on the development of renewable energies, since the model analyzed is the one followed by all Spanish companies that carry out their activity in this field.”

Javier Martín Fernández / Jesús Rodríguez Márquez are Partners at Ideo Legal and Professors of Financial and Tax Law.

See the article in the Cinco Días newspaper.

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