The application of the tax neutrality regime to non-proportional total demergers — transactions that allow shareholders to separate completely from one another — remains a controversial issue in Spain.
Article 76.2.2 of the Spanish Corporate Income Tax Law requires that, where the proportional allocation of shares among shareholders is not maintained, the assets and liabilities transferred to the recipient companies must constitute independent business units.
However, in recent years, this requirement has been seriously challenged on the grounds that it may be incompatible with Directive 2009/133/EC.
How the Case Has Developed
2020 to Present → Spanish Directorate-General for Taxation (DGT)
The DGT continues to adopt a strict interpretation: in a non-proportional total demerger, the tax neutrality regime does not apply unless the assets and liabilities transferred constitute independent business units.
2023 → High Court of Justice of Castile and León
In its judgment of 13 June 2023, the Court held that the Spanish requirement for independent business units was contrary to the EU Directive.
It considered that EU legislation does not permit Member States to impose this additional requirement merely because shareholders are allocated shares in different recipient companies.
2024 → European Commission and Spanish Supreme Court
The Spanish Supreme Court agreed to hear an appeal on a point of law concerning this issue. In parallel, the European Commission referred Spain to the Court of Justice of the European Union (CJEU), arguing that Spain had incorrectly transposed the Directive.
The European proceedings are registered as Case C-874/24.
2025 → Supreme Court Suspends the First Appeal
The Spanish Supreme Court decided to stay appeal No. 706/2023 pending the CJEU’s decision.
2026 → Supreme Court Again Defers to the CJEU
By Order of 19 March 2026 (ATS 3172/2026), the Supreme Court also stayed appeal No. 6991/2024.
The Court considered that the forthcoming European judgment could directly affect the outcome of the appeal and that issuing a ruling beforehand could even cause irreparable harm.
Where Do Things Stand?
The Spanish legislation remains in force, and the Tax Authorities continue to require the existence of independent business units. Consequently, carrying out a non-proportional total demerger without meeting this requirement currently involves significant tax uncertainty.
Nevertheless, the legal dispute remains unresolved: there is a favourable judgment from the High Court of Justice of Castile and León, the European Commission has expressly challenged the Spanish legislation, and the Supreme Court itself has chosen to await the CJEU’s ruling before establishing binding case law.
There is also a separate issue that should not be overlooked: even if the CJEU ultimately rejects the requirement for independent business units, it will still be necessary to assess whether valid commercial reasons exist and whether the anti-abuse provision under Article 89.2 of the Spanish Corporate Income Tax Law may apply.
The next decisive step will therefore take place in Luxembourg.
The CJEU’s judgment in Case C-874/24 could prove decisive for the future tax treatment of non-proportional total demergers in Spain.