In Argentina, it is possible to carry on an intragroup reorganization with no tax effects. Mergers, spinoffs or partial spinoffs are exempted from income tax, VAT and turnover tax if certain requirements are met.
Income tax on indirect transfers can also be carried on with no tax costs if it is an intragroup transfer.
Tax-free reorganization provisions include CGT exemptions, exemptions for intragroup transactions in a consolidated group and a stamp duty exemption for corporate reconstructions.
According to the provisions of the Austrian Reorganization Tax Act (Umgründungssteuergesetz), reorganizations of partnerships and corporations may be carried out tax-neutrally under certain conditions. In the case of cross-border reorganizations, it is especially essential that a possibly existing right to tax of the Republic of Austria continues to exist. If the requirements of the Reorganization Tax Act are (intentionally) not fulfilled, the reorganization is tax effective, which could be useful in specific situations.
Qualifying reorganizations (merger, demerger, partial demerger, contribution of a universality of goods or a business line) involve the direct transfer of all assets and liabilities from the transferor to the receiving company.
Subject to certain conditions, national and EU cross-border reorganizations can be performed under a tax-neutral regime under which capital gains would not be taxed. The regime provides for restrictions on the transferability of certain deductions (eg, tax losses) from the transferor to the receiving company and on the use by the receiving company of its tax losses and other carried-forward deductions after reorganization.
The recognition of gains or losses in reorganizations can be structured at cost and deferred.
Certain qualifying corporate reorganizations, combinations and divisions may be eligible to be executed on a tax-deferred basis for federal tax purposes, subject to the detailed statutory restrictions in the Income Tax Act Canada). Certain special rules apply to cross-border reorganizations.
Chile has several tax-neutral regimes when certain operations (eg, mergers, spinoffs, contributions in kind and indirect sales)) are carried out within the context of a corporate group reorganization.
Reorganizations (eg, equity purchases, asset purchases, mergers or splits) may be subject to "Special Tax Treatment" (tax deferral) upon meeting certain substantive and procedural conditions. Additional restrictions are applicable to cross-border reorganizations.
There are tax-free reorganizations (in-kind contributions, mergers, and spin offs) if they comply with certain requirements.
It is worth noting that Colombia taxes the indirect sales of Colombian assets through the sale of foreign entities, whenever Colombian assets represent more than 20 percent of the total assets of the foreign entity being sold considering their book value and/or commercial value.
Income tax or capital gain tax should be determined as if the Colombian asset is sold directly. If the seller fails to comply with its tax duties under this tax regime, the subsidiary in Colombia and the purchaser will be jointly liable.
Once the indirect sale is made subject to income tax, the tax cost that shall be considered for a subsequent purchase, will be the value proportionally paid for the shares, participations or rights in the foreign entity that owns the underlying assets located in Colombia.
This tax regime is not applicable when the shares or rights in the foreign entity are listed in a Stock Exchange Market recognized by the Colombian government, and the shares are not more than 20-percent owned by the same beneficial owner.
Mergers and spin-offs between foreign entities where Colombian assets are being transferred are not subject to tax in Colombia when Colombian assets do not represent 20 percent or more of the worldwide assets of the multinational group to which the foreign entity belongs to.
Finnish implementation of the EU merger directive covers tax-exempt mergers, full and partial divisions, transfers of business and share exchanges. A wide-ranging case law exists.
For all types of restructurings (eg, mergers, spinoffs or partial spinoffs), a favorable tax regime may apply if the assets are transferred under special valuation rules.
Qualifying corporate formations, combinations and divisions may be tax-free to a participating corporation and its shareholders.
Hong Kong, SAR
Ad valorem stamp duty is payable for the transfers or sales of shares or immovable property in a reorganization (see Stamp duty). Stamp duty relief for intra-group reorganization is available subject to certain conditions.
The provisions that implemented the EU Merger Directive apply to domestic situations and provide for a tax deferral (ie, a temporary tax exemption) on capital gains realized on qualifying transactions. Qualifying transactions are identified in the Hungarian legislation by the terms “preferential transformation,” “preferential transfer of assets” and “preferential exchange of shares.” The tax deferral is not automatically available, but only at the election of the taxpayer.
Qualifying corporate formations, combinations and divisions may be tax-free to a participating corporation and its shareholders, except to the extent of any non-qualifying property received.
In a cross-border transaction, when a foreign holding company transfers its shareholding in an Indian company to another foreign company as a result of a scheme of amalgamation, such transfer of capital asset (ie, shares in the Indian company), is also exempt from capital gains tax in India, subject to certain conditions.
Relief from stamp duty and capital gains tax is available on certain intragroup reorganization transactions.
Tax-free mergers and spinoffs are achievable provided that certain conditions are satisfied. Some of the tax-free reorganizations are subject to a pre-ruling from the Israel Tax Authority.
Group reorganizations are ordinarily tax neutral for the corporations involved. Special rules apply to cross-border reorganizations.
If a corporation transfers its assets to another corporation pursuant to a corporate division, a merger, an investment in kind, a dividend in kind or a share transfer (reorganization), and the reorganization is a “qualified reorganization” for corporate tax purposes, the recognition of the gains and losses on the transfer of the assets will be deferred.
Luxembourg tax law allows for tax neutrality company reorganization provided that certain conditions are met and in the following cases:
- Transformation of the corporate form of an entity into another corporate form
- Merger or demerger of Luxembourg or EU resident companies or
- Exchange of shares when the acquiring company gets the majority of voting rights in the acquired company or increases the majority of voting rights already held.
As mentioned before, the transfer of shares in a Mexican company generally constitutes a taxable event. However, in the case of a domestic corporate reorganization, it may be possible to obtain a ruling from Hacienda authorizing the transfer of the shares at tax basis, and thus avoiding a gain on the transfer. This type of ruling is allowed only where the seller is a Mexican resident and the transaction can be carried out with prior approval if the transfer is made in exchange for shares of another Mexican entity. A 2-year holding period requirement and various reporting requirements must be met.
In the case of a group restructuring where the transferor is a foreign resident, it is possible to transfer the shares of a Mexican subsidiary and defer the income tax due until those shares leave the group. However, a ruling (ie, GRA) must be issued by Hacienda before the transfer is made, and a notice has to be filed each year informing that the shares remain within the group.
Certain income tax treaties entered into by Mexico provide an exemption for capital gains tax derived from corporate reorganizations. However, there are requirements that should be met in order to qualify for a tax-free reorganization, and procedural fillings must be made with Hacienda before the transaction is carried out.
In Mozambique, under the corporate income tax code in force, it is possible to transfer assets or a business at book value without triggering taxation based on tax neutrality principle. Mergers and demergers may also be carried out without triggering any adverse tax consequences.
Tax-exempt mergers, demergers and tax-exempt contributions of assets are available, provided the specific requirements in each case are met. In addition, the consolidation regime may be used to transfer assets or liabilities between group companies without giving rise to tax consequences. Special rules apply to cross-border reorganizations.
Merger and demergers may be carried out without triggering any adverse tax consequences.
The transfer of assets in the context of a reorganization is (in principle) not subject to tax.
For income tax purposes, taxpayers can choose among 3 systems: (i) voluntarily revaluate the assets transferred under the reorganization with tax effects, but tax the gain determined by the difference between the new value and the cost of acquisition; (ii) voluntarily revaluate the assets transferred under the reorganization without tax effects, and not tax the gain determined by the difference between the new value and the cost of acquisition; and (iii) transfer the assets without revaluating them, with any tax effect on its value, rather than gain, determined.
In addition, it must be noticed that, in the reorganization of companies, the acquirer is unable to receive the transferor's tax losses.
Based on the EU Mergers and Acquisitions Directive, mergers, divisions and share-for-share swaps may be tax-neutral provided that certain conditions are met and they are conducted for economic reasons. Otherwise, they result in taxation. However, from January 1, 2022, under the amended provisions of the CIT Act, the tax neutrality of mergers and divisions for partners is limited to activities in which:
- the shares in the acquired or divided company were not acquired as a result of an exchange of shares, mergers or divisions and
- the tax value of the shares at the acquiring party resulting from the merger or division will not exceed the tax value of the shares in the acquired or divided company.
Similar conditions also apply to share-for-share exchange transactions.
Group reorganizations are ordinarily tax neutral.
Qualifying mergers and spinoffs, as well as the transfer of business lines made in exchange for shares, may be tax-free to a participating corporation and its shareholders, provided that such operations are not tax-driven. Similar tax neutrality rules apply to cross-border reorganizations involving EU companies.
Reorganizations are subject to general profits tax rules. Generally, it is possible to carry out a reorganization in a tax-neutral way. However, Russian anti-abuse tax rules must be observed to secure a tax-free reorganization for both the participants and the companies going into the reorganization.
There are provisions to minimize the tax consequences arising from certain intra-group reorganization transactions.
Qualifying corporate reorganization, formations and dividends may be implemented on a tax-free basis, provided all requirements are satisfied. Limited rules apply for foreign corporate reorganizations.
Not applicable for this jurisdiction.
A special Spanish tax regime is applied to corporate reorganizations such as mergers and spinoffs. This regime establishes a tax deferral scheme for these transactions.
It is possible to transfer assets or a business at tax book value without triggering exit taxation.
Mergers and demergers may also be carried out without triggering any adverse tax consequences.
Provided certain prerequisites are met, reorganizations are possible on a tax-neutral basis, as long as the applicable tax accounting values of assets and liabilities remain the same and the assets remain taxable in Switzerland after reorganization.
Qualified M&A transactions may be afforded tax-free treatment according to the Business Mergers and Acquisitions Act.
Not applicable for this jurisdiction.
A reorganization of a Ukrainian resident company is generally tax neutral. Tax attributes should also be generally transferable to successor entities within reorganizations.
United Arab Emirates
Not applicable for this jurisdiction.
Many forms of group reorganization can be achieved on a tax-free basis, due to a combination of reliefs, principally an automatic deferral of corporation tax on transfers of capital assets (including shares) between 2 UK resident group companies, and relief where shares are transferred in consideration of an issue to the transferor of shares or loan notes in the transferee.
Qualifying corporate formations, combinations and divisions may be tax-free to a participating corporation and its shareholders, except to the extent of any non-qualifying property received (ie, "boot"). Special rules apply to cross-border reorganizations.
Companies pay no capital gains tax when transferring capital assets between companies under the same control.