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Practical manual for Income Tax 2024. Part 1

Example: Onerous transfers of unlisted securities

Example

Mrs. GCA On 03-01-1991, it subscribed to 1,500 shares in SA "Beta", which is not listed on the Stock Exchange, for an amount equivalent to 9,000 euros. On 21-12-2000 he acquired 2,000 shares of the same company, paying 25,000 euros for this purpose.

On 05-11-2024, he sold 3,000 shares for 66,000 euros. The share capital of SA "Beta" consists of 12,000 shares, and the company's earnings for the last three fiscal years ending December 31, 2024 amounted to €80,000, €60,000, and €40,000, respectively.

The net equity value corresponding to the transferred securities resulting from the balance sheet for the 2023 financial year ending July 2024 is €21/share.

Determine the capital gain or loss obtained in the event that the taxpayer does not have sufficient evidence that the amount of the transfer corresponds to what independent parties would have agreed under normal market conditions and taking into account that no transfer of assets has been made since January 1, 2015 to whose gain the ninth transitional provision of the Tax Law was applicable

Solution :

To determine the capital gain or loss obtained, it is necessary, first of all, to identify the shares sold within the total number of those owned. To do this, the legal criterion must be applied that the shares sold are those that were acquired first (FIFO criterion). That is to say, the 3,000 shares sold correspond to the 1,500 subscribed on 01-03-1991 and to 1,500 of those acquired on 12-21-2000.

1. Determination of the total capital gain or loss :

Information Acquired on 03-01-1991 Acquired on 21-12-2000
Number of shares sold (3,000) 1,500 1,500
Transmission value (1) (1,500 x 25) 37,500 37,500
Cost price 9.000 18.750
Capital gains 28,500 18.750

2. Determination of the capital gain generated prior to 20-01-2006 :

Since part of the shares were acquired prior to 31-12-1994, the part of the capital gain generated prior to 20-01-2006 must be determined in order to apply the appropriate reduction or abatement coefficients.

Profit generated until 20-01-2006: (28,500 ÷ 12,360 days) x 5,496 days (2) = 12,672.82

3. Calculation of reduction

  1. Profit generated prior to 20-01-2006 susceptible to reduction (3)

    Maximum limit: 400,000.00

    ∑ Transfer value of assets with the right to reduction from 01-01-2015: 0

    Transfer value of the asset to which DT9 Law of IRPF applies = 37,500

    Capital gain subject to reduction = 12,672.82

  2. Applicable reduction

    Number of years of stay until 31-12-1996: 6 years

    Reduction by abatement coefficients (57.12% s/12,672.82) = 7,238.71

  3. Reduced capital gain

    Reduced capital gain (12,672.82– 7,238.71) = 5,434.11

5. Determination of non-reducible capital gain (generated from 20-01-2006):

Profit generated as of 20-01-2006: (28,500 ÷ 12,360 days) x 6,864 days (4) = 15,827.18

6. Determination of the computable capital gain :

5,434.11+ 15,827.18+ 18,750.00 = 40,011.29

Notes on the example

(1) Since the taxpayer does not have proof that the amount of the transfer corresponds to the market value, that is, to what independent parties would have agreed upon under normal market conditions, the transfer value may not be less than the highest of the following:

  1. Agreed value in the transmission: 22 euros/share.
  2. The value of the net worth corresponding to the values transferred according to the balance sheet of the last fiscal year: 21 euros/share.
  3. At 20% of the average of the results of the last three closed fiscal years:

    (80,000 + 60,000 + 40,000) ÷ 3 = 60,000

    (60,000 x 100) ÷ 20 = 300,000

    300,000 ÷ 12,000 = 25 euros/share (Back)

(2) The capital gain generated between the date of subscription of the shares (03-01-1991) and January 19, 2006, both inclusive, is determined by proportionally distributing the capital gain corresponding to said shares (28,500) between the number of days elapsed between the date of subscription and the date of transmission of the same which was 05-11-2024 (12,360 days), with respect to the total number of days between the date of subscription of the shares and 01-19-2006, both inclusive (5,496). (Back)

(3) Since the maximum limit applicable to the transfer value is 400,000 euros and, in this case, the transfer value of the shares with the right to apply the reduction coefficients is 37,500 euros without any other transfer having taken place in the year 2024 (or in the previous two) with the right to apply the ninth transitional provision of the Personal Income Tax Law , the reduction coefficients will be applied to the entire amount of the capital gain generated prior to 20-01-2006. (Back)

(4) The capital gain generated from 20-01-2006 is determined by proportionally distributing the capital gain corresponding to said shares (28,500) between the number of days elapsed between the subscription date and the date of transmission of the same (12,360 days), with respect to the total number of days between 20-01-2006 and the date of transmission of the same (05-11-2024), which amounts to 6,864 days. (Back)