Taxation on the transfer of branches of activity

This article seeks to address, in a summarized form, the possible taxation levied on a business due to the transfer of a branch of activity or business, when the acquisition is coordinated through a sale of assets.

In this respect, under Spanish Law, a sale of assets might generally be subject to essentially two taxes: the Value Added Tax (IVA) and the Capital Transfer and Stamp Tax (ITPyAJD).

The transfer of a branch of activity: Concept

In the case of the transfer of a branch of activity or business, the first step is to define this concept. To this end, a branch of business can be defined as a set of assets and liabilities, which can constitute an autonomous economic unit integral to an economic operation, that is, a body capable of operating on its own.

In other words, it is a set of assets that, jointly considered, constitute a commercial establishment or an autonomous part of a company, capable of developing an autonomous economic activity. However, it does not include the mere transfer of assets, such as the sale of stock, but rather the transfer of all the necessary elements for the development of a business.

The transfer of a branch of activity: Taxation system

When a transfer is made of a complete branch of activity, and not merely individualized assets, the taxation regime is certainly more flexible. This is the case since, with some exceptions, the transfer operation is not subject to VAT (IVA) nor to the Capital Transfer and Stamp Tax (ITPyAJD).


In relation to VAT, Article 7.1 of Law 37/1992 of Value Added Tax establishes that the transfer of a branch of activity is not subject to this tax, insofar as it truly conforms to an autonomous business or productive unit. That said, any other transfer or the transfer of business assets that cannot be considered a branch of activity should be treated as an operation subject to VAT.

For the purposes of this exception, it is irrelevant whether the acquirer continues the same operations as the transferor of the branch of activity, as long as the acquirer attests to their intention to keep the affected acquired assets for the development of economic activity.

Capital Transfer and Stamp Tax (ITPyAJD)

With regard to the Capital Transfer and Stamp Tax, the general rule is that the transfer of a branch of activity will not be taxed as a Taxable Asset Transfer (Transmisiones Patrimoniales Onerosas). In fact, section 5 of Article 7 of Legislative Royal Decree 1/1993, of 24 September, which regulates the aforementioned tax, indicates that transfer operations undertaken by businesspersons or professionals in the pursuit of corporate or professional activity are not subject to the Taxable Asset Transfer. Only the transfer of real properties included in the transferred business or branch of activity would be liable, despite being conducted by businesspersons or professionals.

In light of the above, in the case of the transfer of a business or branch of activity (as previously defined) between companies, in which no real property is incorporated, the operation is in principle fiscally neutral and the levy of the Capital Transfer and Stamp Tax is not applicable under the form of a Taxable Asset Transfer.

In any event, whether or not the payment of tax is required will depend largely on a thorough analysis of the assets subject to the transfer and their nature.

If you would like any further information, or concrete advice in relation to the transfer of a branch of activity in Spain, do not hesitate to get in touch with Mariscal & Abogados.

This article is not considered as legal advice

A licensed attorney with both Business Administration and Law degrees, José María Mesa is specialized in the areas of commercial contract, corporate law and mergers and acquisitions. Working languages: Spanish and English. For any query Contact José María Mesa