Spain’s special tax-neutrality regime for mergers, spin-offs and asset contributions — known as the FEAC regime — is a standard tool in almost any corporate restructuring, because it defers tax on the unrealised gains a transaction generates. But the tax authority can disapply it if it believes the deal was carried out purely for tax reasons. Spain’s Supreme Court has just set clear limits on that power, in a ruling that matters to any company or group considering a reorganisation.
What the FEAC regime does, and why deferral matters
When a company restructures its group — say, by contributing a business line to a new company, merging subsidiaries, or carrying out a spin-off — the transaction can trigger significant accounting or tax gains if the underlying assets have appreciated over time. The FEAC regime prevents that gain from being taxed immediately: the transaction takes place under “tax neutrality,” and the tax bill is deferred until the assets are actually transferred to a third party. In short, it is what allows businesses to plan reorganisations without the tax authority penalising the restructuring itself.
The anti-abuse clause now needs solid justification
The issue arises when the tax authority decides a transaction lacks a valid economic purpose — restructuring, streamlining operations — and was mainly designed to secure a tax advantage. In that case, it can apply the regime’s anti-abuse clause and withdraw the deferral, forcing the company to pay tax on the gains as if the special regime had never applied.
What matters about the Supreme Court’s recent ruling is that it now requires the tax authority to provide solid, specific justification before doing so. A generic reference to the existence of a tax advantage is no longer enough: the authority must explain, in detail, why it believes valid economic motives are absent in that particular case, rather than presuming fraud simply because the transaction happens to produce a legitimate tax saving among its effects.
This approach lines up with EU case law on anti-abuse clauses, which has always required an individualised assessment of each transaction rather than a blanket presumption of fraud. The ruling shifts the burden onto the tax authority to argue its case with rigour, not merely to suspect wrongdoing, whenever it wants to depart from the neutrality the regime offers.
What this means for you
If your company is considering a merger, spin-off, contribution of a business line, or any other restructuring under the FEAC regime, this ruling strengthens your position in the event of a future tax audit: the tax authority can no longer challenge a transaction on suspicion alone — it must build a rigorous case. That said, it remains essential to properly document the valid economic reasons behind the transaction from the outset — streamlining, business succession, bringing in new partners, separating activities — because that documentation is what will support your defence if the tax authority ever questions the deferral.
At EBF Consulting we design and document corporate restructurings under the FEAC regime, paying particular attention to justifying the economic motives the rules require. If you are considering a transaction of this kind, get in touch and we will review it with you before you take the next step.
Official source: Supreme Court ruling on the limits to disapplying the FEAC regime (as reported by Iberley, Legal News, 8 September 2026).