This is a recurring conversation in established family businesses. The company has been trading for decades, has gradually acquired the warehouses, retail units or offices from which it operates, and its balance sheet now holds two very different things: an operating business, with its commercial, employment and financial exposure, and a property portfolio that has quietly appreciated over the years.
Sooner or later the question arises on its own. Does it still make sense for the buildings to remain exposed to the risks of the trade, or for the entire estate to sit in a single company that several siblings will have to run together? The technical answer is well known: a demerger under the tax neutrality regime of Chapter VII, Title VII of Ley 27/2014 (the Spanish Corporate Income Tax Act, Impuesto sobre Sociedades). What deserves attention before taking the first step is where the tax authorities are currently setting the bar.
The question that is usually framed wrongly
The owner's concern is almost invariably the same: whether the Spanish tax authorities will accept the commercial rationale for the transaction. That concern is legitimate, because article 89.2 of the Act disapplies the regime where the transaction is not carried out for valid economic reasons but with the sole purpose of obtaining a tax advantage.
Yet in most of the refusals issued this year the Dirección General de Tributos, the Spanish tax authority's ruling body, never reaches the question of economic motive at all. The transaction fails earlier, and for a far more mundane reason: the block of real estate to be separated does not amount to a rama de actividad, a going-concern branch of activity within the meaning of article 76.4. That is the real filter, and that is where these files are lost.
Two routes that carry very different burdens of proof
Everything turns on how the shares in the resulting companies are allocated among the shareholders. Where the transaction takes the form of a full demerger in which each shareholder retains the same percentage in every resulting company, the Act does not require the separated blocks to constitute branches of activity. Article 76.2.2º imposes that requirement only where shares are allocated in proportions different from those held in the demerged company. The Dirección General de Tributos has repeated this throughout 2026 in a settled formula, stating that in such cases the neutrality regime does not require the demerged estates to constitute branches of activity.
Where the chosen route is a partial demerger, with the company surviving and only the property portfolio being hived off, the requirement always applies. Article 76.2.1º.b) requires the segregated block to form a branch of activity and at least one further branch to remain with the transferring company. The concept calls for an autonomous economic unit capable of operating under its own resources, together with a condition that is often overlooked: the letting activity must already have existed within the company being demerged.
What the authorities have accepted this year
The rulings issued in 2026 follow a pattern that any industrial or trading company holding real estate will recognise. Binding ruling V5213-26, of 20 July 2026, accepts the full demerger of a plastics manufacturer into two newly incorporated companies, one holding the industrial unit and letting it to the other, which takes over the business and the entire workforce. Ruling V5082-26, of 26 June 2026, accepts that of a furniture manufacturer separating its industrial activity from a let industrial unit and from its stake in the family property company. Ruling V1044-26, of 12 May 2026, accepts that of a textile manufacturer holding five industrial units, three used in its own production and two let out.
In all three the allocation was strictly proportional and the branch of activity requirement never entered the analysis. One detail of the first is worth noting: the company receiving the building had no employee of its own and its sole activity would be letting the unit to its sister company. The regime still applied, precisely because proportionality removes the requirement. The reasons accepted without objection are those any business owner would recognise as genuine: shielding the property portfolio from the risks of the trade, allowing new investors into the operating company without giving them a share in the real estate, streamlining management, preparing an orderly succession and preventing disputes among heirs, the last of these expressly accepted in ruling V1098-26, of 18 May 2026.
And what it has refused
The contrast is equally instructive. Binding ruling V5212-26, of 20 July 2026, refused the regime to a family food retail chain with thirty three stores seeking to hive off its entire property portfolio by way of a partial demerger, holding that the assets did not form a branch of activity but isolated items segregated to a newly incorporated entity.
What matters is that a full time accounts administrator and an office were also to be transferred to the recipient company. That was not enough, because the test is not whether the new company will have resources once the demerger is completed, but whether the letting activity already existed, with its own organisation, within the company being demerged. The counterpoint is ruling V1956-25, of 16 October 2025, which did accept the partial demerger of the entire property portfolio of a frozen food wholesaler, where the decisive fact was a full time employee under an employment contract dedicated to managing the properties.
The exposure that surfaces later
A second issue tends to fall outside the initial conversation: what happens if the properties or the shares are sold further down the line. A common misconception is worth dispelling. The neutrality regime does not exempt the capital gain, it defers it. Article 78 requires the assets to retain the tax base cost and acquisition date they had before the transaction, so that on a later sale the gain surfaces in full. Selling later is not, in itself, a problem. It becomes one where the restructuring allows that gain to escape taxation, or to bear less tax than it would otherwise have borne.
In those cases the Act does not strip the transaction of the regime: it removes the effects of the tax advantage alone. The Tribunal Económico Administrativo Central, the central tax tribunal, has held that this removal takes place in the tax year in which the advantage is realised, not necessarily in the year of the restructuring. That follows from its decision of 12 December 2024, claim 00/06543/2024, and from that of 8 May 2026, claim 00/02211/2024, which finds abuse, as a general rule, where the funds are left idle within the company rather than reinvested in a business activity.
An uncomfortable but necessary conclusion follows. There is no quarantine period. No provision of the regime imposes a minimum holding requirement, and waiting three or five years confers no immunity, because the limitation period that matters runs from the tax year in which the advantage surfaces and not from the year of the demerger. The other side of that coin is offered by the authorities' own reasoning: what is corrected is not the sale, but the pattern of conduct confirming that the transaction was carried out for that purpose.
Practical implications
Sequence matters as much as substance. The form of the demerger should be settled before the note on economic rationale is drafted, because it determines whether a branch of activity will have to be evidenced at all. And before settling the form, the objective needs to be stated plainly: protecting assets, preparing the entry of new shareholders, arranging a succession or preparing a sale. Those aims are not all served by the same structure.
The effect on the family business relief under the Impuesto sobre el Patrimonio (Spanish net wealth tax) and on the reduction available under the Impuesto sobre Sucesiones y Donaciones (Spanish inheritance and gift tax) also needs to be measured, since both rest on their own conditions and fall outside the rulings cited. Isolating the properties in a company that does not meet the economic activity test may cost more than the restructuring saves.
Conclusion
The neutrality regime remains the natural route for separating real estate from trading activity, and the authorities accept it without difficulty where the transaction is properly built. What has shifted is where the risk sits: in the characterisation of the block being separated, and in how coherently the structure behaves thereafter.
Lexon advises on corporate restructuring, real estate taxation and family business from Palma de Mallorca and Manacor. If you are considering separating the property portfolio from your operating company, or have already done so and are now contemplating a sale, we can review how the transaction stands before you take the first step.
Source: articles 76, 77, 78 and 89.2 of Ley 27/2014, on Corporate Income Tax; binding rulings of the Dirección General de Tributos V5213-26 and V5212-26, of 20 July 2026, V5082-26, of 26 June 2026, V1098-26, of 18 May 2026, V1044-26, of 12 May 2026, V0751-26, of 6 April 2026, and V1956-25, of 16 October 2025; and decisions of the Tribunal Económico Administrativo Central of 12 December 2024, claim 00/06543/2024, and of 8 May 2026, claim 00/02211/2024.
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This article is provided for general information purposes only and reflects the administrative interpretation in force at the date of publication. It does not constitute legal or tax advice, nor does it replace the individual analysis of each case.