Law 26/2014 of reform of the Personal Income Tax, modified among others, the article 37.1a) of the Personal Income Tax Law (IRPF). Specifically, it affects the sale of pre-emptive subscription rights, which are granted to shareholders when there is an increase in capital and allow a preferential purchase of the shares that are the objective of the equity increase.
Next we will see in what concretely affects this change, especially in relation to its taxation in the IRPF.
Sale of pre-emptive subscription rights: the reform applicable in 2017
When a shareholder is in a situation of equity increase of the company in which it participates, it may opt not to subscribe to the extension, that is, not to acquire more shares of the company that has increased the equity. In this case, the pre-emptive subscription rights can be sold. Until January 1, 2017, this transfer was taxed with the reduction of the acquisition value of the shares. That is, when the shares were sold, their acquisition value was reduced if they have previously sold pre-emptive subscription rights derive from them, generating a higher profit at a future time.
After this reform, the value of the acquisition of the shares due to the sale of pre-emptive subscription rights will not be reduced, passing these to be taxed for the concept of capital gains as an independent element at the same period in which the transfer is carried out.
Taxation of the pre-emptive subscription rights
The taxation of the pre-emptive subscription rights depends on three specific situations, depending on what the partner decides to do with them:
Not subscribe to the equity increase: sale the subscription rights to the same company
The tax treatment of a transfer of the pre-emptive subscription rights to the same company, derived from the no-execution of it is comparable to that of a dividend, subject to withholding.
Not subscribe to the equity increase: sale the subscription rights to a secondary market
In transmissions to the secondary market, the rule that reduced the acquisition cost of the chares ceases to have effect, and is taxed at the time of the sale of the right as a capital gain for the total amount obtained, being subject also to withholding.
If you transfer shares which subscription rights were sold prior to 1-1-2017 and consequently, have not been taxed as capital gains, their amount will be reduced from the acquiring cost of the shares from which the rights proceed.
Subscribe the equity increase
Finally, if you opt to subscribe to the capital expansion, that is, to execute the pre-emptive subscription rights and receive new shares, the tax will be deferred until the shares of the aforementioned increase are sold, without withholding in the moment of enlargement.
As you can see, the pre-emptive subscription rights are not exempt in any case. At GM Tax, we are specialized in advising on everything that surrounds the transfer of shares and their impact on IRPF. Ask us any questions you have!
