A merger, spin-off or the creation of a holding structure may involve transfers of assets or equity interests with significant tax consequences. The FEAC regime allows certain gains not to be taxed immediately when the transaction meets the applicable requirements.
However, this special tax neutrality regime is not an exemption and does not automatically eliminate tax liabilities. In general terms, it defers taxation and preserves the tax values of the assets or equity interests transferred.
For this reason, before restructuring a company, it is necessary to consider more than the potential tax outcome. The business need, the most appropriate transaction, compliance with the legal requirements and the supporting documentation must all be analysed. We explain these points below.
What is the FEAC regime?
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The FEAC regime is the special tax regime established in Spain for certain business restructuring transactions. It is regulated in Chapter VII of Title VII of Law 27/2014 on Corporate Income Tax, Articles 76 to 89.
It allows tax neutrality treatment to be applied to transactions such as:
- Mergers.
- Spin-offs.
- Contributions of assets.
- Share-for-share exchanges.
- Certain non-cash contributions.
The principle behind the regime is relatively straightforward. When a company changes its structure but there are economic continuity and the legal requirements are met, certain gains arising from the transaction may not need to be included immediately in the taxable base.
Therefore, taxation does not necessarily disappear. In many cases, it is deferred until a later stage.
What does FEAC mean?
The acronym FEAC comes from the Spanish names of four of the main transactions covered by the regime:
- Fusiones: mergers.
- Escisiones: spin-offs.
- Aportaciones de activos: contributions of assets.
- Canje de valores: share-for-share exchanges.
In addition, Chapter VII of the Spanish Corporate Income Tax Law covers other related transactions, including certain non-cash contributions.
The terminology may sound technical, but these transactions often respond to very recognisable business needs. For example, organising several companies, separating business activities, facilitating generational succession or creating a holding structure.
Does a company need to request application of the FEAC regime?
Generally, the regime does not operate as a prior authorisation that must be requested from the Spanish Tax Agency.
The Corporate Income Tax Law establishes that transactions covered by this chapter are generally deemed to apply the regime unless the company expressly opts out through the relevant notification.
However, this does not mean that every restructuring transaction can benefit from the special tax treatment.
The transaction must fall within one of the categories covered by the legislation, meet its specific requirements and not have tax fraud or tax evasion as its principal objective.
In addition, the transaction must be notified to the Spanish Tax Agency in accordance with the applicable legal requirements.
Why is the FEAC regime important in a business restructuring?
A company can operate successfully and still reach a point where its structure no longer reflects its business reality.
This can happen, for example, when:
- A business has created several companies without a common structure.
- A family business wants to prepare for succession.
- Different activities involve different levels of risk.
- The company is preparing for the entry of an investor.
In these situations, a business restructuring may be necessary.
The difficulty is that reorganising companies can involve transferring assets, equity interests or entire business units. If these transfers always triggered immediate taxation on latent gains, the tax cost could prevent a transaction that otherwise makes business sense.
The special tax neutrality regime is designed to prevent this immediate tax impact when the relevant conditions are met.
For this reason, FEAC should be considered as one element of the restructuring, not as the reason for carrying it out.
- First, there must be a genuine business need.
- The most appropriate corporate transaction must then be identified.
- Finally, its tax, accounting and corporate implications should be analysed.
This perspective is particularly important because there is no single way to restructure a company. A holding company, spin-off and merger solve different problems.
FEAC Transactions that may qualify for the FEAC regime
The special regime does not apply simply because a company considers that it is carrying out a restructuring.
The transaction must fall within one of the categories regulated by the Spanish Corporate Income Tax Law. In addition, each type of transaction has its own conditions, which must be reviewed before implementation.
| Transaction | What happens, in simple terms | What it may be used for | Key point to review |
|---|---|---|---|
| Merger | Two or more companies combine their assets and liabilities. | Simplifying structures, eliminating duplication or integrating businesses. | The specific type of merger and compliance with its requirements. |
| Spin-off | All or part of a company’s assets are separated and transferred. | Separating activities, risks, assets or different areas of the business. | Type of spin-off and characteristics of the assets transferred. |
| Contribution of a business unit | An organised economic unit is transferred to another entity. | Separating or reorganising a business activity capable of operating independently. | Whether a genuine business unit exists and which assets form part of it. |
| Share-for-share exchange | One company acquires equity interests in another company and obtains or increases control. | Creating or reorganising a holding structure. | Control percentages, tax residence and other applicable requirements. |
| Non-cash contribution | Certain assets or equity interests are contributed to a company. | Reorganising assets, investments or business interests. | Compliance with the specific requirements of Article 87 of the Corporate Income Tax Law. |
In practical terms:
- A merger may be appropriate when several companies perform similar functions or the group wants to simplify its organisation.
- A spin-off makes it possible to separate activities, business lines or specific assets. It may be useful when one company contains businesses with different risk profiles.
- A contribution of a business unit allows an organised set of assets capable of operating as an economic unit to be transferred. This requirement must be reviewed carefully because transferring an organised business is not the same as contributing individual assets.
- A share-for-share exchange is commonly used to reorganise corporate ownership and may be used to place a holding company at the head of a group.
What about a holding company or group reorganisation?
Creating a holding company is not a separate type of FEAC transaction.
What matters is which transaction is used to create the holding structure.
For example, the shareholders of an operating company may contribute their equity interests to a new parent company through a share-for-share exchange. In other situations, several transactions may need to be combined.
Therefore, companies should not assume that “creating a holding company means applying FEAC”.
The starting structure, shareholdings, business objectives and proposed legal transaction must first be analysed.
A properly designed holding company can help organise ownership, structure several companies or prepare for generational succession. It can also facilitate future investments or corporate transactions.
However, its effects will depend on the circumstances of each group. You can explore this further in our analysis of the advantages of a holding company and in our step-by-step guide to setting up a holding company.
Tax neutrality: what it means and what it does not mean
The term tax neutrality can create the wrong impression.
It does not mean that a transaction is no longer subject to tax or that the company automatically receives a tax exemption.
When the FEAC regime applies, certain gains arising from the transfer are not immediately included in the taxable base. In addition, the assets and rights acquired generally retain the tax values they had before the transaction.
In simple terms, taxation is deferred.
Imagine a company that owns an asset whose current market value is higher than its tax value. An ordinary transfer could trigger a taxable gain.
If the transfer takes place as part of a restructuring that meets the requirements of the special regime, that gain may not be taxed immediately.
However, the previous tax value is retained. Therefore, the latent gain does not necessarily disappear and may have tax consequences when the asset is transferred in the future.
Why should tax neutrality not be confused with an exemption?
An exemption means that income that would otherwise be taxable is released from taxation under the conditions established by law.
The FEAC regime works differently.
In many of these transactions, we are dealing with tax deferral. Immediate taxation is prevented from interfering with a genuine business reorganisation, while tax continuity is maintained for the assets or equity interests involved.
In addition, applying the regime does not mean that every tax consequence of the restructuring has been resolved.
Depending on the assets transferred and the specific transaction, other taxes, accounting obligations and consequences for the companies or their shareholders may also need to be reviewed.
For this reason, describing FEAC to “restructure without paying tax” provides an incomplete picture and can lead to incorrect decisions.
Requirements for applying the FEAC regime
There is no single checklist of FEAC requirements that applies to every restructuring.
A merger, spin-off, share-for-share exchange and non-cash contribution each have different conditions. The analysis must therefore begin by correctly identifying the transaction.
1. The corporate transaction must fall within the regime
The first step is to determine what the company is actually doing from a legal perspective.
A general intention to reorganise the business is not sufficient.
- In a spin-off, the type of spin-off and the assets being transferred must be reviewed.
- For a contribution of a business unit, it is necessary to determine whether an organised economic unit exists.
- In a share-for-share exchange, matters such as the control obtained by the acquiring company and the other statutory conditions must be analysed.
This explains why two companies pursuing similar objectives may require completely different transactions.
2. The tax analysis must take place before the transaction is implemented
Tax implications should be analysed during the design phase, not once the transaction has already been signed.
Before making a decision, the company should understand:
- The tax values of the assets or equity interests.
- Any potential latent gains.
- The tax consequences of the new structure.
- The position of the shareholders.
- The tax residence of the participating entities.
- Any transactions planned after the reorganisation.
This makes it possible to identify issues that may affect qualification for the tax neutrality regime before the transaction is executed.
3. Documentation must reflect the genuine reasons for the decision
A restructuring should not be justified solely through a standard sentence inserted into the transaction documents.
Corporate resolutions, reports, public deeds and other documentation should be consistent with the company’s actual circumstances and the objectives behind the transaction.
The FEAC regime also establishes certain reporting obligations. Where applicable, relevant tax information concerning the assets, rights or equity interests transferred must also be retained and disclosed.
Valid economic reasons in restructuring transactions
One of the most important aspects when analysing a FEAC transaction is its economic justification.
The Spanish Corporate Income Tax Law establishes that the regime should not apply when the principal objective of the transaction is tax fraud or tax evasion.
It refers to situations where no valid economic reasons exist and the sole purpose is to obtain a tax advantage.
The legislation itself refers to the restructuring or rationalisation of business activities as an example. However, there is no closed list of reasons that automatically guarantees application of the regime.
A company may have valid business reasons for restructuring when it needs to:
- Organise a group that has grown without a defined structure.
- Separate activities or business units with different risks.
- Facilitate business succession.
- Prepare for the entry of shareholders or investors.
- Improve organisational efficiency.
- Separate business activities from certain asset-holding assets.
- Centralise equity interests within a holding company.
- Simplify an excessively complex corporate structure.
- Prepare for a new growth phase.
- Define a business perimeter before a corporate transaction.
The key issue is not simply which reason is written in the documentation. What matters is whether that reason genuinely exists and is consistent with what happens before, during and after the transaction.
For example, if a company claims that the objective is to improve the organisation of its activities, but nothing changes after the transaction, demonstrating that consistency may be more difficult.
Notification of the FEAC regime to the Spanish Tax Agency
In addition to structuring the transaction correctly, companies must comply with an important formal requirement: notification of the transaction to the Spanish Tax Agency.
As a rule, the acquiring entity is responsible for submitting the notification.
If that company is not tax resident in Spain, the obligation may pass to the transferring entity. Specific rules also apply when non-resident entities participate in the transaction.
The Corporate Income Tax Regulations establish a general deadline of three months from registration of the public deed documenting the transaction.
Where registration is not required, the three-month period begins on the date the public deed or equivalent document is executed.
| Aspect | General rule | What the company should review |
|---|---|---|
| Who submits the notification | The acquiring entity. | Check the special rules where non-resident entities are involved. |
| Deadline | Three months from registration of the public deed. | Correctly identify when the deadline begins. |
| If registration is not required | The deadline begins when the public deed or equivalent document is executed. | Confirm whether the transaction requires registration. |
| Content | Identification of participants, description of the transaction, relevant documentation and, where applicable, notification that the regime will not apply. | Prepare the information together with the other restructuring documents. |
| Failure to notify within the deadline | Classified as a serious tax infringement under the Corporate Income Tax Law. | Include the notification in the transaction completion timetable. |
The notification should therefore not be treated as an isolated administrative formality at the end of the process. Ideally, it should be incorporated from the outset into the corporate and tax timetable for the restructuring.
What happens if the notification is submitted late?
The Spanish Corporate Income Tax Law classifies failure to submit the notification within the applicable deadline as a serious tax infringement and provides for a fixed penalty of €10,000 for each transaction for which information should have been supplied.
However, two separate issues should be distinguished:
- Compliance with the formal notification requirement.
- Whether the transaction itself meets the substantive requirements of the special regime.
Therefore, a problem with the notification should not automatically be confused with the absence of a qualifying FEAC transaction.
Nevertheless, submitting the notification correctly and within the deadline avoids a penalty risk that can be prevented through appropriate planning.
A court ruling worth knowing about
The High Court of Justice of Castilla y León considered a case involving a late notification in a judgment dated 1 July 2025.
In that case, the Court annulled a €10,000 penalty because it considered its application disproportionate considering the specific circumstances.
However, this is a specific judgment that should be interpreted with caution.
The €10,000 penalty remains established in Article 89.1 of the Spanish Corporate Income Tax Law. Therefore, the ruling should not be understood to mean that late notification no longer has consequences or that the same reasoning will automatically apply to other transactions.
Risks of applying the FEAC regime incorrectly
The main risk is not simply forgetting to submit a notification.
Problems may arise from the initial choice of transaction, as well as from how the restructuring is implemented and justified.
Key risks include:
- Choosing a transaction that does not meet the applicable requirements. Spin-offs, contributions and share-for-share exchanges each have specific conditions.
- Structuring the transaction solely around the tax advantage. If there is no genuine business purpose or it is inconsistent with the transaction, the Spanish Tax Agency may review the application of the anti-abuse provision.
- Using overly generic valid economic reasons. Statements such as “improving management” or “restructuring the group” provide limited support unless the company explains the original problem and what genuinely changes.
- Documenting the justification after the transaction has already been implemented. The reasons should form part of the business decision from the planning stage.
- Failing to analyse what will happen after the restructuring. Subsequent actions may also be relevant when assessing the purpose of the transaction.
- Failing to comply with reporting and notification obligations. A technically sound restructuring also requires proper documentation and deadline management.
For this reason, the FEAC regime should not be analysed separately from the broader restructuring process.
Coordination between the corporate, tax and accounting aspects can help identify risks before the new structure has been implemented and becomes significantly more difficult to correct.
Examples of restructuring transactions where the FEAC regime may apply
The purpose of the tax neutrality regime is easier to understand when applied to practical business situations.
A family business preparing for generational succession
Imagine a family business that has grown over several generations.
The family owns several companies, properties and equity interests. Some family members work in the business, while others participate solely as owners.
Before beginning the generational transition, it may be advisable to review the entire structure.
A holding company, a spin-off or a combination of transactions could help organise ownership, separate functions and facilitate future succession.
The FEAC regime would be one of the tax issues to analyse as part of that process, but it would not be the starting point.
Agrícola Garvín is a real example of this type of development. LEIALTA supported this family business in a corporate and asset restructuring process that included a holding structure, a spin-off and a share-for-share exchange.
The business objective was to organise growth, separate risks and assets and prepare the organisation for new opportunities.
A group that wants to integrate companies with duplicated functions
Another common situation arises when a group has created several companies over time.
Two of them may eventually carry out similar activities, share teams or duplicate administrative functions.
In this context, a merger could help simplify the structure and consolidate resources.
Before proceeding, it would be necessary to analyse the assets of the companies, their obligations, tax values and compliance with the applicable requirements.
If the transaction qualifies for the special regime, immediate taxation does not necessarily have to become an obstacle to the integration.
A company that needs to separate two business activities
Consider a company that operates two different businesses.
Each activity has its own customers, teams, suppliers and risks. However, both remain within the same company and share a single corporate structure.
The company may consider a spin-off or, depending on the circumstances, a contribution of a business unit.
Separating the activities may:
- Facilitate management.
- Provide greater visibility over profitability.
- Clarify responsibilities.
- Prepare for the entry of an investor into only one part of the business.
Before proceeding, it will be necessary to determine whether the assets being transferred meet the relevant legal conditions and to analyse the tax consequences of the proposed structure.
Shareholders creating a holding company
Two or more shareholders may decide to place their business interests under a parent company.
One way to achieve this is through a share-for-share exchange.
In exchange for contributing their equity interests in the operating company, the shareholders receive equity interests in the new holding company. The holding company then controls the operating company, while the shareholders participate in the group through the parent entity.
This may make sense when the objective is to:
- Organise several companies.
- Centralise decision-making.
- Facilitate future investment.
- Prepare for business succession.
However, neither creating the holding company nor applying the FEAC regime should be treated as an automatic way to reduce tax.
The structure must serve a genuine business purpose and meet the applicable requirements.
Frequently asked questions about the FEAC regime
What does FEAC mean?
FEAC refers to the Spanish terms for mergers, spin-offs, contributions of assets and share-for-share exchanges.
These transactions form part of the special tax regime regulated in Chapter VII of Title VII of the Spanish Corporate Income Tax Law.
Is the FEAC regime a tax exemption?
No. The FEAC regime should not be understood as an automatic tax exemption.
Its main effect is to allow the deferral of certain gains and preserve tax values when the applicable requirements are met.
Does a company need to request application of the FEAC regime from the Spanish Tax Agency?
As a rule, transactions covered by this chapter are deemed to apply the regime unless the company expressly indicates otherwise.
However, the transaction must meet the relevant requirements, and the corresponding notification must be submitted to the Spanish Tax Agency.
Which transactions may qualify for the FEAC regime?
Certain mergers, spin-offs, contributions of business units, share-for-share exchanges and non-cash contributions may fall within the regime.
Each transaction has its own specific requirements and must be assessed individually.
Does creating a holding company automatically qualify for FEAC?
No. A holding company is not itself a type of FEAC transaction.
It is necessary to analyse the transaction used to create or reorganise the holding structure, such as a share-for-share exchange or contribution and determine whether the relevant requirements are met.
What are valid economic reasons under the FEAC regime?
They are genuine business reasons that justify the restructuring.
These may include organising a group, separating activities, improving management, facilitating succession or preparing the company for a new stage of development.
Whether valid economic reasons exist must be assessed according to the specific circumstances of each transaction.
Who must notify the FEAC transaction and what is the deadline?
Generally, the acquiring entity is responsible for the notification.
It must normally be submitted within three months following registration of the public deed.
Where registration is not required, the deadline runs from the date on which the relevant document is executed.
Special rules apply to certain transactions involving non-resident entities.
Can the Spanish Tax Agency reject or reassess a FEAC transaction?
Yes.
The Spanish Tax Agency may review whether the transaction meets the requirements of the regime and assess whether the anti-abuse provision applies.
If it determines that the regime should not apply, in full or in part, on this basis, the Corporate Income Tax Law provides for the corresponding tax advantage to be eliminated.
Tax and Corporate Advisory Services for Restructuring Transactions
A business restructuring should not begin by asking only how to apply the FEAC regime.
The first question should be different: what does the company need to achieve?
From there, the current structure, existing risks, ownership, assets, activities and shareholder objectives should be analysed.
Only then can the most appropriate transaction be defined and the correct implementation process established.
At LEIALTA, we approach these processes from a coordinated perspective. We combine corporate, tax and accounting analysis so that the structure responds to the company’s genuine business needs, rather than solely to a tax consequence.
You can learn more about how we approach these processes through our business restructuring advisory services.
