Non-cash contribution of mortgaged real estate including the mortgagee’s debt – two taxable events?

José María Echave-Sustaeta Osuna.

16/06/2022 Uría Menéndez (

According to recently consolidated case law, transferring mortgaged real estate (a non-cash contribution), which includes a subrogation to the mortgagee’s debt, does not constitute a single corporate restructuring transaction pursuant to article 19.1 of the Transfer Tax and Stamp Duty Law, but two separate taxable events: expressly assigning real estate in return for assuming the mortgagee’s debts, on the one hand, and a capital increase (which would be the restructuring transaction itself), on the other, since transferring debt is not strictly necessary to incorporate a new company or modify the structural elements of an existing one. The courts have taken this position in cases where the special Corporate Income Tax neutrality regime was applied to the non-cash contribution (Supreme Court judgment 1105/2020 of 18 May) and where it was not (e.g. Supreme Court judgments 419/2019 of 23 March, 1142/2021 of 25 March).

The tax authorities used to consider transferring liabilities separate from “non-cash contributions”, since they had previously been declaring them to be part of the same transaction (among others, reply to binding ruling 0697-17) and even considered such transfer to be directly related to acquiring an asset (answer to binding ruling 0518-11). However, according to the latest decisions of the Supreme Court and under a formal interpretation, the most recent binding rulings (among others, binding ruling 2064-16 and 0490-11) now consider that hat the transfer of the liabilities constitutes an unnecessary transaction in relation to the non-cash contribution. Moreover, this new approach differs from the CJEU’s interpretation of Council Directive 2008/7/EC of 12 February, which states that (i) taxing a transaction that, in turn, is an integral part of a general capital raising transaction, undermines the effectiveness of the Directive (C-299/2013); and (ii) for the purposes of raising capital, it is not the existence of a legal obligation that determines whether a transaction is separate or an integral part of another transaction (C-573/2016).

Therefore, it is worth thinking about whether this case law position should be corrected by the Supreme soon either at its own initiative or as a result of a CJEU judgment that expressly resolves the matter, taking into account that there are already numerous CJEU decisions indicating what its response would be if it were to decide whether a non-cash contribution of mortgaged real estate, which includes a subrogation to the mortgagee’s debt, constitutes two taxable events.

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