How the sale of a company is taxed

It may happen that as a partner of a commercial company, you decide to sell your shares or that you consider selling the company. The sale has important tax implications that you should be aware of, so you need to know how the sale of a company is taxed.

The purchase of shares or participations of a company implies the acquisition of a part or all of the company with all the obligations and rights that the transfer implies. In addition to the tax effects, which we will see below, it is necessary to analyze whether there are limitations or requirements for sale in the statutes or in the shareholders’ agreement that has been signed.

What does taxation consist of in the sale of a company

The first thing we have to differentiate is the situation of the buyer and the seller.

1. Seller. Below, we see the two cases that can occur:

• Individual seller. A natural person’s sale of shares or a company generates a capital gain or loss, which the Personal Income Tax must tax. The difference between the acquisition and transfer values calculates the gain or loss. The expenses incurred by the transmission must also be taken into account.
• Seller legal entity. The company pays Corporate Income Tax (IS), so if the sale of part or all of the shares occurs, the transfer would be taken into account in the IS tax base so that the difference between the acquisition price and the transfer price would be added to the tax base. Shares purchased before December 31, 1994, will be exempt up to a certain limit.

According to article 35 of the Personal Income Tax Law The acquisition value is made up of: the actual amount of the acquisition and the cost of the improvements that have been made. On the other hand, the transfer value will be the amount for which the sale is carried out, discounting the corresponding expenses and taxes. The actual amount is the one that has been paid as long as it is not less than the average market amount.

For example, an entrepreneur creates a limited company with 3,000 euros and, after time, decides to sell the company. He could not sell it at the same price because the shares must consider the market price.

1. Buyer. The amounts allocated to the purchase and sale of shares or shares of a company cannot be deducted.

Company purchase and sale and Property Transfer Tax

Regarding the Tax on Property Transfers it is established in its article 45 B 9 that the transfer of securities admitted or not to trading in an official secondary market is exempt.