Spanish tax authorities deny interest deductions on debt to fund a share premium distribution, overall transaction declared as abusive in binding report

The Spanish tax authorities challenged, in a binding report, the tax deductibility of financial expenses derived from debt used to fund a share premium distribution.

The challenge was based on the application of the General Anti-Abuse Rule (GAAR), on the grounds that by using several “intermediary” entities and carrying out a series of consecutive intra-group transactions, the taxpayer achieved an anticipated distribution of future profits and generated financial expenses which reduced the tax bu…