The restitution of contributions and the total or partial reimbursement of shares

The conceptual and practical difference between the "restitution of contributions" and the "partial or total reimbursement of shares", established in articles 143 and 144 of the Code of Commerce is subtle but significant, and has - likewise - a different tax treatment that must be carefully studied.

The restitution of contributions operates in three cases; i) during the life of the company, when the associates have made a contribution of goods (including money) in usufruct to the company and it has been stipulated and regulated in the corporate contract that at a certain time, this right would revert to the owner of the good, ii) during the liquidation, when the company's liabilities have been cancelled and the company's liabilities have been paid, iii) when the corporate contract is declared null and void with respect to the partner requesting the restitution, if such nullity does not arise from an unlawful purpose or cause.

The total or partial reimbursement of shares, in turn, operates when the company -once dissolved- has cancelled its external liabilities and this has been requested by the corresponding partner or shareholder, which will be made in proportion to the nominal value of the shares, if the contract has not stipulated otherwise.

The Superintendence of Corporations, in its recent Official Letter No. 610-000113 dated January 23, 2018, indicated that the total or partial reimbursement of contributions could also occur during the life of the company and/or before the cancellation of the total external liability in multiple cases, such as occurs with the exercise of the right of withdrawal (in cases such as when the transformation, merger or spin-off of the company generates a greater liability for the dissenting partner, and, also, in front of the S.A.S., when a global disposal of assets or an abbreviated merger is to be approved that implies a loss of equity for such shareholders). Finally, it indicates that the reimbursement may also occur "in many other cases", thus indicating that it must be determined by the shareholder and the company if, in accordance with the law and the corporate contract, it is in any of such cases in order to give it such legal treatment.

In order to determine the tax treatment to be given to the restitution of contributions and to the total or partial reimbursement of shares, several principles, standards and rules existing in our tax legislation must be considered, such as the concept of realization of income and the generating event of the occasional gains tax. In the first place, it must be clear that restitution and reimbursement do not correspond to operations of return of sums or goods contributed to a corporate vehicle, regardless of whether they are returned in kind or in money.

Thus, the dictionary of the Royal Academy of the Spanish Language indicates that to reimburse is "to return an amount to the person who had disbursed it" and to restitute is "to return something to the person who had it before". In this sense, it could not be understood that the simple restitution of the contribution or the reimbursement of the shares, during the life of the corporation, could give rise to the realization of a taxable income, since such operation would simply imply the reclassification of an already existing asset for another one.

Something different occurs when the company is totally or partially liquidated, since Article 301 of the Tax Statute is clear in stating that "occasional gains are considered to be those originated in the liquidation of a company of any nature for the excess of the capital contributed or invested (...)". Likewise, in the case of the restitution of the contribution due to the termination of the term of duration of the usufruct contributed, it shall be understood that - by virtue of the provisions of paragraph 3 of numeral 11 of article 303 of the Tax Statute - "no occasional gains shall be generated on the occasion of the consolidation of the usufruct in the beneficial owner”.