The Spanish Supreme Court, in its judgment of 11 March 2026 (Contentious-Administrative Chamber, Second Section, judgment no. 308/2026, cassation appeal no. 4660/2023, rapporteur Mr Manuel Fernández-Lomana García), confirms a doctrine with direct impact on the VAT regime applicable to mixed holding companies and on the deductibility of input tax. Intragroup transfers of company participations made by a mixed holding company are considered included in the differentiated sector “financial activity” for the purposes of the differentiated-sector regime of the Value Added Tax Act. That said, those same transactions may be non-subject to VAT where they indirectly entail the transfer of an autonomous economic unit capable of carrying out a business activity by its own means.

It is helpful to explain first the legislative framework in which the judgment is situated, because the interplay between differentiated sector, pro rata and non-subjection is the operative key of the regime.

A mixed holding company is one that combines the holding of participations in other companies —typically operating subsidiaries— with the carrying out of its own business activity. In these structures, two planes intersect for VAT purposes. On the one hand, the management of the portfolio and, where applicable, the disposal of participations constitute financial activity, which in general is VAT-exempt and does not generate a right to deduction. On the other hand, the holding’s typical operating activity —management services to subsidiaries, manufacturing, distribution, etc.— is subject to VAT and not exempt, with a right to deduction.

Where the pro rata percentages of each activity differ by more than 50 percentage points, the Value Added Tax Act requires the application of the differentiated-sector regime (articles 9.1.c).a’ and 101.One of the LIVA). Each sector applies its own rule of deduction of the input VAT attributable to it, with the financial activity —exempt— not allowing the deduction of the input VAT on the goods and services allocated to it.

As against that general rule, article 7.1 of the LIVA establishes a case of non-subjection: transfers of a set of tangible and, where applicable, intangible elements that, forming part of the transferor’s business assets, constitute or are capable of constituting an autonomous economic unit capable of carrying out a business or professional activity by its own means. The transaction falls outside the tax and, by the reflex of article 104.Three, paragraph 5, of the LIVA, is not computed in the pro rata calculation.

The cassation question put to the Spanish Supreme Court was twofold. First, whether an intragroup transfer of participations by a mixed holding company must necessarily be included in the differentiated sector of financial activity. Second, whether that same transaction may be non-subject to VAT under article 7.1 of the LIVA, where it indirectly entails the transfer of an autonomous economic unit.

The case under review reflects a typical operation in listed groups. The appellant company —of the SACYR group— transferred intragroup participations in a subsidiary entity (Itinere Infraestructuras), together with a set of concession assets and related loans. The Administration considered that the transaction was included in the differentiated sector of financial activity and was to be computed in the pro rata calculation, with the consequent reduction of the deductible input VAT. The appellant argued that the transaction, in reality, entailed the indirect transfer of an autonomous economic unit and was to be left outside the scope of VAT under article 7.1 of the LIVA.

The Spanish Supreme Court articulates its doctrine in two pronouncements.

First, the intragroup transfers of company participations made by a mixed holding company must be considered included in the differentiated sector financial activity, for the purposes of articles 9.1.c).a’ and 101.One of the LIVA. This conclusion operates as a general rule: the activity of selling participations has its own substantivity vis-à-vis the rest of the holding’s operating activities and integrates, by its nature, with the financial sector.

Second, that general rule admits a significant exception. An intragroup transfer of participations may be non-subject to VAT by application of article 7.1 of the LIVA where it entails the indirect transfer of an autonomous economic unit capable of carrying out a business or professional activity by its own means. In such case, the transaction falls outside the tax and is not computed in the pro rata calculation, in accordance with article 104.Three, paragraph 5, of the LIVA.

The test of the autonomous economic unit is not resolved by labels, but by a case-by-case examination of the elements effectively transferred. The Court recalls, citing its own case law (judgments of 28 September 2011, 22 November 2012, 12 May 2016 and 7 April 2025) and that of the Court of Justice of the European Union (notably, the judgment of 10 November 2011, case C-444/2010, Christel Schriever, on article 19 of Directive 2006/112/EC), that what is determinative is whether the transfer made allows the continuity of an autonomous economic activity. The analysis must be carried out in the light of the nature of the economic activity at issue and considering whether the set transferred is accompanied by the material and personal means necessary for the transferee to carry out the activity by its own means.

Applied to the case under review, the Court concludes that no autonomous economic unit was transferred. Two reasons sustain it.

The first, that the framework agreement was limited to transferring part of the rights inherent in the participation in the subsidiary entity, without that partial transfer being capable of being considered, in itself, an economic unit.

The second, that the know-how and the resources necessary for the management of the business remained in a group company (SACYR Concesiones) and were not transferred with the operation. The transferee did not receive material or personal means sufficient to carry out the concession activity by itself. The concession assets and the loans, isolated from the managing organisation, do not constitute an economic unit capable of operating autonomously.

Accordingly, the Spanish Supreme Court confirms the judgment of the National Court, dismisses the cassation appeal and upholds the tax assessment that had included the operation in the differentiated sector of financial activity and computed it in the pro rata calculation.

In our view, the doctrine of the Spanish Supreme Court correctly articulates the balance between the general rule and the exception.

The general rule —inclusion of intragroup transfers of participations in the financial sector— responds to the logic of the differentiated-sector regime. The activity of selling participations, where it has substantivity and autonomy of its own vis-à-vis the rest of the holding’s operating activities, must be grouped with the rest of the financial transactions, subject to its own input-VAT deduction regime.

The exception —non-subjection by indirect transfer of an autonomous economic unit— responds, in turn, to the logic of article 7.1 of the LIVA and to the European doctrine on article 19 of the VAT Directive. Where the operation, despite being formally articulated as a transfer of participations, is economically equivalent to the transfer of a going concern, the legal order treats it as such and excludes it from the tax.

The practical consequence is highly relevant for multinational groups and for holding companies with their own operating activity.

It is advisable, first, to clearly identify the structure of the group and the composition of differentiated sectors for VAT purposes. The financial activity and the operating activity may generate different pro rata that justify their separate treatment, with an effect on deductible input VAT.

It is advisable, second, to assess case by case whether an intragroup transfer of participations may avail itself of article 7.1 of the LIVA. To sustain non-subjection, it is necessary to evidence (i) that the set transferred includes the material and personal means that allow the activity to be carried out by itself; (ii) that the operation entails the continuity of an autonomous economic activity in the hands of the transferee; and (iii) that the know-how and the business organisation effectively accompany the transfer.

It is advisable, third, to document contemporaneously the set of elements transferred, the personal and material resources transferred to the transferee and the continuity of the activity. The judgment underlines that the assessment is case-specific and rests on the concrete evidence of each transaction.

In conclusion, what this new judgment of the Spanish Supreme Court makes clear is that the intragroup transfer of participations by a mixed holding company integrates, as a general rule, into the differentiated sector of financial activity for VAT purposes, but may be non-subject to the tax where it entails the indirect transfer of an autonomous economic unit —an examination that requires verifying, case by case, the transfer of the material and personal means necessary for the continuity of the business activity—.

Sources

  • Spanish Supreme Court, Contentious-Administrative Chamber, Second Section, judgment no. 308/2026 of 11 March 2026, cassation appeal no. 4660/2023 (ECLI:ES:TS:2026:1155), rapporteur Mr Manuel Fernández-Lomana García: poderjudicial.es.
  • CJEU, case C-444/2010, Christel Schriever, judgment of 10 November 2011: eur-lex.europa.eu.
  • Spanish Supreme Court, Contentious-Administrative Chamber, judgment of 7 April 2025, cassation appeal no. 2875/2023.
  • Spanish Supreme Court, Contentious-Administrative Chamber, judgment of 12 May 2016, cassation appeal no. 2576/2014.
  • Spanish Supreme Court, Contentious-Administrative Chamber, judgment of 22 November 2012, cassation appeal no. 1577/2010.
  • Spanish Supreme Court, Contentious-Administrative Chamber, judgment of 28 September 2011, cassation appeal no. 1991/2007.