As a result of a substantial reform of the Insolvency Law, starting January 1, 2014 the tax treatment of debt restructuring modifies both Spain's Corporate Income Tax Law and its stamp duty regulations.
CORPORATE INCOME TAX
Capital increase by debt conversion
No taxation arises from debt capitalization, unless the creditor acquired the same by transfer of title, for any value different than the face value.
Tax treatment of profits derived from debt restructuring
Income derived from any debt release or settlement, under the Insolvency Law, will be included in the debtor's taxable base, when the financial expenses derived from any such debt were to be registered, up to the limit of income above.
If such income is greater than the financial expenses pending to be registered, the income would be allocated proportionally.
As a consequence, income is not taxed upon the release being agreed, but on registration of the financial expenses derived from the relevant debt.
From 9 March 2014, any deed supporting debt releases, loan or credit reductions, or any other obligations set forth in refinancing agreements or extrajudicial payment agreements, as provided for under the Insolvency Law, is exempt from stamp duty, provided that the taxpayer is the debtor.