Shareholder exit through a capital reduction: two routes to channel liquidity and their taxation

Madrid, October 14, 2026.

Summary

A capital reduction can be used to channel liquidity from a company to one or more shareholders without having to distribute a dividend to all of them in proportion to their holdings. It can be used to structure a shareholder's full exit or to reduce their economic exposure and relative weight. It does not necessarily reduce their percentage holding, however, if the reduction also affects other shareholders. The transaction can be carried out through a direct capital reduction with a return of contributions or through the company's acquisition of its own shares (participaciones) for immediate redemption. The economic outcome may be similar, but the characterization and the tax cost are not identical. This note compares both routes under Transfer Tax and Stamp Duty (ITP-AJD), Personal Income Tax (IRPF), Corporate Income Tax (IS), Municipal Capital Gains Tax (IIVTNU, 'plusvalía municipal'), and VAT (IVA).

1. The two routes for structuring the shareholder's exit

1.1. Route A: direct capital reduction

The first route is a direct capital reduction. Here, the company directly redeems the outgoing shareholder's shares and delivers the corresponding consideration to that shareholder, without any intermediate step. In other words, the shares are extinguished without ever having passed through the company's assets. To illustrate, assume a company with share capital of €100, divided into 100 shares of €1 each, in which a shareholder, Ana, holds 40 shares, that is, €40 of capital. This same case will be used throughout the note.

If Ana wants to exit completely, the result is as follows:

• The company redeems the 40 shares and pays her €40.
• The share capital falls from €100 to €60.
• Ana ceases to be a shareholder.

If, on the other hand, Ana only wants to reduce her holding, the procedure is the same, applied to part of her shares:

• The company redeems 20 shares (€20) and Ana retains the other 20.
• The capital falls from €100 to €80, and Ana remains a shareholder with €20.

1.2. Route B: sale of shares to the company itself and subsequent redemption

The second route consists of the company acquiring the shareholder's shares and redeeming them immediately. This is an acquisition of own shares, or treasury shares (autocartera). Limited liability companies (S.L.) may make such an acquisition when it is carried out to implement a capital reduction resolution adopted by the general meeting, in accordance with Article 140.1.b) of the Capital Companies Law. The purchase must genuinely implement that resolution and comply with the corporate law requirements on valuation, creditor protection, and capital maintenance.

The exact mechanics of this second route are therefore as follows: the company acquires the shares of the shareholder who wishes to exit and immediately redeems them, thereby reducing its share capital.

Returning to the example, we start from the same company, with share capital of €100 divided into 100 shares of €1 each, in which Ana holds 40 shares and wishes to exit. The transaction takes place in two successive steps:

• First step: the company acquires the 40 shares and pays Ana €40. At this point, the company becomes the holder of those own shares.
• Second step: immediately afterwards, the company redeems those 40 shares and reduces its capital from €100 to €60.

As a result, Ana ceases to be a shareholder and the shares cease to exist.

Where the shareholder only wishes to reduce their percentage holding, the mechanism is identical, applied solely to the shares to be redeemed.

The acquisition and the redemption may be documented in a single public deed and executed immediately. Even so, the administrative doctrine of the Central Economic-Administrative Court (TEAC) treats them, for ITP-AJD purposes, as two separate legal transactions. This separation does not prevent the transaction from having to be analyzed, for other taxes, in light of its purpose and its overall result.

In short, both routes can transfer liquidity to the shareholder and bring about their full or partial exit. The difference lies in the legal sequence used and in the characterization that each tax gives to that sequence.

2. Taxation of each route: differences and similarities

2.1. ITP-AJD: where the two routes truly diverge

We begin with this tax because it is the one where the difference between the two routes is clearest and easiest to ground in the legislation itself.

Under Route A, the direct reduction with a return of contributions is subject to Corporate Transactions Tax (Operaciones Societarias) under Article 19.1.1 of the consolidated text of the ITP-AJD Law. The taxpayer is the shareholder receiving the assets or rights, and the rate is 1%. The tax base is the value of what is delivered, determined in accordance with Articles 25.4 and 10. If cash is delivered, the base will be the amount paid. If a property is delivered, the applicable value under those rules must be used, including, where appropriate, the reference value (set by the Cadastre).

Under Route B, the TEAC decision of November 16, 2017, RG 00/00998/2017PDF, issued for the unification of criteria, requires two transactions to be distinguished: the transfer of the shares to the company and the subsequent capital reduction through their redemption.

The transfer of the shares generally qualifies for the exemption for transfers of securities provided for in Article 45.I.B.9 of the consolidated text of the ITP-AJD Law, in conjunction with Article 338 of Law 6/2023, on Securities Markets and Investment Services. The exemption is not absolute. It may be lost if the transfer conceals a transfer of real estate in the anti-abuse scenarios set out in that Article 338.

The subsequent capital reduction is subject to Corporate Transactions Tax, but its tax base is zero because, at that point, no asset or right is delivered to the shareholder. The consideration was already paid in the prior transfer. For the same reason, the reduction without repayment is not subject to the graduated Stamp Duty (AJD) charge (cuota gradual), pursuant to Article 75.4 of the Regulations governing the tax.

Therefore, unless the real estate anti-abuse clause applies, Route B does not give rise to any effective ITP-AJD charge. The transfer of securities is exempt and the reduction has a zero base, although any applicable formal filing obligations remain.

The practical difference is clear. Route A bears a 1% charge on the value of what the shareholder receives, whereas Route B may result in no effective tax charge. In any event, this comparison requires that the second route involve a genuine acquisition of own shares for redemption and that Article 338 of Law 6/2023 not apply.

The TEAC's 2017 doctrine remains the specific benchmark for ITP-AJD. The Supreme Court judgments of 2025 and 2026 cited below address the IRPF and the procedural limits on recharacterization by the tax authorities. They do not contradict the separation of transactions applied by the TEAC for ITP-AJD purposes.

2.2. IRPF: what matters is not the route, but whether the shareholder exits completely

For IRPF purposes, the decisive criterion is not whether Route A or Route B is used, but whether the shareholder exits completely or retains shares after the transaction. The income is attributed to the shareholder, and its characterization changes depending on whether or not there is a genuine separation.

The general rule: when the shareholder does not fully exit

If the shareholder retains shares, Article 33.3.a) of the IRPF Law applies. For unlisted companies, there is a special rule that treats part of the amount obtained as investment income (income from movable capital). Its purpose is to prevent accumulated reserves from being distributed under the guise of a return of contributions.

That income is capped at the positive difference between two amounts: the portion of equity corresponding to the redeemed shares, calculated on the basis of the last closed financial year and with the statutory adjustments, and the acquisition value of those shares. If 20 of the 100 shares are redeemed, the cap is calculated on the proportional part of equity attributable to those 20 shares, not on total net equity. In addition, where the reduction derives from undistributed profits, the entire amount received is treated as investment income.

Any amount exceeding that cap reduces the acquisition value of the shares in accordance with the rules of Article 33.3.a) itself. If that value is exhausted and an excess still remains, the remaining part is again taxed as investment income. When shares are redeemed, those acquired first are deemed to be the ones redeemed, and their acquisition value is allocated proportionally among the remaining homogeneous securities.

The purpose of this rule is to preserve the taxation of the reserves distributed and to prevent a substantive distribution of profits from becoming a deferred capital gain merely because of the form chosen.

The special rule: when the shareholder exits completely

When the shareholder separates completely, Article 37.1.e) of the IRPF Law applies. The capital gain or loss is calculated as the difference between the value of the liquidation share or the market value of the assets received and the acquisition value of the canceled shares.

The TEAC upholds this characterization for a full exit. The Directorate General for Taxation (DGT) has reiterated it in, among others, binding ruling (consulta vinculante) V0378-25PDF of March 20, 2025. If the exit is only partial, the same ruling refers to Article 33.3.a).

To see the effect in figures, let us return to Ana's case, now with more realistic amounts. Ana acquired the 40 shares years ago for €10,000, and, on her exit, the company pays her €40,000.

If Ana exits completely, Article 37.1.e) applies: the capital gain is €40,000 − €10,000 = €30,000, with no statutory minimums or additional adjustments.

The most recent case law has added a significant procedural safeguard. Supreme Court judgment (STS) 516/2025 of April 24, and Supreme Court judgments (SSTS) 54/2026 of January 26 and 623/2026 of May 19, hold that the tax authorities cannot directly recharacterize, under Article 13 of the General Tax Law (LGT), an acquisition of own shares followed by redemption as a capital reduction with a return of contributions. If they seek to challenge the structure as artificial or on account of the tax saving pursued, they must use the procedure for conflict in the application of tax rules (conflicto en la aplicación de la norma) under Article 15 LGT.

In summary, a full exit is taxed under Article 37.1.e) as a capital gain or loss. A partial exit is governed by Article 33.3.a). This entails the special rule for unlisted companies, the initial treatment as investment income up to the statutory cap, and the subsequent adjustment of the acquisition value.

2.3. Corporate Income Tax and IIVTNU: the two routes are analogous; the difference lies in what is delivered in return

For Corporate Income Tax purposes, the two routes behave in exactly the same way. The key is not which one is chosen, but what the company pays with.

If the consideration is cash, the transaction does not in itself generate taxable income for the company. The acquisition and redemption of own shares is recorded in equity and does not involve the acquisition of an third-party asset capable of producing a capital gain.

If the company delivers an asset, normally a property, it must measure that asset at market value. Under Articles 17.4.c) and 17.5 of the Corporate Income Tax Law, the company includes in its tax base the difference between that market value and the tax value of the asset, even if the transaction has not generated an equivalent accounting result.

The starting point for the tax value of the property is usually its acquisition cost less depreciation deducted for tax purposes. It may not, however, match the property's net book value if there have been prior tax adjustments. The gain must therefore be calculated on the basis of the actual tax value and not solely on the basis of the accounts.

The delivery of urban land may also trigger the IIVTNU. The objective method applies the coefficients approved by the city council, within the statutory maximums, to the cadastral value of the land. The actual method compares the transfer and acquisition values and attributes to the land the corresponding cadastral proportion.

The transfer is not subject to the tax if it is proven that the land has not increased in value. If the proven actual increase is lower than the base resulting from the objective method, the tax base is limited to that actual increase.

In a transfer for consideration, the transferring company is generally the taxable person for IIVTNU purposes. The delivery of a property therefore requires a joint review of its tax value, its market value, the reference value, and the change in the value of the land, because each tax uses a different measure.

2.4. VAT: the same logic as in Corporate Income Tax, with two important nuances

If payment is made in cash: here the route chosen does matter

Under Route A, the redemption of shares and the cash payment do not involve a supply of goods or services subject to VAT.

Under Route B, there is a transfer of shares from the shareholder to the company. Its treatment depends on whether or not the shareholder acts as a trader or professional in that transfer.

• If the shareholder transfers the shares in the course of a business or professional activity, the transaction is generally subject to but exempt from VAT as a transfer of securities. The exemption applies only if none of the anti-abuse scenarios in Article 338 of Law 6/2023 is present.
• If the shareholder acts as a private individual, the transfer falls outside the scope of VAT. For ITP-AJD purposes, the exemption for transfers of securities generally applies, subject to the same caveat under Article 338 of Law 6/2023.

In both cases, the transfer of the shares usually results in no effective tax charge. However, the exemption should not be described as unconditional, especially where the company has a significant real estate component.

Article 338 of Law 6/2023 allows the transfer of securities to be taxed where the aim is to avoid the taxation that would have applied to a direct transfer of real estate. The provision expressly covers certain cases of acquisition of control and the contribution of shares to the company itself for subsequent redemption. The composition of the assets and the control acquired must be reviewed before concluding that the exemption applies.

If payment is made with a property: the VAT analysis is the same under both routes, but the consequence of not waiving the exemption differs depending on the route

Regardless of the route chosen, both involve an actual delivery of an asset. The VAT question therefore arises in exactly the same way in both cases, under the general rules:

• The delivery is subject to VAT when the company acts as a trader. If it is a first supply of a building, it will be subject to and not exempt from VAT. If it is a second or subsequent supply, it will, in principle, be exempt under Article 20.One.22 of the VAT Law. The fact that the property is used is not sufficient by itself; the statutory requirements must be verified.
• The exemption can be waived only in two cases: where the acquirer acts as a trader or professional and is entitled to deduct, in full or in part, the input VAT, or where the foreseeable use of the property entitles the acquirer to that deduction. The waiver must be notified and documented for each transaction, before or at the time of the delivery. If the waiver is valid, the reverse charge under Article 84.One.2.e) of the VAT Law applies.
• If the shareholder receives the property as a private asset, the exemption cannot be waived. The possible adjustment of the deductions made by the company must also be reviewed if the property is still within the adjustment period for capital goods.

When the property delivery is exempt and the exemption is not waived, the consequence for Transfer Tax (TPO) depends on the route used. Under Route A, the delivery forms part of a corporate transaction, whereas under Route B it constitutes the consideration for the transfer of the shares.

Under Route B, the delivery of the property by the company is a separate transfer. If it is exempt from VAT and the exemption is not waived, it is subject to TPO under the general rules. In addition, it must be checked separately whether the transfer of the shares triggers the anti-abuse clause in Article 338 of Law 6/2023.

Under Route A, the delivery of the property forms part of the capital reduction, which is subject to Corporate Transactions Tax at 1%. Because Corporate Transactions Tax and TPO are mutually incompatible, TPO cannot be charged on that same delivery. If the value allocated exceeds the value corresponding to the shareholder, the excess may constitute a separate agreement subject to TPO and must be analyzed separately.

3. Conclusion

Both routes make it possible to channel liquidity to one or more shareholders and to structure their full or partial exit, but they are not equivalent for tax purposes. Under ITP-AJD, the direct reduction is taxed at 1% on the value received. By contrast, the acquisition of own shares followed by redemption may result in no effective tax charge, unless the real estate anti-abuse clause applies. Under the IRPF, a full exit is governed by Article 37.1.e), whereas a partial exit is subject to Article 33.3.a). For Corporate Income Tax and IIVTNU purposes, the decisive question is whether the company delivers cash or an asset. For VAT purposes, it is essential to distinguish the transfer of shares from the delivery of a property. It must also be checked whether that delivery is a first or second supply and whether the exemption can validly be waived.

The choice should be made only after quantifying the overall tax cost, confirming the market value of the shares and of the assets delivered, documenting the corporate purpose, and reviewing the corporate law rules on treasury shares and creditor protection. Extracting liquidity through a capital reduction is not an automatic substitute for a dividend. Its treatment depends on the actual structure of the transaction, on whether the exit is full or partial, and on the nature of the consideration.

At OC | Tax & Legal, we closely follow administrative doctrine and case law on corporate transactions and family businesses so that we can provide our clients with rigorous, up-to-date advice.

Main references

TEAC decision of November 16, 2017, RG 00/00998/2017, on the acquisition of own shares followed by redemption for ITP-AJD purposes.

TEAC decision of September 11, 2017, RG 00/06943/2014PDF, on the IRPF treatment of a shareholder's full exit.

DGT binding rulings V0378-25 of March 20, 2025, and V0238-26PDF of February 5, 2026.

STS 516/2025PDF of April 24, ECLI:ES:TS:2025:2032; STS 54/2026PDF of January 26, ECLI:ES:TS:2026:359; and STS 623/2026PDF of May 19, ECLI:ES:TS:2026:2218.

Article 338 of Law 6/2023, on Securities Markets and Investment Services.

About the author
Almudena Gutiérrez is a lawyer at OC | Tax & Legal. She holds a law degree from the Universidad Autónoma de Madrid and an Expert Diploma in Taxation (Diploma de Experto en Tributación) from the same university. She is a member of the Spanish Association of Tax Advisers (Asociación Española de Asesores Fiscales, AEDAF).