Spanish Tax Issues in Debt Restructurings: The Tax Treatment of Cancellation of Debt

The author reviews the Spanish tax treatment of the cancellation debt that may take place when debt is restructured. When third-party lenders take control of the borrower and restructure the debt, potential tax issues may arise if the debt is subsequently renegotiated and cancelled. The Spanish accounting and tax authorities have issued a questionable set of interpretative criteria which may result in adverse tax consequences, which are reviewed in this article.