When I was a child, I used to start my interrogation of my grandfather with "Can I ask you a question? He always responded with the same joke: "Does asking offend?” It was his way of explaining to me that there are no questions that cannot be asked and that it was the answer that conditioned the question. This general rule has exceptions such as the one that motivates this article: a bad question and a worse answer.

This is exactly what has happened with the recent reply from the Directorate General of Taxes (DGT) number V2265-21, regarding the application of the exemption (art. 21.3 LIS) of the positive income obtained in the transfer of shares in companies (SPVs) owning projects in greenfield development of renewable energy generation plants.

In response to the taxpayer's question, the DGT points out that if only the procedures for obtaining the necessary permits for the construction of the solar plant have been carried out and the development has not materially begun, the company is not considered to have carried out an economic activity and, therefore, it is of a capital nature.

Even if the purchase and sale takes place when the entity has obtained all the necessary permits for the construction of the plant (when the project reaches "Ready-to-Build" status), the DGT considers that there has been no material commencement of the production activity of the solar plant, since neither the mere intention or will to carry it out nor the simple preparatory actions or actions tending to begin the effective development of the activity represent its material commencement.

Therefore, the exemption would not be applicable, because no economic activity has been carried out. And its assets, the relevant investments made in its initial phases (acquisition of land, projects, studies and the like aimed at obtaining the necessary licences) are not affected by it.

It is true that, despite the relevance of this consultation in the photovoltaic sector (and even in other possible economic sectors), the criterion is not new. The DGT, regarding entities dedicated to energy production, had understood that the activities consisting of studies, projects and the processing of the necessary permits to build a power plant do not imply the start of an economic activity, but that the start of the activity occurred at the time when the material start of the construction and promotion of the installations took place. However, these consultations were issued under the provisions of the regulations in force until 2014.

However, following the entry into force of the new LIS, in one of its replies, the DGT adopted the criterion of considering that the commencement of economic activity had occurred in the case of an entity engaged in energy production when the construction of the energy substation had begun. It was not expressly stated whether it is the fact of having started construction that constitutes the commencement of the economic activity, but, in short, the management body accepts the development of an economic activity of promotion and exploitation of energy if the material construction of the elements related to energy production has started. Nor is any reference made to the degree of progress of construction.

However, what gave hope to the photovoltaic sector was the reply to binding consultation V2931-16. It seemed that the DGT had abandoned the previous criterion relating to the material start of the works, to conclude by application of article 5 of the LIS relating to asset-holding entities that "for the development of the activity of market prospecting, search for business opportunities and promotion of photovoltaic plants by obtaining the necessary licences and permits for the construction and operation of this type of facility, said entity will not be considered as an asset-holding entity, as its elements will be assigned to the development of an economic activity".

Although it is decisive in this consultation that the SPV has the material and personal resources at group level to carry out its economic activity, it is also decisive that it is expressly stated that its activity consists of development, whereas in the rest of the consultations the main activity consisted of the exploitation and production of energy or the development of photovoltaic plants.

The problem is that in school we are rewarded for having the right answer, but not for asking a good question. It seems that, with the recent answer to such a specific question in the current times, the DGT has taken up the previous criterion of the material start of the works, applying it to the normative change in the regulation of property entities in article 5 of the LIS.

Asking the right questions requires as much skill as giving the right answers. In this sense, the recent response from the DGT ignores the jurisprudential criteria regarding the commencement of the property development activity. And we are not going to go into the fact that there are statements that are doubtful to be sustained in the future: to say, as the reply states, that "entity B has not materially started the development of the solar plant, since, as stated in the consultation letter, at the time of the transfer, only the processing and obtaining of all the necessary permits for the development of the installation will have been carried out" is something that, to say the least, causes some astonishment, since for the DGT, who carries out a study of the site, it is not only the DGT that carries out a study of the site, but also the capacities of the transport network, of the capacities of the transmission or distribution network, contracts land, provides bank guarantees or surety insurance, approves projects, initiates procedures for the declaration of public utility, carries out environmental studies, commits to future payments together with other promoters, pays for licences and so on and so forth, "has not materially initiated the promotion of the solar plant".

It should not be forgotten that the Supreme Court put an end to the criterion - exported from VAT - whereby the Administration considered that an act as simple as the physical movement of land determined the start of the property development activity. In the end, the Court rejected it because "the moment of assignment of the land to the business activity of property development cannot be identified with the start of the development works".

In this regard, the DGT should review the application of the doctrine of what is the so-called preparatory actions, not requiring the commencement of the material execution of the construction as an essential requirement. Likewise, the photovoltaic sector should adjust its usual practice of selling shares in SPVs in the future. So far, there have been 2 sales structures: the so-called "as is" sale and the so-called "a ready to build" sale. In neither scenario, according to the DGT, has an "economic activity" been carried out by the company whose shares are transferred. But there is a developer who is bearing, by imposition of Article 23 of Royal Decree 1183/2020, of 29 December, on access and connection to the electricity transmission and distribution networks (previously by the provisions of Royal Decree 1955/2000, of 1st December, regulating the activities of transmission, distribution, commercialisation, supply and authorisation procedures for electricity installations and so on) an economic guarantee for an amount equivalent to 40 €/kW installed, which means for a project of 50 megawatts of power a 2,000,000€ risk ; this risk would be called a business risk by anyone except the DGT: according to its position this is not a business risk because there is no business activity when no one would dispute the existence of an asset).

In line with the above, the DGT should be asked what character it gives to certain actions such as, for example, the payment of building permits to which these projects are subject, the payment of ICIO, project visas, the payments provided for in the third additional provision of the

Royal Decree-Law 15/2018, of 5 October, on urgent measures for energy transition and consumer protection. Applying the content of the answer given by the DGT by analogy, we would have to assume that the construction by a car brand of a factory to develop a new vehicle would not be a business activity until the first car comes off the assembly line. This does not seem to make much sense: an asset-holding company whose assets consist of a flat in a seaside resort, a Sorolla painting, and a top-of-the-range car is one thing, but a company whose assets consist of the result of a series of investments that have given rise to basic and essential rights for the development of an industrial activity is quite another.

In any case, what is clear is that the sector will have to review its accounting provisions at the end of the year and prepare for turbulent times. The tax risk involved in the numerous sales of SPV holdings - from their greenfield phase prior to ready-to-build - is high, as the application of the controversial exemption has been common practice in the past. And let us not rule out the possibility that there may be an extension of what is said in this reply to sales known in the jargon as "COD sale": cases in which a company is transferred which, although it has all the permits, licences and authorisations required by law and also has the installation built (the photovoltaic park or wind farm), it has not yet begun to sell electricity to third parties.

You can read the article in Invertia | El Español