When Can You Claim a Loss from a Company in Insolvency? DGT Ruling V0308-25

Context and practical relevance

According to binding ruling V0308-25, issued by the Directorate General for Taxes (DGT) on 17 March 2025, a capital loss arising from the liquidation of a company in insolvency proceedings may be reported for Personal Income Tax (IRPF) only when a court order declares the company dissolved. It cannot be claimed at earlier stages, such as the opening of insolvency proceedings or the start of liquidation.

The tax consequence is clear: the loss cannot be recognised until a final court decision declares the company’s dissolution. That decision establishes when the change in the taxpayer’s assets required by IRPF rules takes place.

Applicable legal framework

The DGT bases its response on several key provisions of Law 35/2006 on Personal Income Tax:

• Article 33 defines capital gains and losses as changes in the value of a taxpayer’s assets resulting from a change in their composition, unless the law classifies them as income.
• Article 37(1)(e) provides that, when a company is dissolved or a shareholder separates, the capital gain or loss is the difference between the acquisition cost of the shares and the value of the liquidation proceeds received.
• Articles 14(1)(c), 46 and 49 govern the timing of recognition and classify these changes as savings income.

Practical interpretation

In insolvency liquidation proceedings, the liquidation proceeds are often zero or close to zero, meaning the shareholder loses their entire initial investment. However, the loss cannot be recognised for tax purposes until a legal act sufficiently establishes the change in the composition of the taxpayer’s assets: the court order dissolving the company.

This means that neither the opening of insolvency proceedings, the liquidation phase, nor the absence of dividends is enough to report the capital loss for tax purposes. Only the court declaration of the company’s dissolution establishes the change in assets required by Article 33 of the Personal Income Tax Law.

Consequences

1. The loss is recognised in the tax year in which the court order dissolving the company is issued, even if the company became insolvent or ceased operating earlier.
2. This prevents taxpayers from claiming the loss too soon, reducing the risk of enquiries from the Tax Agency and avoiding subsequent amendments.
3. The loss is classified as savings income and included in the savings tax base, where it is taxed under the scale in Article 46.
4. For tax planning, it is important to keep the court order dissolving the company and sufficient evidence of the initial investment, since the liquidation proceeds will be nil or very low.

Practical example

Suppose a taxpayer acquired shares in a company in 2020 for €50,000. The company enters insolvency proceedings in 2023, and liquidation begins that same year. In 2025, the court issues an order declaring the company dissolved.

In this case, the €50,000 capital loss cannot be reported in 2023 or 2024. It may be reported in 2025, the year of the court order. The taxpayer must include the loss as savings income in their IRPF return for 2025.

Recommendations

• Make sure the court order dissolving the company has been properly notified and dated before claiming the loss.
• Keep all documents evidencing the original investment and the insolvency proceedings.
• Explain to clients that the loss is not recognised when the company stops operating, but when the court expressly declares its dissolution.
• Apply this criterion when reviewing shareholdings in inactive companies or companies undergoing liquidation.