The structure of a transaction — share sale or asset sale — has tax, legal, and operational implications that can represent millions of euros in difference. We explain the key differences every business owner should know.
When a business owner sells their company, one of the most determinative decisions — and one of the least understood — is the legal structure of the transaction: are the shares or equity interests of the company being sold, or are the assets and liabilities that comprise the business being transferred?
This decision, which many business owners delegate entirely to their advisors, has tax implications that can represent several percentage points of the net price received, legal implications that determine which liabilities each party assumes, and operational implications that affect employees, customers, and suppliers.
In a share purchase, the buyer acquires the shares or equity interests of the company. The company itself — with all its assets, liabilities, contracts, employees, licences, and obligations — remains the same legal entity. What changes is ownership.
Tax implications for the seller. If the seller is an individual, the gain is taxed as savings income in personal income tax (IRPF) at rates of 19-28% depending on the amount. If the seller is a holding company, the gain may benefit from the participation exemption under article 21 of the Corporate Tax Act, potentially reducing the effective rate to zero.
Advantages. Simplicity — there is no need to transfer individual assets, contracts, or licences. Continuity — the company continues to operate exactly as before. Speed — the transaction can close more quickly.
Risks for the buyer. The buyer inherits all of the company’s liabilities, including undisclosed or contingent ones. This is why thorough due diligence is essential, and why share purchase agreements typically include extensive representations, warranties, and indemnification provisions.
In an asset purchase, the buyer acquires specific assets (and sometimes specific liabilities) from the company, rather than the company itself. The company remains in the hands of the original owner, stripped of the transferred assets.
Tax implications. The company recognises a gain or loss on the sale of each individual asset, taxed at the corporate tax rate (25%). The buyer obtains a stepped-up tax basis in the acquired assets, which translates into higher depreciation deductions.
Advantages for the buyer. Selectivity — the buyer chooses which assets and liabilities to acquire and which to leave behind. Clean slate — the buyer does not inherit undisclosed liabilities (with limited exceptions). Tax efficiency — the stepped-up basis generates future tax savings.
Disadvantages. Complexity — each asset, contract, and licence must be individually transferred, often requiring third-party consents. Employee subrogation under article 44 of the Workers’ Statute applies regardless of the structure, but the process is more administratively complex.
Share purchase is preferred when: the company has valuable licences or permits that cannot be easily transferred, the business has complex contractual relationships that would be disrupted by an asset transfer, the seller wants to take advantage of the participation exemption, or the transaction needs to close quickly.
Asset purchase is preferred when: the buyer wants to isolate specific risks (particularly tax or litigation liabilities), the company has assets the buyer does not want, the buyer wants the stepped-up tax basis, or the company is in financial distress and the buyer wants to acquire the business without the problematic liabilities.
In practice, many middle-market transactions use hybrid structures. A common approach is to combine a share purchase with pre-closing restructuring — spinning off unwanted assets or liabilities into a separate entity before the transaction closes. Another approach is to acquire shares but with specific indemnification provisions that effectively ring-fence identified risks.
Employee treatment. Under Spanish law, employees are protected regardless of the transaction structure. Article 44 of the Workers’ Statute provides for automatic subrogation of employment contracts in the event of a business transfer, whether structured as a share sale or an asset sale.
Third-party consents. An asset purchase may require consent from landlords, key customers, or regulatory authorities to transfer specific contracts or licences. A share purchase generally does not, although some contracts include change-of-control provisions that may be triggered.
Transaction costs. Asset purchases tend to have higher transaction costs due to the need to transfer individual assets, pay transfer taxes on real estate, and obtain third-party consents. Share purchases tend to be more cost-efficient.
The choice between a share purchase and an asset purchase is not a technical detail — it is a strategic decision that affects the tax outcome, the risk allocation, and the operational continuity of the business. It should be made early in the process, with input from both tax and legal advisors, and with a clear understanding of the implications for both buyer and seller. In many transactions, the structure of the deal matters as much as the price.
By Dirk Manuel Martens Jiménez
By Dirk Manuel Martens Jiménez
By Dirk Manuel Martens Jiménez
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