The latest Supreme Court rulings—No. 637/2026 of 17 February; 640/2026, of 19 February; and 874/2026, of 20 February— address an issue of particular relevance in the context of family businesses: the application of the full-time employee requirement within corporate groups for the purposes of applying the reduction under Article 20.6 of the Corporate Income Tax Law (LISD) and the exemption under Article 4.8 of the Personal Income Tax Law (LIP).
Specifically, the High Court examines whether, for the letting of property to qualify as an economic activity, the employee requirement laid down in Article 27.2 of the Personal Income Tax Law (LIRPF) can be deemed to be met when the worker in question is not employed by the letting entity itself, but by another company within the same group.
At first view, it might appear that the Supreme Court is definitively softening this requirement, accepting that the person employed may be with any company within the group. However, a closer reading of the case law reveals that this conclusion must be significantly qualified.
The Supreme Court shifts the focus from a formal analysis — where the employee is employed — to a substantive analysis: the existence of a genuine economic and functional unity within the group. In this regard, it establishes that, where the leasing entity forms part of a group within the meaning of Article 42 of the Commercial Code and the organisation of the activity is carried out using the group’s human and material resources—even if these are centralised—the requirement regarding the employee for the purposes of Article 27.2 of the Personal Income Tax Law may be deemed to have been met, provided that there is genuine functional integration into the economic activity of the group as a whole.
This implies that the leasing company must be integrated into the group’s activity, serving that activity, and not merely making instrumental use of external resources. Otherwise, that is to say, where there is only formal membership of the group without such economic and functional integration, the requirement must be met individually by the leasing company itself.
The court rulings, therefore, avoid establishing an automatic rule and opt for a clearly case-by-case approach, which allows the rule to be adapted to the diversity of business structures, but also increases the burden of proof on the taxpayer. The distinction between ‘functional integration’ and the mere ‘use of resources’ will not always be clear, particularly in groups with diverse activities or holding companies unconnected to the core business.
Thus, although these rulings open the door to a more economic and less rigid interpretation of the full-time employee requirement, they also foreshadow a scenario of potential litigation, where the tax authorities are likely to continue rigorously analysing the underlying reality of each group.
In short, these rulings represent a step towards an interpretation more in line with the economic reality of business groups, moving away from excessively formalistic approaches. However, they also introduce a more demanding standard of analysis, which obliges taxpayers to strengthen the justification for the structure and operation of their groups if they wish to apply the tax benefits associated with family businesses.
In practice, the key will no longer be so much where the employee is employed, but how the group is organised and, above all, how the actual functioning of the group can be demonstrated from an economic-functional perspective.
At Joan Cerdà, we advise family businesses and corporate groups, taking into account the latest administrative doctrine and case law regarding the tax requirements set out in the regulations, given their particular impact—in particular—on Wealth Tax, always adopting an approach based on the economic reality of the group and of each of our clients.