Spanish holding companies

Spanish holding companies

Spanish holding companies, also known as ETVEs, are businesses that benefit from a special tax regime that exempts them from taxation on dividends or capital gains earned from foreign stocks and investments.

These companies are regulated by articles 107 and 108 of the Companies Tax Law (IS) and are defined as entities whose business purpose includes the management and administration of foreign entities and businesses through the organization of material and personal resources.

The Spanish government offers a special regime for these types of companies, which have several notable characteristics:

• Dividends that a holding company (ETVE) obtains from its subsidiaries (whether domestic or non-resident) are fully exempt from corporate tax, provided that certain requirements are met: the holding company must have a minimum 5% ownership stake in the subsidiary, and the subsidiary must be subject to a corporate tax rate of at least 10% in its home country.
• Capital gains obtained by a Spanish holding company from the sale of shares in a non-resident company are also exempt from corporate tax.
• Dividends that a Spanish holding company distributes to its non-resident shareholders are also exempt from corporate tax.

One of the main advantages of a Spanish holding company is the ability to defer or avoid corporate tax on dividends and capital gains earned from foreign investments.

This can be particularly beneficial for international businesses that want to use Spain and its network of tax treaties as a base for investment in Latin America.

There are several other advantages to setting up a holding company in Spain:

• The Spanish corporate tax rate is one of the lowest in Europe, at 25%.
• Spain has a large network of double taxation treaties with other countries, which can help reduce or eliminate the risk of double taxation on international investments.
• Spain has a favorable business environment, with a highly skilled workforce and a strong infrastructure.

It is worth noting that Spanish holding companies are subject to certain obligations, such as the requirement to prepare and file annual financial statements and the obligation to appoint a legal representative in Spain. It is advisable to seek the advice of a financial or legal professional when setting up a holding company in Spain in order to ensure compliance with all relevant laws and regulations.

In conclusion, Spanish holding companies, or ETVEs, offer several advantages for international businesses looking to structure their investments in a tax-efficient way. The special tax regime for ETVEs allows for the exemption of corporate tax on dividends and capital gains earned from foreign investments, as well as on dividends distributed to non-resident shareholders.

In addition, Spain has a low corporate tax rate and a comprehensive network of double taxation treaties, making it an attractive location for holding companies.

It is important to consider all of the potential implications and obligations when setting up a holding company in Spain, and to seek the advice of legal professional.