When planning an international investment, finding the best structure to optimise the investment return is one of the most important tasks, in which taxation plays a significant role.
For such purpose, it is highly convenient to gain knowledge about which advantages are offered by each of the intervening jurisdictions in the international structure.
Spanish regulations offer an attractive Corporation tax regime for companies channelling their international investment through Spain, commonly known as ETVEs. They can be authentic look – through entities, as they benefit from exemption on dividends and capital gains and no withholding tax is imposed on their dividend distributions or qualifying gains deriving from the transfer of shares in ETVEs by foreign shareholders.
Let us summarize below their main features for you.
✔ Their main tax benefits include:
ETVEs enjoy the general exemption on dividends and capital gains derived from the holding of shares in companies, which implies that these dividends and capital gains are not taxed in Spain.
Besides, no withholding tax is applied on distributions made by the ETVE out of these tax – exempt foreign source dividends and capital gains.
Foreign shareholders not resident in a tax haven can also benefit from tax – exempt qualifying capital gains deriving from the transfer of shares in ETVEs.
✔ What do you need to take into account
The ETVE regime applies to holding companies and ordinary companies whose social purpose comprises engaging in the administration and management of participations in the equity of non-resident entities.
The regime is not affected by the fact that the so-called ETVE engages in other activities or holds an interest in other Spanish entities. It is important to note, however, that it requires that the Spanish Company actively holds its foreign participations with an adequate organization of human and material resources dedicated to it.
It is an optional regime that requires taxpayers to elect for it.
Taking the above features into account as well as the wide range of Double taxation treaties signed by Spain, investing overseas through a Spanish ETVE is a must in your international investment structures’ roadmap.