These past days, we have learned on the numerous cases in which offshore companies
have been used, in low-tax jurisdictions.
The use of international structures in cases with the purpose of offshoring capitals not
directly invested in entrepreneurial activities, for tax reasons, does not escape from
our tax rules, as they foresee a method of allocation of the overseas income to the
Spanish shareholders, as if they had directly obtained them without the intermediary
✔Both Spanish Personal income tax and Corporate income tax regulations include
the so-called “International fiscal transparency” system (better known in the English
speaking world as CFC rules). These rules try to avoid the use of special purpose
vehicles when the non-resident company does not dispose of an organization of
human and material resources to carry on an economic activity.
As a result of their application, the Spanish resident shareholder is allocated the
income obtained by the non-resident intermediary company, as if it did not exist.
✔On which aspects do these rules focus?
– On the one hand, on the capacity of control and decision on the special
purpose vehicle, as it applies when the resident shareholder owns at least 50%
of the non – resident company.
– Another feature which is taken into account is the Corporate income tax paid
by the non – resident entity, when it is lower than 75% of the one that would
have applied following Spanish rules. Generally speaking, for a Spanish
company subject to the standard 25% rate it would mean a tax paid lower than
✔ Which type of income can be allocated to the Spanish shareholder?
Only passive income, not deriving from the performance of entrepreneurial activities,
as defined by the Spanish regulation. For example, certain income from real estate
properties, image rights, intellectual property or from credit, financial, insurance and
the rendering of services, when they generate a tax deductible expense in Spanish tax
– related resident companies.
Spanish CFC rules do not apply when the intermediary company is resident in the EU
and it can be proven that it was set up and operates due to sound economic reasons or
it is a harmonized Collective investment institution not set up in a tax haven.
✔ The use of offshore companies in international structures that is accompanied by a
real economic activity should not be affected by the application of CFC rules.
Notwithstanding this and since these are complex and exhaustive rules, it is
recommendable to carry on an in – depth study of each case, so as to accurately
comply with your Spanish tax obligations.