Spain: Have you been taxed on a transfer of holdings in Spain? You may be entitled to a refund

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Spain: Have you been taxed on a transfer of holdings in Spain? You may be entitled to a refund

de-la-cueva.jpg

Alvaro de la Cueva

Under Spanish tax law, corporate income taxpayers that realise a gain on the sale of a holding of more than 5% in a resident entity in Spain are entitled, provided the holding has been owned for more than one year, to take a corporate income tax credit equal to the portion of the gain that relates to the reserves of the investee that have already been taxed at the investee. However this mechanism, which aims to eliminate the double taxation that would arise if the income was first taxed at the investee and then on the occasion of the gain, is not reflected in the non-residents income tax.

Against this backdrop, the Spanish Supreme Court recently published its judgment of October 25 2013 on a French entity's claim that it was entitled to a refund from the Spanish tax authorities on the grounds that, as the Spanish tax legislation on non-residents did not establish a mechanism to avoid double taxation such as that noted above, the tax that the French entity had to pay on the gain that it realised on a transfer of a holding in a Spanish entity infringed the free movement of capital between member states, and was therefore in breach of EU law which prohibits discrimination on grounds of nationality and, by extension, on grounds of residence.

In addressing the claim, the Supreme Court, referring to the extensive case law of the European Court of Justice on the prevalence of Community Law and its direct applicability when it comes to preventing discriminatory situations, acknowledged the French entity's right to take the tax credit, thus reducing the tax due, and consequently its right to obtain a refund of the non-resident income tax that it had overpaid.

In light of the above, although the applicability of this judgment is restricted to certain cases (essentially because of the Spanish non-resident tax legislation, which establishes an exemption for gains realised on the sale of holdings in Spanish entities that are not real estate entities or of holdings that did not reach 25% in the preceding year, and by application of the tax treaties which, with certain significant exceptions such as France or Portugal, among others, reserve the taxation of these gains to the state of residence of the sellers), taxpayers would do well to analyse the transfers they have made in the past four years.

Alvaro de la Cueva (alvaro.delacueva@garrigues.com)

Garrigues Taxand

Tel: +34 915 145 200

more across site & bottom lb ros

More from across our site

US partner Matthew Chen was named as potentially the first overseas PwC staffer implicated in the tax leaks scandal, in a dramatic week for the ‘big four’ firm
PwC alleged it has suffered identifiable loss and damage arising out of a former partner's unauthorised use of confidential information; in other news, Forvis Mazars unveiled its next UK CEO
Luxembourg saw the highest increase in tax-to-GDP ratio out of OECD countries in 2023, according to the organisation’s new Revenue Statistics report
Ryan’s VAT practice leader for Europe tells ITR about promoting kindness, playing the violincello and why tax being boring is a ‘ridiculous’ idea
Technology is on the way to relieve tax advisers tired by onerous pillar two preparations, says Russell Gammon of Tax Systems
A high number of granted APAs demonstrates the Italian tax authorities' commitment to resolving TP issues proactively, experts say
Malta risks ceding tax revenues to jurisdictions that adopt the global minimum tax sooner, the IMF said
The UK and what has been dubbed its ‘second empire’ have been found to be responsible for 26% of all countries’ tax losses by the Tax Justice Network
Ireland offers more than just its competitive corporate tax environment but a reduction in the US rate under a Trump administration could affect the country, experts tell ITR
The ‘big four’ firm was originally prohibited from tendering for government work until December 1 due to its tax leaks scandal, but ongoing investigations into the matter have seen the date extended
Gift this article