ETVE in Spain

Since its introduction in 1995, the status of ETVE (Entidad de Tenencia de Valores Extranjeros) has made Spain one of the most attractive destinations in Europe for establishing a holding company. The creation of an ETVE is based on Spanish corporate legislation. It is not a unique type of entity; it may be created under one of the existing legal forms in Spain, such as the Limited Company.

Advantages:

• Exemption on dividends received from subsidiaries
• Exemption on capital gains obtained from the sale of shares in the subsidiary
• Exemption on profits from permanent establishments outside Spain
• 0% withholding tax on dividends distributed to shareholders by the ETVE
• Capital gains obtained from the sale of ETVE shares not taxed in Spain
• An extensive network of tax treaties

Requirements:

For the ETVE to benefit from such tax advantages, the conditions are the following:

• The purpose of the ETVE must be the administration and management of shares, participations and shares in foreign companies. It is possible to request a tax ruling from the tax authorities in order to confirm the applicability of this scheme.
• The ETVE must hold a minimum of 5% of the shares of its subsidiary abroad, either directly or indirectly. This is not compulsory if the ETVE has invested more than 20 million euros in the acquisition of its subsidiary.
• The ETVE must maintain its participation for at least 12 months. However, if dividends are distributed before the 12 months, the tax regime still applies, provided that the participation is effectively maintained for more than 12 months.

For the subsidiary to benefit from such tax advantages, the conditions are the following:

• The subsidiary must be taxed on its profits by a system equivalent to that in force in Spain. According to the tax authorities, such an equivalence or fiscal analogy is accepted when:
  • there is an agreement to avoid double taxation provided for an exchange of information between the two countries
  • there is a tax system intended to tax subsidiary's profits.
• The subsidiary cannot have its tax residence in a blacklisted country.

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