Spanish Holding Company (ETVE)

A regime governing Spanish holding companies came into force in 1995 providing an efficient mechanism to structure multinational groups with investments in Latin America, since Spain has the most extensive network of tax treaties with countries in Latin America.

Spanish Holding Company ETVE

Spanish International Investment Companies (ETVE), “Entidades de Tenencia de Valores Extranjeros”, are extremely tax-efficient international investments structures. ETVE Spanish Holding companies are widely used by UK and international companies to structure investment holdings in Latin America, using Spain, and its treaty network, as the base.

The ETVE regime has been used for more than 20 years and is one of the most tax-efficient international investment vehicles in the world.


What is an ETVE Spanish Holding Company?

Spanish International Investment Companies (Entidades de Tenencia de Valores Extranjeros ETVE), are regular Spanish resident companies involved in “the supervision and management of securities issued by companies non-resident in Spain”. They are international investment companies and are widely used for Latam investment, using Spain, and its Latam treaty network, as a base.

The ETVE structure complies with all EU and OCDE criteria, including the benefit of being located in a double tax treaty jurisdiction and in the EU territory. As such, the ETVE is protected by EU Directives, such as the Parent-Subsidiary Directive and the Merger Directive, and is regarded as Spanish resident for tax purposes.

The broad Spanish tax treaty network, specifically with Latin America, and the European character of the ETVE, makes it an interesting vehicle for channelling capital investments towards Latin America, as well as a tax-efficient exit route for EU capital investments by non-EU companies.

In 1995, the Spanish Corporate Tax Act (Ley 43/1995 del Impuesto de Sociedades), included a chapter devoted to the tax regime of the ETVE, Entidades de Tenencia de Valores Extranjeros (Foreign Securities Holding Companies), which most people know as the International Spanish Holding structure. Over the years, the structure has proved to be robust enough to compete in the international tax planning market for holding companies.


How do Spanish ETVE Holding Companies work?

The ETVE is a regular Spanish company subject to Spanish Corporate Tax rules on its Spanish trading income, but exempt from taxation on qualified foreign-source dividends and capital gains. To benefit from this regime, the ETVE structure requires disclosure and notification to the Spanish tax authorities. Although formal authorization is not needed, communication is a formal requirement that must be complied with.

  • ETVEs may carry out other business activities in addition to those of a pure holding nature.
  • ETVEs may be fully exempt from the payment of tax on dividends and capital gains obtained from their shareholding in non-resident companies.
  • The shares of ETVEs must be nominative so that the shareholders are easily identifiable at all times. Shares issued to the bearer are not allowed. Authorization by the tax authorities is not required in order to benefit from the ETVE regime.

Tax Benefits of ETVE Spanish holding companies.

The ETVE benefit from the Spanish double tax treaty network and may carry other activities in Spain or internationally.

  • Investments on foreign qualifying assets means that the dividends and capital gains received by the ETVE are totally exempt from Spanish Corporation Tax.
  • Capital gains arising from the sale of the shares of the ETVE are not subject to taxation in Spain in accordance with certain rules.
  • The distribution of dividends from Spain from the ETVE to a non-resident shareholder, are not subject to withholding tax in Spain.
  • The Spanish ETVE may also take advantage of the Parent-Subsidiary Directive: 0% withholding tax for dividends received from subsidiaries resident in other European Union countries. Where the provisions of the parent/subsidiary directive do not apply (or where anti-avoidance provisions are in place) Spanish holding companies can rely on a reasonably extensive network of double taxation treaties, the effect of which is to obtain a reduction in withholding tax rates on dividends remitted to Spain from the subsidiary jurisdiction.

ETVE rules and regulations

The ETVE may apply for a full participation exemption on qualifying investment income coming from dividends or capital gains according to certain rules, such as:

  • Income earned by the non-resident entities, from which dividends and capital gains are paid, is derived from business activities conducted outside Spain. The company’s principal activity should not be the management of movable or immovable property (Article 116.1 LIS).
  • The ETVE must have a Board of Directors meeting regularly and its corporate purpose must include managing and administering securities representing the equity of entities not resident in Spanish territory, with a minimum holding of 5% in their equity, or when the acquisition value of the holding exceeds 6 million euros (article 116.1 LIS). The ETVE must have the corresponding organisation of material and personal resources (see definition contained in the reply issued by the Directorate General for Taxation, in binding tax consultation number 120/03.
  • The securities representing the participation in the ETVE must be registered (article 116.1 LIS).
  • The option for the scheme must be communicated to the Ministry of Finance. It will be applied in the tax period ending after the communication, and in the following periods, unless waived (article 119 LIS).
  • The non-resident company must be subject to, and not exempt from, a tax system that is similar to Spain’s corporate tax system. This requirement will be considered as fulfilled whenever the foreign company is resident in a country that has signed a double tax treaty with Spain and must include an information exchange clause. The amount of the exempt income and the taxes paid abroad corresponding to it must be mentioned in the notes to the ETVE’s annual accounts (article 118.3 LIS).
  • The non-resident entity must not reside in a country or territory identified by the Spanish tax authorities as a tax haven and dividend distribution cannot be made to tax haven
  • For capital gains tax purposes, the seller and the purchaser must be unrelated parties if the purchaser is a Spanish entity.
  • There must be a minimum one-year holding period to apply for the exemption
  • There are other requirements depending on the investment, which should be reviewed with our tax & legal team.
  • Latin America: The use of Spanish holding companies is extremely manageable in relation to Latin American countries due to the Spanish extensive network of double tax treaties and bilateral investment treaties in the region.

Spanish Holding Company ETVE Considerations

  • The financial costs associated with the acquisition of participations are in principle deductible for corporate tax purposes.
  • Stamp Duty is usually 1%, payable on the issue of share capital on entities established in Spain, which is exempted in paper for paper operations.
  • The ETVE can hold shares in other entities resident in Spain, with no limits in terms of participation. However, there is a limit of a 15% holding of assets located in Spain when selling the shares.
  • If the participation by the ETVE in the non-resident entity was valued according to the rules applicable to the special tax regime for mergers, spin-offs, exchanges of shares and in-kind contributions and payment of direct taxes in Spain was deferred, the exemption only applies to the positive difference between the transmission value and the market value when the participation was acquired by the ETVE. The remaining of the income obtained in the transfer will be included in the tax base.
  • If foreign source dividends are exempt from tax in Spain, the ETVE cannot include in the taxable base the depreciation of the participation corresponding to those dividends.
  • If the ETVE has losses in the transmission of a participation in a foreign company, such losses will be reduced by the amount of exempt gains obtained by an entity forming part of the same group of companies of the ETVE that transmitted the participation to the ETVE.

FAQ’S on the ETVE (Spanish holding company)

What does ETVE mean?

Entidades de Tenencia de Valores Extranjeros or Entities Holding Foreign Security (ETVE

Is the ETVE a special Spanish Company?

ETVE, also known as Spanish holding companies, are those businesses that benefit from a special tax regime that consists of tax exemption with respect to any dividends or capital gains that they may obtain from stocks and shareholdings in foreign businesses.

What are the main tax advantages granted by this special tax regime?

Double taxation treaties signed by Spain apply to ETVEs, as in the case of any other Spanish resident company. As a result, ETVEs can benefit from any exemptions and reduced rates for dividends, capital gains, or interest. Below is a list of the countries with which Spain has signed a double taxation treaty.

  • Albania
  • Algeria
  • Argentina
  • Armenia
  • Australia
  • Austria
  • Barbados
  • Belgium
  • Bolivia
  • Bosnia Herzegovina
  • Brazil
  • Bulgaria
  • Canada
  • Chile
  • China
  • Colombia
  • Costa Rica
  • Czech Republic
  • Former USSR states (excluding Russia)
  • Croatia
  • Cuba
  • Denmark
  • Ecuador
  • Egypt
  • El Salvador
  • Estonia
  • Finland
  • France
  • Georgia
  • Germany
  • Greece
  • Holland
  • Hungary
  • Iceland
  • India
  • Indonesia
  • Iran
  • Ireland
  • Israel
  • Italy
  • Jamaica
  • Japan
  • Kazakhstan
  • Kuwait
  • Latvia
  • Lithuania
  • Luxembourg
  • Macedonia
  • Malaysia
  • Malta
  • Mexico
  • Moldavia
  • Morocco
  • New Zealand
  • Norway
  • Pakistan
  • Panama
  • Poland
  • Portugal
  • Romania
  • Russian Federation
  • Saudi Arabia
  • Serbia
  • Singapore
  • Slovakia
  • Slovenia
  • South Africa
  • South Korea
  • Sweden
  • Switzerland
  • Thailand
  • The Philippines
  • Trinidad & Tobago
  • Tunisia
  • Turkey
  • United Arab Emirates
  • United Kingdom
  • United States of America
  • Uruguay
  • Venezuela
  • Vietnam

What are the requirements for this regime?

In order to benefit from the ETVE Regime, a company needs to be considered an “active entity”, developing its activity by means of the organisation of material and personal resources. It is not necessary that the human and material resources reach a certain minimum threshold, but the ETVE company may not, as an investment company, be an empty shell or a mere custodian of assets.

What are the legal requirements to apply the tax exemption to the dividends and capital gains?

The Corporate Tax Act (RD 4/2004 de 5 de Marzo, TRLIS, Chapter XIV section articles 116-119) includes the current definition of the ETVE. This legal definition, together with regulations, tax office opinions and Court Caseshas helped to complete a more mature structure ready to be used for international tax planning purposes under adequate Spanish tax supervision.
An ETVE is a regular Spanish company subject to a 30% tax on its income, but exempt from taxation on qualified foreign-source dividends and capital gains. In June 2000, the regime was amended in order to introduce significant new improvements, including a capital gains tax exemption on the transfer of shares in the Spanish holding company, which enhance the possibilities of the ETVE as a holding vehicle. Also, the EU’s Code of Conduct Committee has determined that the ETVE does not represent potentially harmful tax competition.

Why should the ETVE be of interest to my clients?

The tax advantages of an ETVE holding company in Spain are unique compared to other countries in Europe. The management is cheaper and more transparent, shareholder anonymity is high, and it makes it is possible for the company to work in international markets without having to pay any taxes on the dividends. It is not a coincidence that many of the world’s top companies use ETVEs.


How we can help set up an ETVE Spanish holding company

Del Canto Chambers will support and advise you on the creation of an international holding ETEV company in Spain. We can help determine how the ETVE is best structured and organised to serve your aims and our Tax & Legal team will take care of all the tax planning aspects, company formation as well as the accounting and compliance aspects of running the company annually. We can also provide directorship services.

The partner in the original engagement stays involved throughout the work to ensure you experience a seamless service. That connection provides consistency and intimate client knowledge, expertise and proactive advisory services.

We have worked with a variety of projects in Spain, Middle East and Latin America, advising European and American companies. Our team is able to offer turn key solutions managing the whole project with our local partners. As members of The Leading Edge Alliance, we work with local auditing firms assisting with tax audits and general compliance. We work collaboratively with LEA Global firms, with a strong focus on client service.

Please contact us so we can explain in more detail the tax advantages of a holding company in Spain so that you can optimise your company’s international taxes.

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