Spanish International Investment Company (ETVE)

The Spanish International Investment Company (ETVE), Entidades de Tenencia de Valores Extranjeros are extremely tax efficient international investments structures.

ETVE are widely used by UK and international companies to structure investment holdings in Latin America, using Spain, and its treaty network, as the base.


ETVE, the Entidades de Tenencia de Valores Extranjeros

ETVE stands for Entidades de Tenencia de Valores Extranjeros. They 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 channeling 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 probed to be robust enough to compete in the international tax planning market for holding companies.

Today, 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 Cases, has helped to complete a more mature structure ready to be used for international tax planning purposes under adequate Spanish tax supervision.

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.

Tax benefits of the ETVE

  • The ETVE benefit from the spanish double tax treaty network and may carry other activities in Spain or internationally.
  • The ETVE regime has been used for more than 20 years it is a well established investment holding vehicle, probably one of the most tax efficient international investment vehicles in the world.
  • 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.
  • Additionally, the Spanish ETVE may 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.

The 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 companies 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 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 bi-lateral investment treaties in the region.

Issues to be considered

  • 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.

Turnkey Project management

Del Canto Chambers will support you on the creation of an international holding company in Spain. We shall determine how the ETVE could be organised to serve your aims. 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.

Del Canto Chambers offers a turnkey project management approach with a full-service support solution, including decision-making protocols and timelines.

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.

Del Canto Chambers assists clients in structuring a wide range of transactions, from private equity deals to corporate acquisitions. A turnkey project management approach allows us to incorporate multiple local partner to ensure a successful implementation. Our firm will help you navigate through the transactional process coordinating the different professionals involved. View major cases

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.

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.


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