28 September 2023

Tax advisor: Foreign Securities Holding Entities (ETVE): Considerations about the application of the ETVE regime

ETVEs are efficient corporate vehicles for investments abroad. These entities
benefit from a special tax regime that significantly reduces the tax burden on
foreign profits, which makes these vehicles highly attractive to international

However, the application of the special tax regime requires the fulfilment of
several requirements. In the following, we will discuss the main requirements
and highlight the most problematic issues in the application of the regime.

What are ETVEs?

The Foreign Securities Holding Entities (ETVE) are legal entities that are used to
funnel investments abroad. The legal form of this investment vehicle is that of an
ordinary company, whose particularity lies in the fact that the company has opted
for the application of the special tax regime for ETVEs.

This special tax regime makes it possible to significantly reduce the tax burden
that normally falls on income and profits generated by investments abroad.
However, the value of this vehicle is mainly focused on structures in which both
the partner of the ETVE and the investments made by the ETVE itself are located

The special tax regime for ETVEs

One of the most attractive features of the special tax regime for ETVEs in Spain
is their preferential tax treatment, which can be analysed from two perspectives:

  1. Profits distributed by non-resident subsidiaries to the ETVE vehicle itself
    in its shareholder status.
  2. Distribution of the ETVE’s profits to its non-resident shareholders.

In relation to profits distributed by non-resident subsidiaries to the ETVE, the tax
treatment of such income has no particularities with respect to the general
corporate income tax (CIT) regime1. Thus, dividends and profits obtained by the
ETVE from the transfer or holding of shares in entities in which the requirements are broadly met, will be tax exempt: (i) a shareholding of more than 5% is held, (ii) the shareholding is held for at least one year, and (iii) the subsidiary is taxed by a tax analogous to IS at a minimum nominal rate of 10%.

The distinctive characteristic of ETVEs, therefore, lies in the treatment of
dividends and profits obtained by ETVE shareholders who are non-residents in
Spain. Hence, shareholders who are taxable persons subject to Non-Resident
Income Tax (NRIT) will not be subject to taxation on the profits or shares in profits
received2. This means that if the requirements are met, notwithstanding the
provisions of the Double Taxation Agreements (DTA) signed between Spain and
the country of residence of the shareholder, the dividend distributed will not be
subject to withholding tax in Spain.

Requirements for the application of the ETVE regime

In order to benefit from the advantages of the special tax regime for ETVEs,
certain requirements must be met. It is important to review the compliance with
these requirements on an ongoing basis, as the Tax Administration may review
the fulfilment of these requirements at any time. In particular, the following
conditions are required:

  1. That the company’s corporate purpose includes the management and
    administration of securities representing the equity of entities.
  2. That such entities are non-resident in Spanish territory.
  3. That the ETVE company does not consist of an asset-holding entity3.
  4. That material and personal resources are available for the management
    of the investees.

Of the aforementioned requirements, the most controversial and problematic is
the requirement relating to the organisation of material and human resources.
This requirement means that an entity cannot benefit from the ETVE regime if it
is a mere passive holder of the shares in the subsidiaries that are not resident in
Spain. Thus, the company must carry out an effective and real management and
administration activity of the investees, which, moreover, cannot be delegated to
third parties4.

The case-by-case nature of compliance with this last requirement is very broad,
being the requirement most reviewed and analysed by the Tax Administration, so
it is necessary to carry out an adequate analysis of the particular circumstances
on a case-by-case basis to ensure compliance with this requirement and to be
able to access the application of the ETVE regime.


The special tax regime for ETVEs in Spain offers a unique opportunity for
international investors wishing to maximise their investments abroad and
optimise their tax structure. Hence, the profits and dividends from subsidiaries
abroad and distributed to the non-resident foreign partner are not subject to
taxation in Spain, a tax treatment that maximises the financial and fiscal return
on the investment abroad.

However, expert legal and tax advice is essential to ensure compliance with all
regulations in order to take full advantage of this special tax regime, as well as to
analyse the overall tax impact of the structure worldwide.




B Law & Tax International Tax & Legal Advisors.

“En B LAW&TAX somos especialistas en asesoramiento fiscal internacional tanto a empresas como para particulares. Si desea ampliar la presente información, estaremos encantados de poder atenderle en el 917817194 o en [email protected]