9 SPAIN

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9.1 Spain
Taxation of resident investment funds
Spanish Collective Investment Vehicles (hereinafter, “CIVs”) can adopt a corporate form
(such as the Spanish Sociedad de Inversión de Capital Variable; hereinafter, “SICAV”) or a
fund form (such as a Spanish Fondo de Inversion Mobiliaria; hereinafter, “FIM”).
Both are subject to the general 19% flat rate of WHT on dividend income levied by the
distributing Spanish companies.
CIVs are subject to corporate income tax (CIT). The applicable CIT rates vary depending on
certain requirements, such as the number of shareholders, amongst others:
- if the CIV has under 100 shareholders, they are treated as common taxpayers for CIT
purposes, and subject to the general rate;
- SICAVs and FIMs having 100 shareholders or above, are subject to CIT at a flat rate of
1%. In order to benefit from the 1% flat rate, Spanish SICAVs and Spanish FIMs should
also fulfil the rest regulatory requirements set forth Law 35/2003 and the regulations set
by the CNMV (diversification, professional management, supervision, etc.).
CIVs can offset the upfront WHT against CIT due. If the WHT paid exceeds the final CIT
liabilities (which would depend on the characteristics of the CIV and would vary from a 1%
up to a fixed 25%, a refund occurs.
This applies equally to resident investment funds that are UCITS or AIFs.
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Taxation of foreign investment funds
WHT rates have suffered variations during the last years :
• As of January 1st, 2009 and prior to December 31, 2011, the domestic rate of the WHT
was 19%.
• As of January 1st, 2012, and prior to December 31, 2014, the domestic rate was 21%.
• As of January 1st 2015, and effective until 12th July 2015, the rate was 20%.
• As of 13rd July 2015 and prior to December 31, 2015, the rate was 19,5% .
• As of 1st January 2016 onwards, the rate is 19%.
Domestic refund – UCITS SICAVs or FCPs
The EU commission issued a reasoned opinion, dated 25th July 2006 (press release
IP/06/1060), reporting Spain’s discriminatory tax treatment on outbound dividend
payments (not specially for investment funds or SICAVs), and actually raised the issue to
the European Court of Justice on 22nd January 2007 (Case 2004/4354).
As a reaction to the latter, on March 2010, Law 2/2010 was introduced (in force as of 1st
January 2010), modifying the tax treatment to non residents from a Spanish perspective
and under which UCITS funds would be tax treated equivalently to a Spanish CIV with more
than 100 unitholders.
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9.2 Spain
UCITS are entitled to the refund of any amount exceeding their tax liability in Spain (1%).
In order for a UCITS to be entitled to the 1% tax rate on its Spanish source dividends and
profits, a certificate should be issued by the Financial Authority (AMF or CSSF) certifying
the UCITS compliant status. If a UCITS certificate is provided to the Tax Authorities the
refund is granted.
Viability of a EU claim for AIFS
In contrast, AIFs are subject to 19% withholding tax at source, which becomes definitive
taxation, as the Law does not provide for a mechanism to enable effective taxation at 1%
(whereas resident AIFs are taxed at 1%).
The 2010 amendment left AIF funds out of the scope, which is why in recent years there has
been an increase in litigation in the courts due to the different treatment in taxation, alleging
infringement of Article 63 TFEU.
The Supreme Court (in recent judgments, 2019 and 2020) has upheld the
infringement of Article 63 TFEU. Although the cases tried concerned harmonized funds
(UCITS) in years prior to 2010 and of them refers to US funds, the logic of the legal
reasoning can be extrapolated to AIFs.
At the end of 2021, there were some judgments with differing rulings.
The National High Court (“Audiencia Nacional, 30/07/2021) found an infringement of
Article 63 TFEU in a case of a non resident AIFs (resident in Germany), albeit with two
dissenting opinions.
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The Madrid High Court of Justice (“Tribunal Superior de Justicia de Madrid”, 22/09/2021)
found no infringement of Article 63 TFEU in the case of a non resident AIF (resident in
France).
The Supreme Court recently published its decision of 5 April 2023, in which it ruled for the
first time on the taxation of dividends obtained from companies resident in Spain by non-
resident AIFs and the possible discriminatory tax treatment with respect to resident
alternative investment funds (AIFs).
The current decision concerns a French hedge fund.
The Court, referring to its previous rulings in 2019 and carrying out an analysis and
assessment of CJEU Case-law, with continuous reference to the most recent; 30/01/2020,
Köln-Aktienfonds Deka, C-156/17, 07/04/2022, A SCPI, C-342/20, 17/03/2022, Allianz GI-
Fonds AEVN, C-545/19, concludes as follows, establishing its jurisprudential doctrine in the
following terms:
1. Firstly, it claims that Spanish legislation on the matter infringes EU law, violating the
principle of free movement of capital guaranteed in Article 63 TFEU, as there is no express
regulation on the conditions of comparability for receiving the same tax treatment and there
is no procedure for refunding the excess withholding tax borne at source, for a non-resident
AIF that is in a comparable situation to a resident AIF that enjoys the more beneficial tax
regime.
It reasons that it is inherent to the principle of legal certainty to expressly regulate the
documentation and information that must be provided in order to enjoy the tax advantage,
meaning that, in this case, the absence of regulation by the national legislator cannot be an
obstacle which prevents non-resident funds in a comparable situation from enjoying the tax
advantage granted to the resident.
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9.3 Spain
2. In order to carry out the comparability analysis, the requirements demanded of resident
AIFs under the domestic legislation do not have to be fulfilled identically, but rather the
objective and the content and aim of the domestic legislation must be taken into account.
Therefore, it must be carried out taking into account the essential elements considered by the
domestic legislator to grant favourable tax treatment to resident AIFs, interpreted in the light
of the Directive regulating the management of AIFs, 2011/61/EU, as well as the legislation
applicable to this type of AIF in their state of residence.
It rules out that the requirements on the minimum number of investors, minimum capital or a
certain investment, risk and diversification policy required under Spanish law to grant
resident AIFs the favourable tax treatment have to be applied identically to non-resident AIFs.
3. Therefore, the elements to be taken into account for the purposes of the comparability test
are as follows:
- The AIF shall be open in nature, in the sense that it attracts capital contributions from the
general public, including professional investors, but excluding AIFs that limit access to family
or personal wealth, or by membership of a particular group.
- The AIF must prove that it is authorised and supervised by the supervisory authority in its
country of residence.
- The AIF must prove that it is managed by an entity authorised in its country of residence as
an Alternative Investment Fund Manager within the meaning of Directive 2011/61/EU on
Alternative Investment Fund Managers (AIFMD), by means of a certificate issued by the
supervisory body.
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4. The burden of proof of compliance with the comparability requirements must be made
more flexible for the non-resident AIF, due to the absence of a domestic regulation that
specifies the means of proof to be provided, without being able to demand disproportionate or
difficult documentary evidence. In case of doubt or insufficient evidence, use should be made
of the information exchange mechanisms under the DTT and Directive 2011/61/EU AIFMD.
5. The neutralisation of the unjustified discrimination can only be achieved by the provisions
of the DTT if it allows the AIF to deduct in full the withholding tax borne in excess in Spain,
confirming that this recovery is at the fund level, not the investor.
The Supreme Court has established this jurisprudential doctrine and sets a very important
precedent. The ruling has two separate dissenting opinions, demonstrating the controversy
sparked. These opinions argue that the majority view is too lax; non-resident AIFs should
have to comply with the same requirements as resident AIFs under domestic law. This
doctrine has been reiterated by the Court in other rulings issued in subsequent days (between
5 and 25 April) with similar dissenting opinions. It remains to be seen whether the Spanish
Tax Authorities or the Central Economic and Administrative Court will adopt this Supreme
Court doctrine when resolving open claims or will stick to the arguments of the dissenting
opinions, but there is no doubt that an interesting horizon is opening up for future claims
from this type of funds. Furthermore, as this, doctrine is based on the violation of article 63 of
the TFEU which refers to the free movement of capital both between EU Member States and
other countries, we believe that the arguments should apply not only to EU AIFs but also to
non-EU AIFs.
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9.4 Spain

Viability of a DTT claim In the present case

French and the Spanish administrations have exchanged letters on 2005 to agree on the
applicability of the treaty benefits to French Organismes de Placements Collectifs (“OPC”),
despite the fact that some of them do not have legal personality and are not subject to
French CIT (even if it could raise some difficulties based on the literal wording of Art. 4 of
the treaty).
WHT rates may be reduced to a flat 15% under the Spanish-France Double Tax Treaty.
Time limitation period
We recommend filing claims (and potentially appeals) when the amounts at stake exceed
150 000 €.
Based on the data you provided us with, the following funds would be concerned
• FAGUS (French AIF FCP) amounts at stake for 2019 to 2022 : 169.347 euros
• GROUPAMA ISR (French AIF FCP) amounts at stake for 2019 to 2022: 158,303,70
euros.

Country Statute of limitation Years reclaimable Deadline

Spain 4 years Q1/January 2019 Before 20 Avril 2023

Chances of success

Teniendo en cuenta los últimos pronunciamientos judiciales y a la espera de la reacción de

las Tax Authorities y/o Tribunales económico-administrativos sobre ellos, es aconsejable la
reclamación para conseguir la reducción de la tributación al 1% y solicitar la devolución del
exceso de retención soportada.

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9.5 Spain
Stage 1 Claim filed with the STA per
quarter
Procedure 5-15 months
Preliminary claim rejection
10 days
Allegations

Final rejection of the refund

claim
1 month

Stage 2* Regional Administrative

3-4 years
Court

Central Administrative Court 2 years

2 months
6 months
Stage 3 Court of Justice

Audiencia Nacional (claims

>150 K€))

Superior Court of Justice

(claims < 150 K€)

Stage 4 Supreme Court *Nota: No obstante, transcurrido 1 año desde que se

presenta la reclamación en el TEAR/TEAC sin que hayan
dictado resolución, por silencio administrativo, es posible
presentar el recurso ante los tribunales de justicia (Audiencia
Nacional/ TSJ)
Stage 5 ECJ

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