What an ETVE is
An ETVE (foreign-securities holding company) is a Spanish company whose corporate purpose includes managing and administering securities representing the equity of non-resident entities, and which opts into the special regime of arts. 107 and 108 of the Corporate Income Tax Act (LIS) by notifying the tax authorities.
It has two attractions: dividends and income from its foreign subsidiaries can be exempt at the level of the ETVE, and profits distributed to non-resident shareholders receive specific treatment.
The exemption covers 95% of the income: the remaining 5% is included in the tax base as management expenses (art. 21.10 LIS). In addition, asset-holding entities (entidades patrimoniales) cannot use the regime (art. 107.1 LIS).
Requirements
| Requirement | Detail |
|---|---|
| Corporate purpose | Management and administration of holdings in non-resident entities |
| Resources | Appropriate organisation of material and human resources |
| Form of the securities | Registered shares or holdings |
| Minimum holding | 5% direct or indirect holding in the capital or equity of the subsidiary (art. 21.1.a LIS) |
| Holding period | One uninterrupted year; it can be completed after the distribution |
| Taxation of the subsidiary | A tax similar to Spanish corporate income tax with a nominal rate of at least 10%; deemed met if the subsidiary is resident in a country with a treaty that includes an exchange-of-information clause (art. 21.1.b LIS) |
Artículo 107.1. Podrán acogerse al régimen previsto en este capítulo las entidades cuyo objeto social comprenda la actividad de gestión y administración de valores representativos de los fondos propios de entidades no residentes en territorio español, mediante la correspondiente organización de medios materiales y personales. […]
Artículo 108.1. […] c) Cuando el perceptor sea una entidad o persona física no residente en territorio español sin establecimiento permanente, el beneficio distribuido no se entenderá obtenido en territorio español.
In short. ETVEs apply the exemption on foreign-source dividends and income under the conditions of art. 21 LIS, and the profits they distribute out of that income receive specific treatment in the hands of their shareholders.
Source: Ley 27/2014, of 27 November (BOE)
Taxation of shareholders
The effect of a distribution depends on where the shareholder is resident: non-resident shareholders may not be taxed in Spain on profits derived from exempt income, unless they are resident in a country or territory classed as non-cooperative. Resident shareholders are taxed under their own tax.
ETVE vs ordinary holding company
| Aspect | ETVE | Ordinary holding company |
|---|---|---|
| Exemption on foreign dividends | Yes, under the conditions of art. 21 LIS | Yes, under the conditions of art. 21 LIS |
| Distributions to non-resident shareholders | Specific regime under art. 108 LIS | General withholding, unless a treaty or directive applies |
| Election and notification | Requires notification to the tax authorities | Not required |
| Resources requirement | Express | General |
Frequently asked questions
01Can an ETVE carry on a business activity?
It can carry on other activities, but the special regime only covers income derived from holdings in non-resident entities.
02When does the election take effect?
From the tax period ending after notification to the Ministry of Finance (Ministerio de Hacienda), and it continues in later periods until a waiver is notified (art. 107.2 LIS).
03Is it suitable for family wealth?
It can be, when there are business investments abroad with real substance; not for passive portfolios with no management.
This guide is for general information and does not replace the analysis of a specific case. Check the legislation cited in its current wording.