We advise international groups, particularly European and Latin American, on structuring and managing ETVEs, a Spanish regime designed for holding and managing shareholdings in foreign entities which, where the legal requirements are met, allows efficient tax treatment of dividends, capital gains and certain distributions to non-resident shareholders.
General exemption on dividends and capital gains that meet the requirements
Equivalent effective rate where the standard 25% rate applies
Double tax treaties in force in Spain
What is an ETVE?
An ETVE is a Spanish-resident entity whose corporate purpose includes the management and administration of holdings in non-resident entities and which opts into the special regime set out in Articles 107 and 108 of the Corporate Income Tax Law.
Dividends and capital gains from holdings that meet the requirements of Article 21 may benefit from its exemption regime. In addition, the ETVE offers specific treatment for certain profit distributions and income obtained by non-resident shareholders, which can make it particularly well suited to international structures.
Govern the regime for Foreign Securities Holding Entities.
Governs the exemption applicable to certain dividends and capital gains from shareholdings.
Governs the notification of the election into, and waiver of, the regime.
Access requirements
Must include the management and administration of holdings in non-resident entities.
There must be an organisation of material and human resources appropriate to that activity.
The ETVE's shares or participations must be registered.
AIEs (Economic Interest Groupings), UTEs (Temporary Business Unions) and entities qualifying as asset-holding entities may not opt into the regime.
Must be notified to the tax authorities.
A direct or indirect shareholding of at least 5%.
Compliance with the holding period provided for by law.
For foreign holdings, the investee must be subject to a tax identical or analogous to Spanish Corporate Income Tax at a nominal rate of at least 10%.
This requirement is deemed met where there is an applicable DTT with Spain containing an exchange-of-information clause.
Election into the regime
The election is notified to the tax authorities using Form 036. The regime applies to the tax period ending after the notification and to subsequent periods unless it is waived.
Tax benefits
As a general rule, 95% of certain income from shareholdings may be exempt where the requirements of Article 21 CIT Law are met.
Profits distributed out of certain exempt foreign income may be treated as not obtained in Spain where the shareholder is a non-resident without a permanent establishment, subject to the legal requirements and exclusions.
Spain currently has 99 double tax treaties in force, whose application must be analysed in light of the structure, the jurisdictions involved and anti-abuse rules.
Practical example
A Colombian company sets up an ETVE in Spain that holds a Mexican company. If the shareholding meets the requirements of Article 21 CIT Law, the dividends received by the ETVE may benefit from the corresponding exemption.
Subsequently, when the ETVE distributes profits out of that exempt foreign income to the Colombian shareholder, the portion meeting the requirements of Article 108 may be treated as not obtained in Spanish territory.
If the same ETVE also receives €100,000 in dividends from a Spanish investee company, that amount also benefits from the 95% exemption at ETVE level (Art. 21 CIT Law). However, when distributed to the Colombian shareholder, the treatment differs depending on the source:
Specific treatment under Article 108 CIT Law for the portion corresponding to exempt foreign income.
Do not, on that basis alone, benefit from the specific Article 108 treatment provided for income from non-resident entities. The taxation of the distribution to the Colombian shareholder must be analysed under Non-Resident Income Tax and the applicable DTT.
Example for illustrative purposes; the specific tax treatment depends on the applicable DTT and each shareholder’s situation.
How to set it up
Setting up an ETVE is straightforward on paper, but qualifying for — and keeping — the special regime requires getting each step right from day one.
We review the group's shareholders, the countries of the subsidiaries and the applicable tax treatment to confirm whether the ETVE is the right structure.
We set up the Spanish entity with a corporate purpose that includes the management and administration of holdings in non-resident entities, and with registered shares.
We help put in place an organisation of material and human resources appropriate for managing and administering the holdings, designed and documented case by case.
We notify the election to the tax authorities using Form 036, so that the regime applies from the tax period ending after the notification.
We support the ETVE's corporate and tax management year after year, keeping the substance and documentation the regime requires up to date.
We review the group's shareholders, the countries of the subsidiaries and the applicable tax treatment to confirm whether the ETVE is the right structure.
We set up the Spanish entity with a corporate purpose that includes the management and administration of holdings in non-resident entities, and with registered shares.
We help put in place an organisation of material and human resources appropriate for managing and administering the holdings, designed and documented case by case.
We notify the election to the tax authorities using Form 036, so that the regime applies from the tax period ending after the notification.
We support the ETVE's corporate and tax management year after year, keeping the substance and documentation the regime requires up to date.
ETVE vs. conventional holding
The answer depends on the investment profile, the origin of the shareholders and the countries of the subsidiaries.
| Criterion | ETVE | Ordinary holding company |
|---|---|---|
| Exemption on dividends and capital gains | Article 21 of the Corporate Income Tax Law (LIS) may apply if its requirements are met | Article 21 of the Corporate Income Tax Law (LIS) may apply if its requirements are met |
| Distribution of foreign-source profits to a non-resident shareholder | The specific treatment under Article 108 of the Corporate Income Tax Law (LIS) may apply | The general Non-Resident Income Tax regime applies, without prejudice to any applicable DTA or exemptions |
| Organisation of material and human resources | Specific requirement under Article 107 of the Corporate Income Tax Law (LIS) | There is no specific ETVE requirement, without prejudice to any substance requirements that may be relevant |
| Formal election | Yes, by means of a notification to the Tax Administration | No |
| Specific regime | Articles 107 and 108 of the Corporate Income Tax Law (LIS) | General regime |
Incompatibilities
Why Seegman
We have extensive experience structuring and managing ETVEs for international groups — particularly European and Latin American — and advising on tax inspection proceedings involving the regime, in sectors including energy, food, distribution and technology.
Legal, tax and corporate coordination across multiple jurisdictions.
We design the corporate and tax structure in line with the regime’s requirements and the substance needed for its proper application.
Corporate and tax management of the ETVE throughout its life, not only at incorporation.
All the information on the regime, its requirements, tax benefits and a practical example, in one downloadable document.
Frequently asked questions
Both structures may apply the Article 21 CIT Law exemption on certain dividends and capital gains if they meet its requirements. The ETVE also offers a specific regime for certain distributions and transfers linked to foreign-source income where the shareholder is non-resident, and requires compliance with the specific requirements of Article 107 CIT Law.
Yes. The regime applies only to qualifying foreign-source income; any other income from other activities is taxed under whichever regime applies to it.
The law requires an organisation of material and human resources appropriate for managing and administering the holdings. The specific structure will depend on the characteristics, size and complexity of the group, so it must be designed and documented case by case.
It can be particularly attractive where there are non-resident shareholders, significant holdings in foreign entities and a strategy of dividend distribution or future divestment. Its suitability must be analysed taking into account the jurisdictions involved, the shareholders’ profile, the Article 21 requirements and taxation in the countries of origin and destination.
The election must be notified to the tax authorities. The regime applies to the tax period ending after that notification, so if it is intended to apply in a given year, the notification must be made before that year-end.
Tell us about your group’s structure, the jurisdictions involved and your investment objectives. Our team will analyse whether the ETVE regime is suitable and how to implement it correctly.
This content is for advertising and general informational purposes only. For professional legal advisory services, please contact the firm directly through the designated specialist contacts. Seegman refers to Seegman Servicios Jurídicos, S.L.P., NIF B88144852.
