What is an ETVE and why is it key in international tax planning?

An ETVE (Entidad de Tenencia de Valores Extranjeros, or Foreign Securities Holding Company) is a company incorporated in Spain that benefits from a special tax regime applicable to dividends and capital gains derived from holdings in non-resident entities. Its purpose is to facilitate the channeling of foreign investments while optimizing the tax burden on international operations.

Created in 1995, this legal structure aims to attract foreign capital through a competitive tax treatment, similar to what is offered in jurisdictions like Luxembourg or the Netherlands.

Tax advantages of ETVEs: how to save legally with the right structure

ETVEs benefit from a 95% exemption under Spanish Corporate Income Tax (CIT) on:

• Dividends received from foreign subsidiaries.
• Capital gains from the sale of such holdings.

This translates into an effective tax rate of just 1.25%, provided all requirements are met. In addition:

• No withholding tax applies on dividends distributed to non-resident shareholders (unless located in a tax haven).
• Spain offers an extensive network of double tax treaties, enhancing its appeal as a regional holding hub.

Who can incorporate an ETVE? Key requirements

Any individual or legal entity can set up an ETVE, provided the following requirements are met:

• A company incorporated and tax resident in Spain (S.L. or S.A.), with a minimum share capital of €3,000 or €60,000, respectively.
• Corporate purpose must expressly include the management of holdings in non-resident entities.
• The company must have its own material and human resources to carry out this activity.
• Holdings must be active (i.e. not merely passive investment entities).
• A minimum direct or indirect participation of 5%, held for at least one uninterrupted year.
• The investee must be subject to a tax equivalent to Spanish CIT and located in a country with a double tax treaty (DTT) with Spain.

Legal framework of ETVEs in Spain

The ETVE regime is primarily governed by:

• Articles 107 and 108 of Spanish Corporate Income Tax Law (Law 27/2014).
• Article 21 of the same law, concerning exemption for the avoidance of double taxation.
• Article 51 of the Corporate Income Tax Regulations (Royal Decree 634/2015).

Dividends exemption

If the investment meets the regime’s requirements, dividends received from foreign subsidiaries are 95% exempt from CIT and not subject to Spanish withholding tax.

Capital gains on the disposal of shareholdings

Capital gains generated from the disposal of foreign holdings are also 95% exempt, provided the regime’s conditions are satisfied.

Taxation under the ETVE regime

Entities under the ETVE regime may carry out other business activities besides holding participations, as long as the qualifying foreign income is accounted for separately. Non-qualifying income is taxed under the general CIT regime.

Key tax benefits include:

• Dividends and capital gains from foreign entities: 95% exemption under CIT, resulting in an effective tax rate of 1.25% (25% applied to the 5% taxable portion).
• Dividend distribution by the ETVE:
  • If the shareholder is not tax resident in Spain and has no permanent establishment in the country, the exempt dividends are not considered Spanish-sourced income and are not subject to withholding tax, unless the shareholder is located in a tax haven.
  • If the shareholder is resident in Spain, the dividends are included in the savings tax base and taxed at the progressive savings rates (19% to 30%), with no special treatment compared to other dividends.

• Tax recovery: Tax not paid by the ETVE on exempt income is not recaptured at the time of distribution, except in specific cases governed by applicable double tax treaties.

How to use an ETVE to centralize international holding investments

An ETVE enables international groups to:

• Consolidate foreign subsidiaries under a single structure.
• Benefit from Spain’s DTT network.
• Reduce tax leakage on cash flows (dividends/sales).
• Repatriate profits to non-resident shareholders with no Spanish withholding tax.

This structure is particularly attractive for European or Latin American holdings with multi-jurisdictional investments.

How to set up an ETVE step by step (and what to avoid)

1. Choose the legal form: S.L. or S.A., with registered office in Spain.
2. Draft proper bylaws: include the management of foreign holdings in the corporate purpose.
3. Ensure real substance: material and human resources based in Spain.
4. Notify the Spanish Tax Authorities (AEAT): before year-end of the fiscal year in which the exemption is to be applied.
5. Avoid common mistakes:
   • Lack of substance (shell companies).
   • Holding in non-taxed entities.
   • Poor planning of dividend distributions.

Is it legal to use an ETVE? What the Spanish Tax Authorities allow (and what they don’t)

Yes, the ETVE regime is fully legal and explicitly regulated under Spanish tax law. No prior administrative approval is required, but the Spanish Tax Authorities expect:

• Transparency.
• Real economic substance.
• Alignment between declared activities and actual operations.

The regime cannot be used by passive asset-holding entities, Economic Interest Groupings (AIEs), or Temporary Business Unions (UTEs).

Strategic comparison: ETVE vs. other tax structures

Feature	ETVE	Regular Spanish Company	Luxembourg Holding
Dividend exemption	Yes (95%)	Partial or none	Yes
Capital gains exemption	Yes (95%)	Partial or none	Yes
Withholding tax for non-residents	No (if requirements met)	Yes	No
Access to DTT network	Over 90 countries	Over 90 countries	Varies
Tax transparency	High (requires substance)	Medium	High

Why choose us as your ETVE legal advisors?

At Seegman, we have extensive experience structuring and advising on ETVEs for international groups—especially from Europe and Latin America—and assisting in audit proceedings involving the regime.

Our experience advising on ETVEs

• We have advised holding companies across sectors such as energy, food, retail, and technology.
• We specialize in coordinating legal, tax, and corporate matters across jurisdictions.
• We ensure solid and compliant implementation aligned with current Spanish Tax Authority standards.