ETVE – Securities Holding Entity

What is an ETVE?

An ETVE is a Foreign Securities Holding Entity.

These are Companies incorporated in Spain, which can opt for a special Tax regime, provided that a series of requirements are met and they choose to do so.

The regime for securities holding Entities is regulated in articles 107 and 108 of Law 27/2014, of November 27, on Corporate Income Tax (hereinafter, LIS).

It is a special Tax regime of interest to Spanish Companies that participate in the equity of Entities not resident in Spain.

Why Establish an ETVE?

The main incentive is the 95% exemption (previously 100%) on dividends and profits obtained from participation in the equity of foreign Entities, provided that the requirements discussed here are met.

What Requirements Must be Met to be Considered an ETVE?

The Corporate purpose of these types of Entities must be the management and administration of securities representing the equity of Entities not resident in Spanish territory. This does not preclude them from carrying out other types of activities, both within Spain and abroad.

In turn, they must have the corresponding organization of material and human resources to carry out their activity; that is, they must have economic activity. It will not be considered economic activity if the management and administration of the shares is transferred to third parties, so that they, with their own material and human resources, perform such work.

The shares representing participation in the capital of the ETVE must be registered.

This Tax regime is not automatically applied when establishing a ETVE (Spanish Holding Company for Foreign Investment); it must be opted for in writing to the Tax Agency. This regime will apply in the same Tax period in which the notification is made and will continue to apply to subsequent tax years, unless opted out by means of the appropriate notification.

What Advantages does it Have Compared to Other Types of Entities?

Dividends and profits received by an ETVE from participating in non-resident Companies are exempt from Corporate Income Tax, when they meet certain requirements regulated in Article 21 of the LIS:

1. When the percentage of participation, directly or indirectly, is at least 5%.
2. When the shareholding has been held continuously for the year prior to the date on which the dividends are distributed or, where applicable, the date on which the transfer takes place. In the case of dividends, if the shareholding has not been held for at least one year on the distribution date, its holding must be extended until that period is completed.
3. When the non-resident Entity in which the investment is made has been subject to, and not exempt from, a foreign Tax of the same or similar nature to Spanish Corporate Income Tax at a nominal rate of at least 10% in the Tax year in which the distributed or invested profits were obtained, or, in the case of transfer, in each and every tax year during which the investment was held. This requirement will be considered fulfilled when the investee Entity is resident in a Country with which Spain has a Double Taxation Agreement that is applicable and contains an information exchange clause. Under no circumstances will this requirement be considered fulfilled when the investee entity is resident in a country or territory classified as a tax haven.

Until 2020, dividends and profits from the transfer of shares were entirely exempt from Corporate Income Tax for these types of entities, provided the specified requirements were met. However, since the approval of the 2021 General State Budget Law, this has changed. Now, 5% of the positive income obtained will be included in the taxable base as management expenses related to the shares.

Taking into account all of the above and considering that the Corporate Tax rate is 25%, the ETVE will be Taxed at an effective rate of 1.25% (5% of 25%) on the dividends received, as well as on the gains obtained from the transfer of the shares.

With the application of this 5% Tax, the regulations are updated, as is a previous article of ours, which you can read at this link:

– Material and human resources in the ETVE