Special tax regime for international tax transparency

This special tax regime regulated in article 100 of the LIS establishes the imputation of income obtained by taxpayers who are partners or participants in non-resident companies under a series of circumstances, such as these being owned by more than 50 percent by the partners and having a direct tax burden of less than 75 percent of what would correspond in Spain.

This imputation regime will not apply when the entity not resident in Spanish territory is resident in another Member State of the European Union, provided that the taxpayer proves that its constitution and operation respond to valid economic reasons and that it carries out economic activities or is a collective investment institution other than those provided for in article 54 of this Law, constituted and domiciled in a Member State of the European Union.

This escape clause from the application of the international tax transparency regime when the controlled entity is resident in another Member State will not apply to the United Kingdom as of 1 January 2021.

Therefore, as of January 1, 2021, the international tax transparency regime will no longer apply and the income obtained by the entity domiciled in British territory will be subject to the imputation regime at the headquarters of the Spanish partner.