Which incomes are exempt?
For tax periods beginning on or after 1 January 2021 the exempt amount shall be 95 per cent of this dividend or income. The management expenses related to such participations will not be deductible from the taxpayer's taxable profit, and their amount will be set at 5 percent of the dividend or positive income obtained.
This limit will NOT apply to companies that have net revenue of less than 40 million euros and that are not part of a business group, for a period limited to three years, when obtained from a subsidiary, whether or not a resident in Spain, constituted after 1 January 2021.
They must meet the following requirements:
The percentage holding, direct or indirect, in the entity's own capital or funds, must be at least 5%, or the acquisition value of the stake must be higher than 20 million euros.
The corresponding holding must be held uninterrupted throughout the year preceding the day on which the profit being distributed is due, or, failing this, it must be held afterwards for the time required to complete said time period. To calculate the time period, you also need to take into account the period in which the holding has been uninterruptedly maintained by other entities that fulfil the circumstances referred to in article 42 of the Code of Commerce to form part of the same group of companies, regardless of the place of residence and the obligation to draw up consolidated annual accounts.
In the event that the controlled company acquires dividends, shares in profits or income derived from transferring securities that represent the entities own capital or funds by more than 70% of their income, the application of this exemption with respect to said income will require that taxpayer to have an indirect stake in these entities, and meet the requirements laid out here. The aforementioned percentage of income is calculated on the consolidated result of the fiscal year, when the directly controlled company is the parent company of a group, according to the criteria established in article 42 of the Code of Commerce, and draws up consolidated annual accounts. Nevertheless, an indirect stake in second and subsequent-level subsidiaries must respect the minimum percentage of 5%, unless said subsidiaries fulfil the circumstances referred to in article 42 of the Code of Commerce to form part of the same group of companies as the directly controlled company, and draw up consolidated accounting statements.
The requirement of the previous paragraph is not applicable when the taxpayer proves that the dividends or shares in profits received have been integrated into the gross tax base of the directly or indirectly controlled company as dividends, shares in profits or income derived from the transfer of securities that represent the entities' own capital or funds, without having the right to apply an exemption or deduction system due to double taxation.
Additionally, this is the case with the own capital or funds of non-resident companies in Spain, where the controlled company has been subjected to and not exempt from an identical or similar foreign tax to this one at a nominal rate of, at least, 10% during the fiscal year in which the profits being distributed, or in which a share is held, have been obtained, regardless of the application of any kind of withholding, allowance, reduction or deduction on such profits.
This requirement will be deemed to be met when the subsidiary is registered in a country with which Spain has an agreement to avoid double international taxation, which is applicable and contains a data exchange clause.
From 01-01-2017, under no circumstances shall this requirement be deemed to be met when the subsidiary is located in a country or territory classified as a tax haven unless it is a member State of the European Union and the taxpayer can prove that its establishment and operation corresponds to valid economic reasons and that it is carrying out economic activities.
In the event that the non-resident company obtains dividends, shares in profits or income derived from the transfer of securities that represent the entities' own capital or funds, the application of this exemption with respect to said income will entail that the requirements in this point are fulfilled by, at least, the controlled company.
For tax periods beginning on or after 1 January 2021, the alternative requirement that the acquisition value of the holding be greater than 20 million euros to be considered a qualifying holding is eliminated. However, transitional provision 40 has been added to Law 27/2014 of 27 November on Corporation Tax, which regulates the transitional regime for the taxation of holdings with an acquisition value of more than 20 million euros.
Except in certain cases, where special rules apply, gains on the transfer of an ownership interest in an entity, as well as gains arising on its liquidation, the exit of a shareholder, a merger, a full or partial spin-off, a capital reduction, non-monetary contribution or the global transfer of assets and liabilities, are exempt provided they meet the exemption requirements for dividends or shares in the profits of entities, in particular:
The requirement established in article 21.1.a) must be met at the transfer date. The requirement established in article 21.1.b) must be met in every financial year in which the ownership interest is held.
Nevertheless, if the requirement established in article 21.1.b) is not met in one or more financial years in which the ownership interest is held, the exemption will apply, subject to certain rules.
As of 1-1-2017, in the cases indicated, the application of this exemption will occur in the following cases:
When the participation in the entity had been valued in accordance with the rules of the special regime of Chapter VII of Title VII of the LIS (mergers) and the application of said rules had determined the non-integration of income in the tax base of the Corporate Tax, or the Non-Resident Income Tax, derived from:
The contribution of a holding in a company that does not meet the requirement of letter a) of article 21.1, or, in whole or in part, at least in one fiscal year, the requirement referred to in letter b) of article 21.1.
The non-monetary contribution of other assets that differ from holdings in entities' own capital or funds.
In this case, the exemption will not be applied on the transferor's deferred income as a result of the operation, unless proof is provided that the acquiring company has integrated this income in its gross tax base.
- When the holding in the entity has been valued in accordance with the standards of the special regime of Chapter VII of Section VII of the LIS, and the application of said standards has determined the non-integration of income in the gross tax base of Personal Income Tax, derived from the contribution of holdings in companies.
In this case, when such holdings are subject to a transfer in the two years following the date on which the operation took place, the exemption will not be applied to the positive difference between the fiscal value of the shares received by the acquiring company and the market value at the time of the acquisition, unless proof is provided that the natural persons have transferred their holdings in the company during the aforementioned period.
This exemption will not be applied:
To the portion of income derived from the transferral of a holding, direct or indirect, in a company that is considered a holding company, under the terms established in section 2 of article 5 of the LIS, which does not correspond with an income of non-distributed profits generated by the controlled company during the time in which the holding was maintained.
To the portion of income derived from the transferral of a holding in a Spanish or European economic interest group, which does not correspond with an income of non-distributed profits generated by the controlled company during the time in which the holding was maintained.
To income derived from the transfer of the holding, direct or indirect, in a company that meets the requirements established in article 100 of the LIS, provided that at least 15% of its income is subject to the international fiscal transparency system that is regulated in said article.
When the circumstances indicated in letters a) or c) are only fulfilled in certain tax periods during which the holding is maintained, the exemption will not be applied on the part of the income referred to in said sections that proportionally correspond with said tax periods.
The exemption will not be applied:
To income distributed by the public regulation fund of the mortgage market.
To foreign income acquired by Spanish and European economic interest groups and by joint ventures, when at least one of their partners is a natural person.
To income from a foreign source that the entity integrates into its tax base and in relation to which it chooses to apply, if applicable, the deduction established in articles 31 or 32 of the LIS .
The exemption will not be applied under any circumstances when the invested company is a resident of a country or territory recognised as a tax haven, unless its registered office is a member state of the European Union and the taxpayer can prove that its constitution and operations respond to economically valid reasons and that economic activities are being carried out.