Spain tribunal denies EU dividend withholding tax exemption, applying ECJ doctrine

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July 2020


Spain’s Central Administrative Tribunal (i.e., its administrative body) recently published a ruling from an October 2019 case in which it applied the European Court of Justice withholding tax doctrine for the first time. The ECJ previously had denied the withholding tax exemption on dividend payments to European Union parent companies in a set of Danish cases.

The takeaway

Although the decision can be appealed, the Spanish tax authority’s current approach is to challenge the dividend withholding tax exemption based on beneficial ownership and applicable anti-avoidance provisions, including the abuse of right as a general EU law principle. There is no position on whether Spanish courts and tribunals will admit and apply the tax authority’s approach. Thus, non-resident investors holding participations in Spanish companies and receiving dividends from them should review their corresponding investment structures in seeking to mitigate any potential impact.

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Doug McHoney

International Tax Services Leader, PwC US

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