(November 26, 2014)

On November 26, 2014 the European Commission issued a press release announcing that it decided to refer Spain to the Court of Justice of the European Union to ensure that the Spanish legislation on taxation of investments in non-resident companies complies with EU law.

According to the European Commission under the Spanish provisions, the tax treatment for foreign-sourced dividends (i.e. dividends distributed by a non-resident company to a Spanish company) is more burdensome than the one applied to domestic-sourced dividends (i.e. dividends distributed by companies resident in Spain). As a result, a Spanish company which invests in a non-resident company must fulfill more conditions (e.g. volume of income, level of shareholder participation) than for a domestic investment if it wants to benefit from the tax advantage. In other cases, the tax advantage foreseen for domestic-sourced dividends is not available for foreign-sourced dividends.

In June 2013 the European Commission sent a request taking the form of a reasoned opinion to Spain. Spain was requested to amend its tax rules on investments in non-resident companies, as the European Commission considered that they infringed the right of establishment, the freedom to provide services, the cross-border supply of goods and the free movement of capital as set out in the EU Treaties.

According to the European Commission there have been no changes to the legislation. The European Commission states that it therefore has decided to bring the matter before the Court of Justice.

For further information click here to be forwarded to the press release as issued by the European Commission in this respect.

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