Introduction
In the dynamic world of international business, companies are constantly seeking structures that allow them to optimise their operations and reduce their tax burden efficiently. Spain, aware of its strategic position as a bridge between Europe and Latin America, has developed a tax regime that makes it an attractive destination for foreign investment: Foreign Securities Holding Entities (ETVE).
This special regime, regulated by the Corporation Tax Law, not only offers significant tax advantages, but also allows multinational companies to manage their holdings in foreign companies from a secure and stable environment.
However, setting up and managing an ETVE is not a simple administrative procedure. It requires a strategic approach that combines commercial and tax aspects, ensuring that the structure complies with legal requirements and takes full advantage of the opportunities offered by the regulations.
The ETVE Regime: A Strategic Tool
ETVEs are Spanish companies that are primarily engaged in managing holdings in foreign entities. Through this regime, companies can benefit from a tax exemption on dividends and capital gains obtained from such holdings. This makes ETVEs a particularly attractive instrument for business groups operating internationally
Imagine, for example, a company based in Latin America that wants to expand into Europe. Setting up an ETVE in Spain would allow it to centralise the management of its investments, benefit from Spain’s network of double taxation treaties with numerous countries and, at the same time, take advantage of the tax exemption on profits generated by its foreign subsidiaries.
But it is not as simple as it seems. To qualify for this regime, the company must meet certain tax and commercial requirements. Among these, it is important to have sufficient material and human resources to demonstrate that the entity’s main activity is actually carried out in Spain. This means that it is not enough to set up an ‘empty’ company; there must be an operational structure to support the share management activity.
Commercial aspects of setting up an ETVE
From a commercial point of view, ETVEs do not have a specific corporate form. They can be set up as limited liability companies or public limited companies, depending on the needs of the partners and the expected turnover.
In any case, it is essential that the articles of association clearly state that the company is subject to the special ETVE regime and that its main activity is the management of holdings in foreign entities.
Notwithstanding the above, the choice of corporate form is not a minor detail. While a limited company may be more suitable for smaller or family-owned structures, a public limited company offers greater flexibility in terms of bringing in new partners or raising capital. Whichever option is chosen, it is important that the corporate structure is designed to facilitate international operations and ensure compliance with legal requirements.
Furthermore, the incorporation of an ETVE involves making strategic decisions about its share capital, financial structure and decision-making mechanisms. For example, it is often advisable to include specific clauses in the articles of association governing the distribution of profits, the admission of new members or the transfer of shares. Although these decisions may seem secondary, they are essential to ensuring the long-term success of the company.
Advantages and Challenges of the ETVE Regime
The main attraction of ETVEs lies in the tax exemption they offer on dividends and capital gains generated by holdings in foreign entities. This means that, provided the legal requirements are met, the company will not have to pay tax in Spain on this income. In addition, non-resident shareholders can also benefit from an exemption on dividends received from the ETVE, unless they reside in a tax haven.
However, these tax advantages come with certain obligations. The ETVE must keep detailed accounts that clearly identify the income and expenses related to its share management activity. In addition, it is essential to maintain adequate documentation proving compliance with tax requirements, especially with regard to the exemption of dividends and capital gains.
In this regard, transparency and good management are key. The Spanish tax authorities require ETVEs to demonstrate that their main activity is actually carried out in Spain and that they comply with all legal requirements. This includes not only having an adequate operational structure, but also being prepared to respond to possible inspections or requests for information.
Conclusion
Foreign Securities Holding Entities represent a unique opportunity for companies seeking to optimise their corporate and tax structure internationally. However, their creation and management require a comprehensive approach that combines knowledge of commercial law with strategic tax planning.
At Belzuz Abogados, S.L.P., Madrid, Commercial Law Department, we have a solid track record in the field of commercial and tax law. We are committed to offering strategic and personalised solutions that allow our clients to take full advantage of the opportunities offered by the ETVE regime, ensuring efficient and secure management.
If you are considering setting up an ETVE or need advice on how to structure your international investment, please do not hesitate to contact us. We will be delighted to help you turn your business goals into reality.