Creating a Spanish ETVE is a very interesting form of establishment notably for multinational companies. Offering many legal, fiscal and financial advantages, this fiscal regime is one of the most attractive in Europe.
The ETVE “Entidad de Tenencia de Valores Extranjeros” (Entities holding foreign securities) is a Spanish holding company that consists of the exemption from profits made from foreign subsidiaries and paid out as dividends or as capital gains from investment disposals.
Also called a “parent” company, the holding company holds shares or equities in different companies, those which belong or not to different sectors who intend to obtain a united direction.
The financial contribution of a holding company must exceed 50% of the shares or social parts of the companies in order to control them. Not only does this allow redemption of shares through the revenue collected but it also allows the recovery of low tax cost dividends made possible by the parent/child set-up.
In Spain, the sectors should not be implemented on Spanish soil or on the land considered as a “tax haven”. They must be non-residents and subject to a tax equal to that of corporate tax. Their income must be generated by activities that are neither directly nor indirectly carried out in Spain and their value of participation within the ETVE must be 5% of the capital or € 6 million if thus amount is less than 5%. The income received by the ETVE must come from the earnings of professional activity. In addition to this, profits and capital gains obtained by an ETVE from its subsidiaries and overseas activities are exempt from taxation.
In order to create an ETVE in Spain, there are two legal form options. The first form is the “public limited company” SA with a minimum formation capital of 60,101 Euros. But just 25% of the capital needs to be paid as a minimum. Secondly, there is the “limited liability company” SL with a minimum formation capital of 3,006 Euros (18,600 Euros in the Netherlands and 31,000 Euros in Luxembourg). For this option, the capital must be fully paid.
Due to its stakes in various different companies, a holding company benefits from numerous tax advantages. - Exemption from inbound dividends The fact that Spain is a member of the European Union, where Spanish holding companies hold a minimum of 5% of stocks or shares for an EU subsidiary for a minimum of one year, any dividends paid by this EU subsidiary to the Spanish holding company are exempt from withholding tax. - Exemption from outbound dividends Non-residents (excluding tax havens) are not liable to pay income tax on dividends received from an ETVE. They are only required to declare the money received in their respective countries of residence. - Exemption from capital gains Capital gains resulting from the sale of shares or other securities are exempt from tax provided they share the same conditions that apply to dividends. Thus, any capital gains made from the transfer of shares are not taxed, in other words, the selling price may be fixed and so may favour transmissions regardless of the value of the subsidiaries.
In order to take advantage of the tax system in terms of exemption from projects made by foreign subsidiaries, certain conditions must be met. In Spain, you must first realise that in order to gain ETVE accreditation, it must comply with the following: 1. The holding company has a real presence in Spain, so there must be an employee as well as a manager. 2. The premises must be located in Spain 3. The management of foreign ownership must appear in line with corporate intention 4. The shares must be issued by registration 5. The ETVE has both human and material resources necessary for the implementation of business Regarding fiscal management of the company, the companies are obliged to declare VAT and IRPF, as well as annual returns and bank deposits.