Centro de ayudaIncome from a foreign company may be subject to inclusion in the annual tax return of a Spanish tax resident individual — or even a legal entity that holds the shares — under certain conditions:
Who this applies to:
- Spanish tax residents who own (directly or through related parties) 50% or more of a foreign company, where the effective tax burden of that company is less than 75% of what would be paid in Spain on equivalent income.
Which types of income are subject to inclusion:
- The entire profit of the foreign company, if it does not have a real structure (i.e., no employees or material resources).
- If the company has a real structure, only the following passive income is included:
- Real estate income, if the property is not used in actual business activity
- Shares and loans to other companies (except for certain regulated financial institutions)
- Insurance and capitalization products
- Royalties, technical assistance, image rights, business leasing
- Gains from the sale of the above-mentioned assets
- Derivatives and financial instruments, unless used for hedging business-related risks
- Insurance, credit, and financial activities not linked to real economic activity
- Transactions with companies linked to the Spanish resident that do not generate real economic value
- Financial and insurance services provided to Spanish residents, if they lead to a tax expense in Spain — unless two-thirds or more of the income from those services comes from non-related parties
This falls under the Spanish CFC (Controlled Foreign Company) rules. If you'd like, we can help analyze whether this applies to your case and how to comply correctly
Exceptions:
- If the total passive income is less than 15% of the company's overall profit, it is not included (except for income from services provided to related Spanish entities).
- Income is not included if the company is based in the EU or EEA, is genuinely engaged in economic activity, or qualifies as a regulated investment fund under EU Directive 2009/65/EC.
When and how to declare:
- The income must be declared for the tax year in which the foreign company closes its financial year (maximum period of 12 months).
- Profits must be calculated according to Spanish tax law and converted into euros using the exchange rate on the closing date of the financial year.
Elimination of double taxation:
- A foreign tax credit is allowed for taxes paid abroad, but only up to the Spanish tax rate.
- If dividends are distributed later from previously declared income, they are not taxed again.
Required documentation to be submitted with the tax return:
- Name and address of the foreign company
- List of directors and their tax residency addresses
- Balance sheet, profit and loss account, and explanatory notes
- Calculation of the income subject to inclusion in the Spanish tax base
- Documents proving payment of taxes abroad
Special rules for offshore jurisdictions:
- For companies located in countries classified as tax havens, there is a presumption that 15% of the acquisition value of the shares is treated as annual profit.
- This presumption may be rebutted with supporting documentation