Spain’s Basque Country extends participation exemption regime to capital gains on transfer of shares in Spanish companies


Spain’s autonomous Basque Country region has extended its participation exemption regime (applicable to foreign participations) to capital gains derived from the transfer of shares in Spanish companies (dividends were already exempted).

The Basque Country's participation exemption regime took effect January 1, 2014. It exempts dividends and capital gains derived from the transfer of shares in both Spanish and non-Spanish companies, provided that the following requirements are met:

  • Direct or indirect participation of at least 5 percent in the subsidiary (3 percent if a public company) held for at least one year.
  • The subsidiary is subject to and not exempt from a tax similar in nature to the Spanish corporate income tax. In regard to foreign participations, this requirement is deemed to be complied with when a tax treaty has being signed between Spain and the country of residence of the subsidiary.
  • At least 85 percent of the revenue earned by the subsidiary is derived from business activities.

With this amendment, the Basque Country’s participation exemption regime becomes an advantageous alternative for locating holding companies.

Finally, please note that Basque Country holding companies may benefit from the application of all EU directives as well as the Spanish tax treaty network, making them even a more attractive choice.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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