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Freshfields Risk & Compliance

| 2 minutes read

Parent-subsidiary tax exemption: Spanish Supreme Court confirms application to a Luxembourg holding company as the beneficial owner

The Spanish Supreme Court (‘the Supreme Court’) has issued a judgment upholding the Spanish National High Court (“the High Court”) position and confirming that a Luxembourg holding company, wholly owned by a non-EU investor, is entitled to apply the parent-subsidiary tax exemption to Spanish dividends.

Freshfields’ Madrid office has advised throughout the entire administrative and judicial procedure. For further details on the previous judgment of the High Court and the background of the case, see our previous blog post here Parent-subsidiary exemption: Spanish court recognises its application to a Luxembourg holding company, Silvia Paternain, Bosco Montejo, Álvaro Fernández (

Investment through a Luxembourg holding company is valid

In this latest judgment (appeal number 6522/2021), the Supreme Court has confirmed that the parent subsidiary tax exemption was applicable to Spanish dividends received by a Luxembourg holding company on the basis that the company had been incorporated for valid economic reasons and conducted a business activity. Moreover, the Supreme Court confirms that the Luxembourg holding company was the beneficial owner of the dividends received.

In reaching its decision, the Supreme Court referred to the facts evidenced before in front of the Spanish tax authorities and at the High Court, as follows:

  • the Luxembourg holding company had been investing in companies in different jurisdictions since its incorporation. That is, the company was a genuine permanent investment vehicle and the investment in the Spanish company distributing the dividends was just one of its investments;

  • dividends distributed by the Spanish entity were, although significant, only a portion of the total income obtained by the holding company from its multiple investments; and

  • the Luxembourg holding company managed the Spanish dividends with a view to optimising the use of cash and reinvested the dividends received.

The High Court had also previously concluded that the fact that the Luxembourg holding company was wholly owned and controlled by a non-EU company is not, on itself, sufficient to deny beneficial ownership or categorize the company as a conduit vehicle. The court confirmed that a subsidiary can act on an autonomous basis even if the decision-making sits with its parent company, as this is an inherent characteristic of corporate groups.

The burden of proof

A key conclusion from these judgments is that the Spanish tax authorities cannot presume that a holding company controlled by a non-EU entity is artificial or abusive in order to deny the application of the parent subsidiary exemption. They have the burden to proof the abuse. In reaching this conclusion, the Supreme Court followed the ECJ doctrine on dividend cases (essentially the Equiom case, C-6/16; the Deister Holding case, C­504/16 and C-613/16; and the Danish Cases, C-116/16 and C-117/16).

This case court is in line with the recent Supreme Court judgments (appeal number 6517/2021 and 6528/2021) that have confirmed that the Spanish tax authorities have the burden of proving any abuse in order to deny the application of the Spanish parent-subsidiary exemption, reversing its previous doctrine which established that the burden of proving the existence of fraud was on the taxpayer.

Please contact the Freshfields’ Madrid team if you would like to discuss the implications of this decision in further detail.


dividends, parentsubsidiary, holdingcompany, tax