The Spanish High Court and the Basque Country High Court recently issued two judgments in favour of Credit Suisse Securities (Europe) Ltd (Credit Suisse), ordering the tax authorities to refund Spanish withholding tax that Credit Suisse had borne on dividends received from Spanish companies. These judgments apply the conclusions reached by the decision of the Court of Justice of the European Union (CJEU) in Case C-601/23 that we analysed in detail in our previous blog, available here.
The judgments were reached on the grounds that a withholding tax applicable to non‑resident companies in a loss-making position breaches the EU right to free movement of capital, as it leaves non‑resident companies in a disadvantaged position compared to resident companies.
The full judgment of the Spanish High Court (SAN 3629/2025, dated 28 July 2025) is available here and the judgment of the Basque Country High Court (STSJ PV 1832/2025, dated 12 May 2025) is available here. Both judgments are now final as it has been confirmed that the tax authorities have not appealed the decisions.
A team from Freshfields’ Madrid office, led by counsel María Mera, senior associate Álvaro Fernández, and associate Carmen Delgado, advised the in-house tax team of Credit Suisse throughout these judicial proceedings.
Background
The cases relate to Credit Suisse, a UK tax resident company that, during 2012-2015 and 2017, was in a tax loss position and received dividends from several companies established in Spain. The dividends were subject to Spanish withholding tax that constituted a final, actual tax cost for Credit Suisse.
However, under Spanish tax legislation, a Spanish resident company in a tax loss position is able to request a full refund of Spanish dividend withholding tax borne during that year. Credit Suisse argued that this difference in treatment between Spanish resident companies and non-resident companies under the domestic tax legislation constituted a restriction on the free movement of capital, prohibited under Article 63 of the Treaty on the Functioning of the European Union and not justified under Article 65.
For further details on the background of the case, please refer to our previous blog on the CJEU’s decision here.
The Judgments
The Spanish High Court and the Basque Country High Court, by applying the CJEU’s decision in Case C-601/23, have upheld Credit Suisse’s position and have concluded that both the Spanish and Basque Country legislation on non-resident income tax infringe the EU free movement of capital because Spanish resident companies in a loss‑making position are entitled to recover withholding tax through their Spanish corporate income tax returns, whereas non‑resident companies lack any mechanism to claim such recovery, resulting in discriminatory taxation of dividend income.
The Spanish High Court emphasised the primacy and direct effect of the CJEU’s jurisprudence within the Spanish legal system, reiterating that domestic courts are bound to apply EU law as interpreted by the CJEU. The judgment also clarifies that, although the CJEU’s decision dealt specifically with the non-resident income tax rules in force in the Basque Country, those rules are identical to the non-resident income tax rules applicable in Spain and consequently, the CJEU decision was fully applicable.
In its defence, the Spanish State Attorney argued that Credit Suisse had failed to prove its loss‑making position in the UK. However, both the Spanish High Court and the Basque Country High Court rejected this argument, confirming that the documentation provided by Credit Suisse sufficiently evidenced its tax loss position. In addition, the Spanish High Court highlighted that the Spanish tax authorities had access to information‑exchange mechanisms — under the Spain‑UK Double Tax Treaty, the EU Directive 2011/16 on administrative cooperation, and the Convention on Mutual Administrative Assistance in Tax Matters — to verify such data where necessary, but had failed to utilise these mechanisms.
On this basis, both the Spanish High Court and the Basque Country High Court ordered the tax authorities to refund the Spanish withholding tax borne by Credit Suisse on dividends received in fiscal years 2012 -2015 and 2017, together with late‑payment interest accruing from the date on which the withholding tax was initially paid to the tax authorities.
Key Takeaways
These judgments have significant implications for cross-border investors in Spain that have incurred Spanish withholding tax, not only on dividends but also on other types of income, in years when they were in a tax loss position, resulting in actual, final tax costs in Spain. These investors may now have grounds to claim Spanish withholding tax refunds as a result of these judgments.
Furthermore, the conclusions of these judgments may have wider application, as they may influence how domestic courts of other EU Member States apply the CJEU decision in Case C-601/23 when the domestic withholding tax rules applicable to non-resident investors leave them in a disadvantaged position when compared to resident investors.
If you would like to discuss any of the points raised in this blog post in further detail, please contact the authors or your usual Freshfields contact.
