Taxation of a non resident in Spain for the transfer of the shares of the ETVE

The capital gains/income obtained by the partner (individual or legal entity) is exempt from tax in Spain if the partner’s country of residence has signed a Treaty to Avoid Double International Taxation.

Now, if said capital gains/income were subject to tax in Spain because there is no applicable Treaty, the Spanish Law sets forth a special tax regime to determine which part of the capital gains/income is effectively subject to tax.

When the transfer value of the shares in the ETVE is:

• Equal to the equity of the ETVE.

The capital gains/income obtained by the partner correlate to the non distributed profits of said entity, generated during the time of possession of said shares, which will come from exempt and non exempt capital gains/income.
In such case, the capital gain applicable to the exempt capital gains/income is deemed as not obtained in the Spanish territory.

• Greater than the equity of the ETVE.

The capital gains/income obtained by the partner will correlate partly with the non distributed profits of said entity, generated during the time of possession of said shareholding, that correlate with exempt and non exempt capital gains/income obtained by said entity, as well as with the increase in value of the shares that the same entity has in its partially owned entities.

In summary, capital gains/income that correlate to the non distributed profits obtained by the ETVE charged to exempt capital gains/income deriving from shares in non resident entities and in permanent establishments, will not be deemed as obtained in the Spanish territory.

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