New rules will significantly ease the access by qualified Collective Investment Undertakings (CIUs), Alternative Investment Undertakings (AIFs) and pension funds incorporated, or formed, in a European Union (EU) Member State to a specific domestic exemption from Spanish tax on Spanish source interest and capital gains (other than gains on the disposal of real estate or land-rich entities).
This domestic exemption applies to Spanish source interest and non-real estate capital gains obtained by residents of an EU Member State (other than Spain), or by their permanent establishment in another EU Member State. In practice, if the recipients of the income were CIUs or AIFs, whether in the form of a fund or a company, they faced significant obstacles to evidence their residence in an EU Member State. It was impossible to prove such residence if, for instance, the local tax authorities refused to issue a certificate of residence (for example, because the relevant undertaking lacked legal personality).
As from 20 October 2019, the process of proving residence is much simpler. For EU CIUs, AIFs and pension funds that meet all other requirements, and are not subject to a “look-through” tax regime, the cumbersome “certificate of residence” can be replaced by a statement issued by the representative of the CIU, AIF or pension fund (or its management company).
The new rules also introduce a special procedure for entities subject to a “look-through” tax regime. For EU CIUs and AIFs, the domestic exemption will be applied based on EU resident investors’ stakes in the relevant CIU or AIF as at December 31 of the preceding calendar year, on a year-by-year basis. EU CIUs and AIFs can evidence the tax residence of their investors pursuant to Annexes I and II of the DAC.