Fund Taxation Alert 2021-08

Spanish High Court grants dividend withholding tax refunds to European non-UCITS Funds

Spanish High Court grants dividend withholding tax refunds to European non-UCITS Funds

Olivier Schneider

Partner, Financial Services Tax

KPMG in Luxembourg



On 30th of July 2021, the High Court (second Spanish second tier court) confirmed that a higher taxation imposed on European Non-UCITS investment funds compared with that for resident funds restricts the free movement of capital.

Spanish case law had already in the past confirmed that higher taxation imposed on non-resident investment funds as compared to resident funds infringes the free movement of capital granted by the Treaty on the Functioning of the European Union. The High Court has now confirmed in its judgment of 30th July 2021 that this should also apply to investment funds resident in other Member States that are not covered by Directive 2009/65/EC (“UCTIS Directive”). As a result, the 1% tax-rate should also apply to non-resident EU funds, which are entitled to claim a refund for taxes withheld in Spain at higher rates.

In the case at hand, all arguments presented by the Spanish tax authorities were refuted by the High Court.

The High Court confirmed that the evidence submitted by the funds (issued by the regulatory authorities of Germany in the case at hand) was sufficient, since they would be sufficient for German funds to comply with the requirements under German law. Furthermore, the Spanish tax authorities had not specified which documents should have been provided by the fund instead and the Spanish tax authorities did not use the possibility of exchange of information and collaboration with the German tax authorities.

The Spanish tax authorities have the possibility to appeal the High Court’s decision before the Spanish Supreme Court.

KPMG Comments

This is the first Spanish case in which European investment funds that are not covered by UCITS Directive are granted a withholding tax refund to be treated like Spanish resident investment funds.

This decision constitutes a strong basis for Luxembourg and other EU non-UCITS funds to file withholding tax (WHT) reclaims in Spain to benefit from this positive jurisprudence.

A dedicated team of tax advisers and project management experts could support you in in processing the WHT reclaims in Spain accordingly.