Spain: Beneficial ownership requirement inapplicable to domestic interest exemption (court decision)
Domestic interest exemption pre-dates and is independent from EU interest and royalties directive.
The High Court of Justice of the Valencian Community on September 30, 2025, held (judgment no. 690/2025) that a beneficial ownership requirement could not be applied to deny exemption from withholding tax on interest payments made by a Spanish company to its Dutch shareholder/lender.
Article 14.1(c) of the Spanish Nonresident Income Tax Law provides a withholding tax exemption for interest paid to EU residents, without requiring that the recipient be the “beneficial owner.” The court found that this exemption pre-dates and is independent of Directive 2003/49/EC (interest and royalties directive), which includes a beneficial ownership requirement. The court held that the beneficial ownership requirement may only apply where expressly introduced through anti-abuse provisions, or when transposing EU law.
Read a November 2025 report prepared by the KPMG’s EU Tax Centre