Spain: Dutch holding company did not meet beneficial ownership test under EU interest and royalties directive (Supreme Court decision)
Company could not rely on treaty benefits as an alternative.
The Spanish Supreme Court in January 2026 held that a Dutch holding company that received royalties from a Spanish company for the use of intellectual property (IP) did not meet the beneficial ownership test under the EU Interest and Royalties Directive (IRD).
The Dutch company’s main activity was to administer and collect royalties from EU subsidiaries. In practice, however, it retained only a small margin and promptly transferred most of the royalties to a related entity in Curaçao. Initially, the Dutch company claimed relief under the Spain – Netherlands income tax treaty, which did not contain a beneficial ownership requirement and limited Spain’s taxing rights to 6% of the gross royalties. The company later applied for a full withholding tax exemption under which the IRD, which requires the recipient to be the beneficial owner of the income.
The Spanish tax authorities held that the Dutch company did not meet the beneficial ownership requirement because it lacked real substance, decision-making functions, and the ability to use and enjoy the royalty income. The High Court of Justice of Catalonia upheld the tax authorities’ position, and the Supreme Court affirmed.
The Supreme Court also confirmed that the IRD takes precedence over tax treaties, and if the IRD denies an exemption, the taxpayer cannot rely on treaty benefits as an alternative.
Read a March 2026 report prepared by KPMG’s EU Tax Centre