The TEAC resolution of 20 March 2024 (RG 07921/2020) marks a significant shift in how Spain's tax administration analyses cross-border payment structures involving EU intermediaries. By applying a rigorous beneficial-ownership test to dividends routed through an EU entity whose ultimate beneficiary resided outside the EU, the Tribunal Económico-Administrativo Central signalled that formal compliance with treaty or directive requirements will not shield arrangements that lack economic substance. Groups with Spanish-source income flows and holding structures that rely on EU conduit entities should treat this resolution as a material compliance signal and review their positions proactively.
Legal Framework: Beneficial Ownership in Spanish Tax Law
Spain's approach to beneficial ownership draws on several interlocking sources: domestic anti-avoidance rules under the Non-Resident Income Tax Act (RDLeg 5/2004), EU directives on parent-subsidiary and interest and royalty payments, and the OECD commentary on Article 10–12 of the Model Tax Convention. Together, these layers create a framework in which a formal payee can be disregarded if it is found to lack genuine control over the income it receives.
Under RDLeg 5/2004, non-resident withholding tax applies at rates that vary according to the nature of the income and the recipient's residence. According to that legislation, the headline rate on dividends and interest paid to non-EU beneficiaries is 19%, while royalties are generally taxed at 24% – though reported sources indicate a reduced 19% rate may apply to EU and EEA recipients. Where a double-tax treaty is in force, the applicable rate depends on the recipient's residence and its treaty position, and treaty benefits are typically conditional on the recipient qualifying as the beneficial owner of the income.
Spain has also implemented the EU Parent-Subsidiary Directive and the Interest and Royalties Directive, both of which include general anti-abuse rules. Those rules require Member States to deny directive benefits where an arrangement is non-genuine – meaning it was put in place without valid commercial reasons that reflect economic reality and with the essential purpose of obtaining a tax advantage. It is within this multi-layered framework that the TEAC's 2024 resolution must be understood.
The TEAC Resolution of 20 March 2024: Analysis
In RG 07921/2020, the TEAC examined a structure in which payments originating in Spain were channelled through an entity resident in an EU Member State before reaching an ultimate beneficiary established outside the EU. The resolution applied a beneficial-ownership analysis and concluded that, notwithstanding the intermediary's EU residence, treaty or directive protections could not apply because the intermediary was not the true beneficial owner of the income.
The TEAC's reasoning rested on substance indicators: the intermediary was found to exercise no meaningful decision-making authority over the funds, it bore no genuine economic risk, and its interposition served no discernible commercial function independent of the tax benefit. This approach is consistent with the OECD's post-BEPS guidance, which emphasises that the beneficial-owner concept is not purely a legal or formal one but must be assessed against economic reality.
What makes this resolution noteworthy for tax risk management purposes is its procedural context. It arose from an AEAT (Agencia Estatal de Administración Tributaria) audit challenge to a withholding position that the taxpayer had treated as protected by the applicable directive. The TEAC upheld the administration's recharacterisation, confirming that AEAT is willing to look through EU-resident entities where the facts support a conduit finding. Groups that have relied on similar routing structures should take note of this enforcement posture.
If your group has Spanish-source income routed through holding or financing entities, a preliminary review of substance and beneficial-ownership documentation is a prudent first step. Our tax disputes team is available to discuss the implications at info@ferrazwhitmore.com or via our contacts page.
Interaction with EU Law: The CJEU Nordcurrent Ruling
The TEAC doctrine does not operate in isolation. On 3 April 2025, the Court of Justice of the European Union issued its ruling in Nordcurrent Group (C-228/24), addressing the application of the Parent-Subsidiary Directive's general anti-abuse rule to national participation exemptions. The CJEU confirmed, according to reporting on that decision, that the anti-abuse rule applies not only to the directive's own withholding tax exemption but also to national participation exemptions that derive their legitimacy from the directive framework.
Critically, the Court reiterated the dual-element test for abuse: there must be an objective element – a non-genuine arrangement that does not reflect economic reality – and a subjective element – the main purpose, or one of the main purposes, of obtaining a tax advantage. (Source: Loyens & Loeff analysis of C-228/24, available at loyensloeff.com.)
This ruling has direct relevance to the Spanish context. If AEAT challenges a structure on beneficial-ownership grounds and the taxpayer invokes directive protection, the administration can respond by invoking the directive's own anti-abuse clause – applying the Nordcurrent dual-element test. The TEAC resolution of 20 March 2024 can be read as an administrative anticipation of precisely this line of reasoning, even before the CJEU's April 2025 judgment formalised it at EU level.
For a comparative perspective on how similar beneficial-ownership doctrine is being applied in another major EU jurisdiction, our analytical piece on the Italian Cassazione ruling 32467 on beneficial ownership sets out the parallels and divergences that cross-border groups should be aware of.
Open Questions and Areas of Uncertainty
Despite the TEAC's relatively clear statement of principle, several important questions remain unresolved in Spanish administrative and judicial practice.
- The threshold of substance: The TEAC did not prescribe a definitive list of substance indicators sufficient to rebut a conduit finding. Groups seeking to demonstrate that their EU holding entities are genuine must rely on general guidance from the OECD and the EU Anti-Tax Avoidance Directives, together with the evolving Tribunal Supremo case law, to calibrate what level of local management, staffing and risk-bearing will satisfy AEAT.
- Transfer pricing interaction: Where payments between group entities are challenged on beneficial-ownership grounds, there is an open question as to whether AEAT will simultaneously assert transfer pricing adjustments under the arm's-length principle, potentially creating double exposure on the same transaction.
- Tax treaty override: Spain's treaty network is extensive. Where a third-country beneficiary's state of residence has a bilateral treaty with Spain that is not overridden by the directive framework, the interplay between the beneficial-ownership analysis and the treaty's own anti-avoidance provisions requires careful case-by-case assessment.
- Procedural avenues: A TEAC resolution is binding on AEAT but not on ordinary courts. Taxpayers who disagree retain the right to challenge through contencioso-administrativo proceedings, and the Tribunal Supremo's position on several associated questions is not yet settled.
- Registro Mercantil and CNMV disclosures: For groups subject to Spanish corporate disclosure obligations – including CNMV-regulated entities – the beneficial-ownership analysis may intersect with ultimate beneficial owner registration requirements, creating parallel compliance considerations distinct from the tax challenge itself.
Practical Impact: Who Is Most Exposed?
The TEAC doctrine of 20 March 2024 carries material implications for several categories of cross-border investors and corporate groups operating in Spain.
- Non-EU parent groups with EU holding companies: Any structure in which a non-EU ultimate owner receives Spanish dividends, interest or royalties through an EU intermediary that lacks genuine substance faces an elevated risk of AEAT challenge under the beneficial-ownership analysis articulated in RG 07921/2020.
- Private equity and fund structures: Funds established in Luxembourg, the Netherlands or Ireland that hold Spanish assets, particularly where the investment manager or ultimate LP base is outside the EU, should assess whether their Spanish portfolio companies have properly documented the withholding tax position at source.
- Intragroup financing and IP arrangements: Spanish operating companies making royalty or interest payments to group treasury or IP-holding entities resident in EU Member States should ensure those entities can demonstrate genuine risk-bearing and decision-making capacity, not merely legal ownership of the relevant asset or receivable.
- Tax structuring reviews triggered by audit: Groups already under AEAT examination – whether through a routine tax audit or a more targeted anti-avoidance enquiry – will find the TEAC doctrine directly applicable to any withholding tax position currently under scrutiny.
If your group falls into any of these categories, engaging specialist counsel before AEAT issues a formal proposal for settlement (acta) is considerably more cost-effective than contesting an assessment that has already crystallised. Our tax disputes practice in Spain advises on AEAT investigations from the inspection phase through to administrative review and judicial proceedings.
Strategic Recommendations
Facing the heightened enforcement environment signalled by the TEAC's 2024 resolution, groups with Spanish-source income should consider a structured response across three dimensions: documentation, restructuring and dispute readiness.
Documentation and substance. Intermediary entities in the payment chain should be able to demonstrate, through contemporaneous records, that they possess genuine decision-making authority over the funds, employ or contract personnel with relevant expertise, bear genuine financial risk, and have a commercial rationale independent of the tax benefit. The burden of proof in a beneficial-ownership dispute will lie initially with the taxpayer to show entitlement to treaty or directive benefits; internal documentation built before an audit inquiry is far more persuasive than post-hoc reconstruction.
Structural review and tax risk management. Where existing structures cannot be substantiated, groups should model the withholding tax cost of the applicable rate under domestic law or a relevant treaty and weigh it against the cost and complexity of restructuring. In some cases, inserting genuine substance – board members, decision-making functions, risk capital – into EU holding entities may be operationally feasible and commercially justified. In others, simplification of the chain may be preferable to maintaining an entity whose only function is interposition.
Dispute readiness. Where AEAT has already raised queries or an audit is in progress, taxpayers should immediately consider the procedural options available: the proceso monitorio equivalent in administrative proceedings, negotiation of an acta con acuerdo, and – if the administrative route is exhausted – challenge before the Audiencia Nacional and ultimately the Tribunal Supremo. Our litigation and arbitration team in Spain can advise on the relative merits of each avenue in the context of a specific factual matrix.
Cross-Border Implications and Outlook
The convergence of the TEAC's 20 March 2024 resolution with the CJEU's April 2025 ruling in Nordcurrent Group suggests that the beneficial-ownership challenge is now a permanent feature of the European tax enforcement landscape rather than an isolated Spanish phenomenon. Tax authorities across EU Member States are increasingly coordinating their approaches, sharing audit intelligence through the framework of Directive 2011/16/EU on administrative cooperation (DAC), and applying the dual-element abuse test with greater confidence.
For Spain specifically, the TEAC doctrine – which sits below the Tribunal Supremo in the administrative hierarchy but sets binding guidance for AEAT – is likely to influence a wave of ongoing and forthcoming audits. Where the Tribunal Supremo subsequently addresses the beneficial-ownership question directly, its ruling will have broader normative force and may either confirm or moderate the TEAC's position. Until that happens, the 20 March 2024 resolution is the most authoritative domestic statement of how Spanish tax authorities will approach conduit-entity cases.
Groups should also monitor developments in OECD Pillar Two implementation in Spain, since the interaction between the qualified domestic minimum top-up tax and existing withholding arrangements may alter the economics of certain structures in ways that affect the beneficial-ownership analysis.
For further factual background and a broader comparative digest of beneficial-ownership decisions across jurisdictions, the TPcases beneficial owner digest is a useful reference resource.
The landscape is evolving rapidly. If you would like to discuss how the TEAC doctrine applies to your group's specific structure in Spain, please contact our team at info@ferrazwhitmore.com or visit our contacts page to arrange a consultation.
Sources
- TPcases, Beneficial Owner Digest – tpcases.com/digests/beneficial-owner/
- Loyens & Loeff, CJEU rules on the application of the GAAR under the PSD to national participation exemptions (C-228/24) – loyensloeff.com
- Facts last verified: 22 September 2026
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.