Beneficial ownership and interest tax exemption: where we stand

In Spain, article 14.1.c) of the Nonresident Income Tax Act ("NRIT Act") exempts interest payments made by Spanish debtors to lenders resident in another EU or EEA state, provided the lenders do not operate through a permanent establishment in Spain. Despite this exemption, the income must still be declared to the Spanish tax authorities; however, no amount will be withheld or otherwise paid.

Unlike article 1 of the Interest and Royalties Directive ("IRD") or the provisions of most double tax treaties, the NRIT Act’s exemption does not explicitly condition the exemption on the recipient being the "beneficial owner" of the interest. However, following the Court of Justice of the European Union (CJEU) judgment in the well-known "Danish cases" on February 26, 2019 (ECLI:EU:C:2019:134), two interpretations on the role of beneficial ownership ("BO") have emerged.

The first view asserts that BO is an implicit condition nonresident taxpayers must fulfill to benefit from the exemption, as article 14.1.c) of the NRIT Act implements an EU Directive that sets this requirement. Under this approach, the tax authorities may reject the exemption outright if this condition is not met. This is the tax authorities’ current approach, as reflected in the resolution of the Directorate-General for Taxation dated July 31, 2024 (binding tax ruling V1827-24), as well as in resolutions by the Central Tax Tribunal of October 8, 2019 (res. 185/2017) and March 20, 2024 (res. 7921/2020). Also, the National High Court (Audiencia Nacional) held this position in its judgment of October 17, 2024 (ECLI:ES:AN:2024:5319).

The second interpretation proposes that the Spanish legislature created a broader interest exemption, intentionally omitting certain requirements found in the IRD, such as the condition of payer and payee as associated companies or the condition of the payee as the beneficial owner of the income. Given that the Spanish exemption was enacted almost 15 years before the IRD (with a more expansive scope), proponents of this view argue that EU caselaw concerning the BO clause in the IRD is not a valid reference when interpreting the Spanish exemption. Thus, any challenges to the exemption should be based on general anti-avoidance rules ("GAAR") provided under the Spanish General Tax Act. Support for this interpretation can be found in precedents such as report nº 4 of the Spanish advisory committee on tax abuse, the resolution by the Tax Tribunal of Catalonia of October 4, 2018 (res. 08/6134/2015), the decision of the National High Court of October 31, 2017 (ECLI:ES:AN:2017:4707), and the recent decision of the Superior Tribunal of Valencia of September 30, 2025 (ECLI:ES:TSJCV:2025:2999). As the latter points out, this second interpretation aligns with the Spanish Supreme Court’s stance on the BO clause governing the taxation of royalties in tax treaties. Notably, in its judgment dated September 23, 2020 (ECLI:ES:TS:2020:3062), the Supreme Court considered “astonishing” the tax administration’s position that configured BO as  a kind of meta-legal norm or principle of natural law that must always and in every circumstance be imposed regardless of the specific wording of the legal provision.

Probably, at the heart of the issue lies the question concerning the interplay between BO and tax abuse, which remains particularly unclear in the Danish cases. In other words, although there should not be much debate on whether BO over the income is a relevant circumstance for the tax analysis (a position that is compatible with both approaches), discrepancies arise on what the actual relevance of the concept is and what procedures to follow. In fact, in the Danish cases the CJEU developed a different analysis for BO and tax abuse given the IRD's specific requirement, although the EU general principle that prohibits abuse of rights shall always be considered when EU law is at stake. Also, Spain’s domestic GAAR transpose Article 6 of the Anti-Tax Avoidance Directive, as stated in the preamble to Spanish Act 11/2021.

This is not pure conceptual discussion; on the contrary, it has substantial practical implications. From a substantive perspective, it raises questions such as whether the exemption applies if the recipient is not the beneficial owner of the interest but is not involved in an artificial arrangement. In terms of the burden of proof, it must be determined whether the taxpayer is required to demonstrate BO or whether the tax authorities are obliged to prove abuse. Procedurally, the debate focuses on whether the tax authorities can reject the exemption outright or if they must adhere to specific procedures provided under article 15 of the General Tax Act. It even impacts the imposition of penalties, specifically whether conditions and limitations under GAAR apply to penalties that could be imposed in this context.

As groundbreaking as the Danish cases were in 2019, legal certainty demands a comprehensive technical discussion on the topic, not biased by a given background but rooted in a proper interpretation of the law. Notably, shortly after the CJEU’s judgment in the Danish cases, our lawyers, Antonio Barba and Diego Arribas, highlighted this issue in a joint article (available here), and their insights might resonate in the procedures mentioned above. However, the issue remains unresolved because, contrary to the Central Tax Tribunal’s assertions, the Supreme Court did not confirm the first interpretation in its decision of June 8, 2023 (ECLI:ES:TS:2023:2652). Consequently, we expect that the Spanish Supreme Court or, potentially the CJEU, will address this matter in the near future.

Further developments are awaited from these courts, as well as from other European courts that may face similar challenges, such as in the case of Belgium in relation to its EU withholding tax exemption for royalties.

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