Tax refunds to foreign insurance companies

Can insurance companies established in other EU Member States without a permanent establishment in Spain deduct in the non-resident income tax (NRIT)  their allocations to technical provisions from the income  obtained from investments in Spanish listed companies?

Since the last reform of the NRIT Act, in force since January 1, 2015, non-resident insurance companies without permanent establishment in Spain that invest in Spanish securities can deduct from the NRIT taxable base the deductible expenses established in the Company Tax Act, including the expressly mentioned allocations to the technical provisions.

However, in practice, it has been very difficult to exercise this right and to obtain the corresponding NRIT refunds, given that doubts were cast on the correlation of income and expenses or on the very regulation under which the non-resident insurance companies booked the technical provisions in their jurisdiction of residence.

The Spanish Supreme Court in its Judgment of November 17, 2025 (RC 5786/2023, ECLI:ES:TS:2025:5385) in a case advised by Cuatrecasas, confirmed the right of an insurance company established in Germany to deduct the expenses related to the allocation to technical provisions from dividend income from Spanish securities and, therefore, to obtain the corresponding NRIT refunds.

The Supreme Court considers that refusal to admit the deduction of those technical provisions is an unjustified obstacle to the free movement of capital, given that Spanish insurance companies can deduct in the Spanish Corporate Income Tax the allocations to technical provisions from  the income they obtain from their investments in companies of other Member States, while foreign companies were in practice prevented from doing this in the NRIT.

The court established the following case law: “Insurance companies resident in another Member State of the European Union that only carry out financial investments in Spain—but do not have a permanent establishment in Spain—for which they obtain income from movable capital, can consider, for the purpose of the deductibility of expenses established in article 24.6 of the consolidated text of the Non-resident Income Tax Act (“TRLIRNR”), that the expenses related to technical provisions (comparable to those established in article 38 of the Regulation on the Order and Supervision of Private Insurance [“ROSSP”] and exclusive to insurance activity) are tax deductible to avoid discrimination contrary to the free movement of capital under article 63.1 TFUE, given that it must be understood that those expenses are directly related to earnings obtained in Spain and have a direct and inseparable economic link to the activity carried out in Spain”.

Therefore, it is confirmed that insurance companies from other Member States of the European Union and third states (since this matter is within the scope of the free movement of capital principle) can recover the corresponding amounts withheld in relation to NRIT by the payers of the income (i.e., dividends) they obtain, given that the Supreme Court admits the deductibility in the taxable base of the allocations to technical provisions. This is both the case for non-statute-barred years and, in Cuatrecasas’s opinion, also for statute-barred years.

On this matter, the Supreme Court has issued two further judgments, both dated December 11, 2025:

• The first one (RC 5203/2023, ECLI:ES:TS:2025:5816) resolves the appeal in favor of the same appellant as in the previous judgment and reiterates the same legal doctrine.
• The second (RC 7741/2023, ECLI:ES:TS:2025:5953) analyzes the case of an insurance company established in the United Kingdom. The appellant requests a full refund of the NRIT paid on Spanish source dividends, claiming discriminatory tax treatment versus resident pension funds which are taxed at 0% corporate income tax rate. However, the Supreme Court rules that, under the principle of free movement of capital, a nonresident insurance company that carries out social welfare services cannot be equated with Spanish pension funds for the purpose of applying the 0% tax rate.
  
  Nevertheless, the Supreme Court itself, acting as a court of first instance, applies the doctrine discussed in this post and allows the deduction of technical provision expenses by the foreign insurance company—if comparable to those of Spanish insurers—when calculating NRIT from dividends, on the grounds that these expenses are directly linked to the dividends received in Spain and have a direct and inseparable link to the business activities in Spain.

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