What Is a C-Corporation?
The C-Corporation (C-Corp) is the standard form of capital company in the United States. It has full legal personality, capital divided into shares, formal corporate governance (board of directors, shareholders’ meeting), and the ability to access capital markets. The vast majority of publicly traded US companies are C-Corps.
The “C” designation distinguishes it from the S-Corporation, a closely held variant with pass-through tax treatment. The C-Corp is the default category for any incorporated entity that has not expressly elected another classification.
Taxation in the US
The C-Corp pays federal corporate income tax at 21% on its net profits — the rate in effect since the 2017 Tax Cuts and Jobs Act. On top of that comes state corporate income tax, which ranges from 0% in Wyoming or Nevada to 11.5% in New Jersey; California’s rate is 8.84%.
When a C-Corp distributes dividends to shareholders, those dividends are taxed again at the personal level (economic double taxation). US resident shareholders pay the qualified dividends rate (0%, 15%, or 20% depending on income). Foreign shareholders are subject to US withholding tax at source.
Treatment in Spain: Opaque Entity by Default
For the AEAT, a C-Corp is unambiguously an opaque entity. It does not satisfy any of the three cumulative criteria established by DGT Resolution BOE-A-2020-2108 to qualify as a flow-through entity (entidad en atribución de rentas) under Spanish law: it pays corporate income tax in the US, and its profits are not automatically attributed to shareholders. Therefore:
- The Spanish shareholder does not owe Spanish income tax while profits remain inside the C-Corp.
- The Spanish tax obligation arises only when the C-Corp distributes dividends or the shareholder sells shares.
This difference from an LLC is fundamental when analyzing US-Spain structures.
Dividends Under the Spain-US Treaty: 0%, 5%, and 15% Rates
The 2019 Protocol (BOE-A-2019-15166) amending the Spain-US Convention established the following maximum source-country withholding rates on dividends (Art. 10 of the treaty):
| Beneficial owner situation | US withholding rate |
|---|---|
| Company holding ≥ 80% of voting stock for ≥ 12 months | 0% |
| Qualifying pension fund generally exempt from tax | 0% |
| Company holding ≥ 10% of voting shares | 5% |
| Any other case (including individuals) | 15% |
To access these reduced rates, the beneficial owner must be a qualified person under Article 17 of the Convention (the LOB clause). An individual resident in Spain qualifies automatically.
In Spain, the net dividend (after US withholding) is included in the savings tax base of the IRPF (19–28%) or corporate tax, with the right to claim a foreign tax credit for the amount withheld in the US.
C-Corp Status Via Check-the-Box
An LLC that has elected corporation treatment with the IRS by filing Form 8832 (check-the-box) receives C-Corp treatment for IRS purposes. However, this US tax election is not automatically binding on Spain: the AEAT applies its own three-criteria test. In practice, where the LLC was already subject to tax in its state of formation before the election, the DGT tends toward opaque treatment — but no binding ruling specifically addresses this scenario head-on.
GILTI Exposure
US shareholders (US persons) in a controlled foreign corporation may be subject to the GILTI regime (§ 951A IRC). If the shareholder is simultaneously a US citizen and a Spanish tax resident, double exposure can arise: GILTI in the US and potentially CFC (TFI) rules in Spain.
At BMC we always analyze a C-Corp from both angles — IRS and AEAT — because the most common mistake in this cluster is assuming the same entity receives identical treatment in both countries.