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V3501-15 13 November 2015 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · exención por doble imposición

Investors may apply the double taxation exemption on share redemptions if the entity has already been taxed

A query is made as to whether investors in a venture capital management company are entitled to the exemption under Article 21.3 of the LIS regarding income derived from funds in tax havens. The DGT responds that, if the management company is already fully taxed in Spain on such income, the partners may apply the exemption provided they meet the participation requirements.

The question raised

Question posed: Whether investors are entitled to the exemption to avoid double taxation regulated in Article 21.3 of the LIS for income derived from the redemption of their shares in the funds managed by the applicant, insofar as the latter corresponds to income obtained by said funds from funds domiciled in tax havens, to the extent that the latter will be subject to full taxation under Spanish Corporate Income Tax at the level of the funds managed by the applicant.

The DGT's ruling

The special regime for venture capital entities excludes the exemption if the income is obtained through a tax haven. However, if the management company is fully taxed in Spain on income from funds in tax havens, the partners may apply the exemption under Article 21.3 of the LIS. This is possible provided they meet the participation percentage requirements and such income has already been effectively taxed within the entity itself.

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