Management companies of joint account structures must comply with Art. 21.1 LIS to exempt dividends

The application of the dividend exemption in complex investment structures has been subject to analysis by the Tax Administration. Within the framework of joint account contracts (cuentas en participación), doubts arise as to whether a management company can automatically apply the exemption to the profits distributed by the invested company.

What the DGT has resolved

The Directorate General of Taxes (DGT) has determined that the possibility of applying the exemption provided for in Corporate Income Tax (IS) is neither absolute nor automatic for companies acting as managers in joint account contracts. For these dividends not to be taxed in the management company, it is imperative that the requirements established in Article 21.1 of the Corporate Income Tax Law (LIS) are met.

The resolution underlines that the exemption is contingent upon the company meeting the conditions for participation and profit generation required by current regulations. There is no unlimited application of the exemption in these business models; rather, the nature of the joint account contract does not exempt one from complying with the tax legality applicable to holding or investment companies.

What it means for you

If your professional or business activity involves managing joint accounts where dividends are received from participated companies, the DGT's interpretation has a direct impact on your tax burden. This implies that:

• There is no automatic exemption: The mere existence of a joint account contract does not guarantee that the dividends received will be exempt from taxation.
• Need for requirement control: You must verify that the management company complies with all the provisions of Article 21.1 of the LIS.
• Impact on investors: Although the impact is direct for the management company, investors acting as joint account participants must be aware that the tax efficiency of the structure depends on compliance with these legal requirements.

What should be done

Given the complexity of joint account contracts and their interaction with Corporate Income Tax regulations, it is necessary to perform a technical analysis of the investment structure. It must be verified that both the participation and the generation of profits meet the LIS criteria to avoid contingencies in the tax settlement. Each investment structure must be assessed individually to ensure that the exemption is correctly applicable.