The Spanish Tax Authority (DGT), in its binding ruling V1827-24 dated July 31, 2024, has reinforced a key principle: the exemption of interest received by residents of another EU or EEA Member State (Article 14.1.c) of the Non-Resident Income Tax Law – IRNR) only applies if the recipient is the beneficial owner.
Although the law does not explicitly mention this requirement, the DGT interprets it as implicit in the article, based on two rulings from the Central Economic-Administrative Court (TEAC) —dated October 8, 2019 and March 20, 2024— and the Judgment of the Court of Justice of the European Union (CJEU) of February 26, 2019.
What does this mean for Spanish companies?
The entity paying the interest must exercise enhanced due diligence to confirm that the beneficial owner:
- Is fiscally resident in the EU or EEA, and
- Does not act as a mere intermediary or conduit entity.
Only under these conditions can the exemption be applied and the withholding under IRNR avoided.