Spain Launches Major Tax Reform

On March 31st, 2012 a Royal Decree-Law of urgent tax measures for fiscal consolidation has been published on the Spanish official Gazette. This Royal Decree, focused on achieving the deficit reduction target, introduces several tax and administrative measures of particular importance for foreign investors, which imply new tax planning opportunities and the need to review current structures of investment. In practice, the new regulation introduces limited-time opportunity measures, such as a repatriation holiday applicable to companies that can not benefit from the Spanish participation exemption regime on foreign source dividends and capital gains, and a «tax amnesty» for resident and nonresident companies and individuals. Likewise, limitations to the tax deduction of financial expenses are introduced and finally the Spanish foreign holding regime (Régimen especial de entidades de tenencia de valores extranjeros, ETVEs) is strengthened and enhanced with new exemptions or benefits that were not initially covered by this regime.