The European Commission has referred Spain to the CJEU, following a request made in June 2013 to amend its tax rules on investment in non-resident companies on the basis that they amounted to discriminatory tax treatment, but Spain has now changed its rules to address the discrimination.

For tax years starting before 1 January 2015, dividends received by one Spanish company from another were eligible for a full tax credit subject to meeting the relevant ownership conditions. Under the participation exemption, the conditions applying to dividends received from non-Spanish companies was different, and in this regard, the tax burden for foreign dividend payments was greater than for domestic dividend payments.

On 28 November 2014, details of the Spanish Tax Reform were published in the Spanish Official Gazette and several local provisions entered into force as of 1 January 2015, including a slight modification on the Spanish participation exemption regime. In this sense, it was the intention of the Spanish Legislator to accept equal tax treatment for both foreign and local dividends. For that purpose, the Spanish Tax Administration published a press note explaining that from its perspective the EU infringement considered by the Commission had already been resolved.

We are of the opinion that no further steps should be taken by the EU institutions in this matter since the current wording of Spanish tax law equalizes the tax burden and the tax requirements to benefit from the participation exemption regime irrespective of the location of the subsidiary company.