A recent Court decision from the Catalonian High Court of Justice (Tribunal Superior de Justicia- TSJ – case number 1947/2023) dated May 26, 2023 recently published analyses in depth the effective beneficiary issue in the royalty payments by a Spanish company to non-resident companies.
The TSJ ratifies the criterion that has been followed by the Tax Authorities and by other Courts in the last years, concluding that the tax exemption stated in the Spanish domestic legislation on royalty payments to entities resident in another EU country (article 14 of the Non-Residents Income Tax Law), is only applicable if the recipient is the effective beneficiary of the royalty.
Therefore, this exemption shall not be applicable if the recipient company is not the effective beneficiary of the royalty, but, for instance, a mere intermediary acting on behalf of other company which is tax resident outside the EU.
The exemption not being applicable in the case analysed, the TSJ concludes that the Spanish payer should have withheld the corresponding withholding tax in accordance with the applicable Tax Treaty between Spain and the country where the effective beneficiary is resident.
The same criterion stated in the Court decision would be applicable in the case of interest payments from a Spanish company to an EU or EEE company.
Access to the full judgment HERE
