In our earlier Tax Alert, we reported that the Spanish Directorate General of Taxes had published a draft resolution that provides guidelines to determine whether a foreign entity is to be regarded as tax transparent (entidad en régimen de atribución de rentas constituída en el extranjero) for Spanish tax purposes.

On 13 February 2020, the Spanish General Directorate of Taxes published the final resolution, which is aligned with the draft resolution published on 5 November 2019.

Key features

In line with the OECD Model Tax Convention on Income and on Capital, the Spanish General Directorate of Taxes has established the following features that a foreign entity must have in order to be considered as tax transparent in Spain:

  • The entity must not be subject to income tax in the country of incorporation.
  • Income generated by the entity is allocated, for tax purposes, to its participants, who are liable to pay tax on such income.
  • Income allocation to participants must occur regardless of any distribution by the entity.
  • Income in the hands of the participants retains the same nature as the income of the entity.


For the Spanish tax authorities the resolution is binding and will be applicable to taxable events occurring on or after 13 February 2020. The resolution does not have a retroactive effect so it will not affect taxable events that took place before 13 February 2020.

Key takeaway

The resolution should be welcomed by many foreign alternative investments funds (AIFs) as there has been a long period of uncertainty on the question of their tax classification for Spanish tax purposes. With the guidelines in place, international structures with foreign tax transparent entities should be carefully analyzed in order to determine the impact of the resolution.

The fact that the criteria set forth by the resolution is aligned with the OECD principles will allow Spanish tax treatment to be harmonized with other countries that follow the same principles. This is expected to reduce mismatches in the classification of investment funds across different countries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.