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This article addresses the Spanish Corporate Income Tax (CIT) special regime for private equity entities (ECR) under Article 50 of Law 27/2014. Tax professionals, private equity managers, and investors – both resident and non-resident – should be aware of the significant exemptions it offers: a 95% exemption on dividends and a 99% exemption on capital gains, with no minimum stake or holding period requirements. These benefits are designed to avoid double taxation and to promote investment in high-potential companies, thereby strengthening Spain’s industrial and commercial sectors. Stakeholders must review compliance with regulatory requirements, assess eligibility for these exemptions, and ensure adherence to anti-abuse rules, particularly in transactions involving related entities or non-cooperative jurisdictions. The regime has remained a cornerstone of Spain’s efforts to foster private equity investment since its introduction in 1986, and continues to play a vital role in channelling savings and investment towards growth opportunities.
Spanish Corporate Income Tax (CIT) regulations include a number of special tax regimes that set out preferential rules in certain situations, either due to the nature of the taxpayers involved or the nature of the transactions in question.
Among these special tax regimes are some as different from each other as the tax consolidation regime, the mining regime, or the SOCIMI’s (Spanish REITs) regime – which the Government has recently considered revising.
Another special tax regime is that set out in Article 50 of Law 27/2014, of November 27, on Corporate Income Tax, applicable to Spanish private equity entities (ECR) and their investors. This Article governs the tax benefits that may apply to income earned by ECRs themselves (whether dividends or capital gains) and by their investors (both resident and non-resident). This regime also set out specific anti-abuse rules, which generally apply when income is obtained from a non-cooperative jurisdiction or when ECR’s shares were acquired from related entities.
Key features of the tax regime
This special tax regime stands out for several features that make it particularly attractive to both ECRs and their investors.
Historical context
Although its rules are closely linked to ECR regulatory provisions –so much so that applying the special tax regime requires compliance with regulatory requirements– the tax rules actually predate the regulatory framework. In fact, tax benefits for ECRs were introduced in 1986, while a unified regulatory framework for these entities was not established until 1999, setting the substantive basis for their corporate regulation.
Tax benefits for ECRs
The special tax regime offers significant tax advantages for typical ECR investments (i.e. qualifying investments). To avoid double taxation, the general CIT regime allows entities receiving dividends or obtaining capital gains to apply a 95% exemption if certain minimum stake and tenancy-period requirements are met. The special tax regime for ECRs removes these requirements, allowing dividend exemption regardless of the stake and tenancy-period –95% exemption– and capital gain exemption regardless of the holding percentage –99% exemption–.
Tax benefits for investors
CIT taxpayers investing in an ECR can apply the 95% exemption on dividends paid by the ECR and on capital gains from its transfer, regardless of stake and tenancy-period. Furthermore, these incomes are not subject to taxation in Spain when earned by investors who are not tax resident in Spain.
A key driver for Private Equity in Spain
Despite numerous legislative changes and successive financial crises –which increased the Spanish tax authorities’ revenue needs– the special tax regime for ECRs has remained a cornerstone of political and legislative efforts to promote the private equity sector in Spain.
Since 1986, its fundamental objective has remained unchanged: to foster a sector whose primary role is to strengthen Spain’s industrial and commercial fabric by improving the financial structure of high-potential companies, channelling savings and investment toward them.
We trust that this principle will continue to be valued as the pillar for applying this advantageous tax regime for ECRs and their investors, further encouraging the growth and consolidation of private equity in Spain.
