Spain: Dividend withholding tax on sovereign wealth funds; refund opportunities

Spain: Dividend withholding tax, sovereign wealth funds

The Spanish Supreme Court held that the dividend withholding tax imposed under Spanish law on distributions to non-Spanish sovereign wealth funds is contrary to EU law.


The taxpayer in both cases—no. 253/2021 and no. 290/2021—was a Norwegian public entity that had been subject to withholding tax in Spain for Spanish-sourced dividends. The possibility to apply any exemption under Spanish domestic tax law was not available. However, the income would have been exempt if it had been received by a Spanish equivalent government body.

The Spanish Supreme Court held, in a case of first impression, that taxation—without exemption—on dividends paid by Spanish resident entities to a non-resident sovereign wealth fund was contrary to the free movement of capital standard contained in Article 63 of the EU Treaty and in Article 40 of the European Economic Area (EEA) agreement.

KPMG observation

The decisions, in confirming that the withholding tax applied to the Spanish-sourced dividends received by the non-resident sovereign wealth funds was contrary to the Community principle of free movement of capital, may provide opportunities for refunds of the withholding tax unduly applied to foreign sovereign wealth funds under the measures of the Spanish tax law.

Read an April 2021 report [PDF 177 KB] prepared by the KPMG member firm in Spain

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