Rethinking “Beneficial Ownership” in Spain: What STSJ Valencia 690/2025 Means for Global Entrepreneurs and Cross-Border Financing
- Business Expats
- 1 day ago
- 2 min read
When is legal form enough — and when does substance become decisive?
The Valencian High Court (STSJ 690/2025) has reopened this question at the heart of international tax structuring, reminding us that sometimes Spanish law speaks as much by what it does not require as by what it does.
The Case in Brief
A Spanish company paid interest to a Dutch lender, invoking Spain’s domestic exemption for outbound interest payments under Article 14.1.c of the Non-Resident Income Tax Law (LIRNR).
The Tax Authority (AEAT) disagreed, arguing that the real beneficiary was the Andorran parent company, and therefore the 21% withholding tax should apply.
The Court, however, ruled differently.
Spain’s domestic exemption predates the EU Interest & Royalties Directive, and its text has never included the “beneficial owner” requirement.
Importing that concept from EU law, the judges reasoned, would be legislating from the bench, not interpreting the rule.
A Quiet but Powerful Message
The Court reaffirmed two key principles:
✅ Only Parliament can create tax conditions — not the administration, and not the judiciary.
✅ Anti-abuse measures must follow formal procedures under Articles 15 and 16 of the General Tax Law (LGT) on conflict and simulation.
If the Tax Authority suspects artificiality, it must prove it — not presume it.
Why This Matters for Global Entrepreneurs
This ruling is not just about interest income; it’s about legal certainty in cross-border structuring.
Many of our clients — founders, investors, and international entrepreneurs — operate through multi-layered EU structures, where Spain, the Netherlands, Portugal, and Estonia interact daily.
It underscores a vital point:
Not every cross-border structure is abusive by design.
If your Dutch BV or Irish DAC performs a real financing function — with contracts, risk, governance, and accounting — the Spanish payer may rely on the literal text of Article 14.1.c LIRNR.
The key lies in alignment, not over-compliance: consistent documentation, operational coherence, and readiness to demonstrate substance when challenged.
From Courtroom to Strategy Room
Although STSJ Valencia 690/2025 is not yet binding jurisprudence (the Supreme Court must confirm this in two consistent rulings), it already signals a shift in how Spain approaches cross-border financing.
For today’s expat economy, where a founder may live in Lisbon, hold shares in Amsterdam, and serve clients from Madrid, this case reinforces a timeless principle:
"Clarity in structure is not a luxury it’s your strongest defence".
Business Expats Insight
At Business Expats, we help global entrepreneurs translate these legal nuances into operational certainty — designing compliant, efficient, and future-proof structures for people who live globally but want their tax strategy to stay one step ahead of regulation.
Thinking about how this ruling could impact your cross-border structure or financing model?
Schedule a free consultation with our international tax and structuring team.
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