The Spanish Supreme Court has recently issued a relevant resolution confirming the discriminatory tax treatment established in Spain for non-resident funds in the European Union (Non-EU funds) in comparison to Undertakings for Collective Investments in Transferable Securities funds, regulated under the Directive 2009/65/EC (UCITS) and Spanish Collective Investment Vehicles (CIV), confirming therefore the right of a United States (US) fund to obtain the refund of the difference between the Spanish dividend withholding tax imposed and the reduced 1% rate applicable to Spanish CIV, as well as the corresponding default interests.

On March 2019, the Spanish Supreme Court already confirmed in two different resolutions the breach of the principle of free movement of capital regulated under Article 63 of the Treaty of the Functioning of the EU (TFEU) related to the fact that the Spanish Non-Resident Income Tax (NRIT) Law (prior to the 2010) did not provide a specific procedure for UCITS funds to apply the reduced rate applicable to Spanish CIV nor to claim the refund of the withholding tax on dividends paid in excess.

This resolution extends the same conclusion for non-EU funds that meet the conditions established for UCITS funds under the Directive 2009/65/EC, clearly stating that the non-EU funds should comply with these conditions and not with the specific ones applicable for Spanish CIV to apply the 1% reduced rate.

Moreover, the resolution establishes that, in this case, the tax information exchange clause included in the Spain-US Double Tax Treaty is sufficient for the Spanish tax authorities to check if the US fund complies with the aforementioned conditions, considering that the Spanish NRIT Law does not regulate the means of proof for the comparability of non-EU funds with UCITS funds and, in this case, the US fund had provided the documents considered relevant for these purposes.

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