This short memorandum deals with the exiting new possibilities arising from (1) the so-called ETVE regime in Spain combined with the fact that a TEIA between Spain and Curacao recently came into force.
Hereunder we will try and connect a Spanish company falling under the scope of
the ETVE regime with a Curacao Holding company and a Netherlands
Antilles tax exempt company.
Important is that, as a consequence of the TEIA between Spain and Curacao countries which has
come in to force recently, the Curacao are no longer blacklisted in Spain.
With the above in mind we will outline the combination of the ETVE status for a Spanish
Sociedad de responsabilidad limitada (S.L.) with the Curacao tax exempt BV
(BV stands for basically the same as Sociedad de responsabilidad limitada). In between
those we will avail ourselves of a “normal” Curacao NV which will act as a
holding company for both entities.
The idea that we would like to bring to the table is that e.g. a company falling under the
scope of the ETVE regime holds (a) qualifying participation(s) in non Spanish resident
subsidiaries. As we understand it the ETVE can in such a situation distribute the
dividends that are obtained from these subsidiaries, to her parent company without
having to withhold tax on these dividends. This parent company cannot be resident in a
tax haven. The Curacao have shed their tax haven status with the Spanish tax
authorities and it is therefore that the parent company could be a Curacao
The Curacao participation exemption however has undergone changes:
The 95% participation exemption for qualifying interests has been replaced by a
100% participation exemption, subject to certain conditions. In order for the
100% participation exemption to apply, the qualifying participation must be
either “subject to tax” or have “enterprise activity / non-portfolio investment”. If
neither condition is met, the participation exemption on dividends will be limited
Also a new, restricted, definition of dividends has been introduced.
The new participation exemption allows for consolidation of the ETVE results with the
results of its subsidiaries before applying for the 100% participation exemption. Also the
limitation to 65% participation exemption is not applicable on situations where dividends
are distributed from subsidiaries of which the assets consist for 95 percent or more of real
The next step is that the Curacao parent company establishes a tax exempt
BV. This BV is capitalized with the dividends which originate from the non-Spanish
subsidiaries. (For obvious reasons it is important that the Curacao parent
company does not lend the dividends received to the tax exempt subsidiary as there is no
fiscal gain from interest payments whereas the interest payments received would be
The tax exempt Curacao BV could then e.g. lend the capital to third parties
or to group companies. Because of the tax exempt status of the BV the interest paying
companies may not be able to deduct the interest paid from their respective taxable
income, as local anti-abuse legislation may be in place, but as the Curacao
tax exempt BV receives the interest taxfree this will make the transaction fiscally neutral.
A source tax may however be due on the outgoing interest payments.