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A recent resolution from the Spanish Supreme Court opens the possibility to request a partial refund of taxes and withholdings borne in Spain by some EU hedge funds. Foreign pension funds, sovereign funds and mutual funds can also claim refunds considering previous judgments.
According to a recent judgment issued by the Supreme Court in April 2023, a foreign EU hedge fund could benefit from the reduced domestic 1% tax rate applicable to Spanish hedge funds on dividends paid by Spanish resident entities, provided that the foreign hedge fund is (i) an EU open-ended entity, (ii) validly authorized to operate in its country of incorporation and (iii) managed by an authorized alternative investment fund manager pursuant to the terms of Directive 2011/61/EU (AIFMD). This leaves room to claim any excess paid on the standard 19% tax rate applicable to non-resident taxpayers (or double tax treaty reduced rates).
This decision comes in addition to previous judgments from the Supreme Court dated March and December 2019, December 2020 and March 2021 concerning the Spanish taxation of pension funds (0%), sovereign funds (0%) and mutual funds (1%), respectively.
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