An analysis by Garrigues, Taxand Spain
The Court of Justice of the European Union (CJEU) has recently ruled that tax regulations on dividends in the Biscay province of Spain unfairly discriminates against foreign shareholders, violating EU law.
While Spanish residents can claim a full refund on withheld tax, non-residents face restrictions, as the withholding tax often becomes a final burden unless offset through a double taxation treaty (DTT). The CJEU found this practice restricts the free movement of capital, as outlined in Article 63 of the Treaty on the Functioning of the European Union (TFEU).
Patxi Arrasate from our Spanish member firm Garrigues has analysed this ruling and its broader implications here. Although the case concerns Biscay, it could impact Spain as a whole and other EU countries with similar tax policies. The ruling may prompt legislative changes to ensure non-resident shareholders receive equal tax treatment.