Spain recognizes French FPCI accreditation of tax residence through the special regime for EU funds

In October 2019, Spain introduced a special regime to facilitate pension and collective investment funds of the European Union (EU) the evidence of their tax residence status for the purposes of the application of the domestic withholding tax exemption on interest payments and capital gains realized by residents of the EU or EEA. In accordance with the special regime, the tax residence status may be proven through a certificate issued by the regulatory or supervisory authority of the fund in its country of incorporation or through an statement made by the representative of the fund according to the form approved by the Spanish Ministry of Finance. Prior to the introduction of this special regime, the application of the Spanish withholding tax exemption was often hampered by the difficulty of proving their tax residence status.

In accordance with paragraph 1.c) of the third additional provision of the Spanish Non-Resident Income Tax regulations, the special regime applies, among others, to EU alternative investments funds (AIFs) that are subject to an authorization, registration or administrative supervision regime and that are managed by an Alternative Investment Fund Manager (AIFM) regulated by the Alternative Investment Fund Managers Directive.

There are some EU AIFs that are not subject to administrative authorization, registration obligations or direct supervision and therefore that do not literally comply with the requirements to benefit from the application of the special régime. This is particularly the case of the French FPCI (Fonds Professionnel de Capital Investissement).

However, on the basis that the French FPCI is obliged to communicate its incorporation (and other corporate transactions) to the French authorities responsible for the authorization, registration and supervision functions referred to in the third additional provision of the Spanish Non-Resident Income Tax regulations, the Spanish General Directorate of Taxes (Dirección General de Tributos), has confirmed - in a recent tax ruling which has not been published yet - that a French FPCI may be considered as being subject to an administrative registration regime even if it is not registered in a public register and therefore it may benefit from the application of the special tax regime to evidence its tax residence status.

This tax ruling should be welcomed by French FPCIs as there has been uncertainty on the application by them of the special regime to evidence their tax residence and the tax exemption on interest payments and capital gains.

For more information, please contact the author or your usual DLA Piper advisors.