The Spanish regulations on Non-Resident Income Tax contravene the principle of the free movement of capital by providing for unjustified, differential tax treatments for nonharmonised, non-resident hedge funds or investment funds and resident Collective Investment Institutions
In its judgment of 5 April 2023, the Spanish Supreme Court (SC) held that the Spanish regulation on the taxation of non-resident hedge funds contravenes the principle of the free movement of capital established in Article 63 of the Treaty of the Functioning of the European Union (TFEU) as it establishes unjustified differential tax treatments for resident free investment funds (hedge funds) and non-resident hedge funds in comparable situations. While the Spanish regulation provides for a tax rate of 1% for resident hedge funds, non-resident hedge funds are taxed at 19% on income received in the form of dividends from Spanish companies.
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