In October 2019, Spain introduced a special regime to make it easier for European Union (EU) pension and collective investment funds to prove their tax residency status for the purposes of applying the tax exemption. national withholding tax on interest payments and capital gains realized by EU or EEA residents. In accordance with the special regime, the status of tax residence can be proven by a certificate issued by the regulatory or supervisory authority of the fund in its country of registration or by a declaration 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 residency status.
In accordance with paragraph 1.c) of the third additional provision of the Spanish regulations relating to the income tax of non-residents, the special regime applies, inter alia, to alternative investment funds (AIF) of the subject to administrative authorisation, registration or supervision and which are managed by an Alternative Investment Fund Manager (AIFM) regulated by the Alternative Investment Fund Managers Directive.
Some EU AIFs are not subject to administrative authorisation, registration requirements or direct supervision and therefore do not literally qualify for the application of the special regime. This is particularly the case of the French FPCI (Professional Private Equity Fund).
However, given that the French FPCI is required to communicate its incorporation (and other corporate transactions) to the French authorities responsible for the authorisation, registration and supervision functions referred to in the third additional provision of the Spanish regulations relating to the non-resident income tax, the Spanish Directorate General of Taxes (General Directorate of Tributos), confirmed – in a recent tax ruling which has not yet been published – that a French FPCI can be considered to be subject to an administrative registration regime even if it is not registered in a register public and that he can therefore benefit from the application of the special tax regime to justify his tax resident status.
This tax ruling should be welcomed by French FPCIs as there has been uncertainty over their application of the special regime of proof of tax residency and the tax exemption on interest and capital gains.