Spain remains one of the most attractive European jurisdictions for renewable energy investment, thanks to its natural resources and the regulatory stability achieved in recent years. In this context, the development of photovoltaic projects has emerged as the preferred option for developers and international investors, both in greenfield developments and mergers and acquisitions (M&A) transactions.
The importance of a proper tax structure
A favourable regulatory framework alone is not enough. To maximise returns and mitigate tax risks, it is essential to structure the renewable energy investment properly from the beginning. Market practice has consolidated a model based on holding companies and special purpose vehicles (SPVs), which serve to isolate risks, facilitate structured financing, and optimise tax treatment throughout the life of the project.
These structures not only enhance operational efficiency but also enable advanced tax planning for a future disinvestment. Indeed, the divestment phase—usually through the transfer of SPV shares—triggers one of the most sensitive tax matters: the potential application of the domestic double taxation exemption outlined in Article 21 of the Corporate Income Tax Law (LIS).
Holding and SPV companies: operational and tax keys
The use of holding companies as vehicles for foreign investment is a widely accepted operational and tax practice internationally. These entities are typically domiciled in jurisdictions that have double tax treaties with Spain—such as Luxembourg, the Netherlands or Ireland—and allow centralised investment across multiple projects, simplifying both financing and management.
An intermediate Spanish holding company is often incorporated to group existing projects under a Spanish-resident entity and enable efficient divestment.
From a tax standpoint, holding companies can offer significant advantages. International tax treaties may reduce—or even eliminate—withholding taxes on dividends, interest, and capital gains, provided that effective residence and economic substance requirements are met. Additionally, many of these jurisdictions offer tax-neutral or participation exemption regimes that allow profit repatriation at a reduced tax cost.
However, to ensure the robustness of the structure from a tax perspective, formal existence is not enough. It is essential to demonstrate that the holding company has genuine economic activity, personnel and assets in its country of residence, and was established for legitimate business reasons. Otherwise, both the Spanish Tax Authorities and those in the holding company’s jurisdiction may challenge the application of tax benefits under anti-abuse clauses in tax treaties or domestic laws.
Capital gains exemption: the scope of Article 21.3 LIS
One of the most critical elements in the structuring of photovoltaic investment projects is the potential application of the exemption under Article 21 of the LIS. This provision allows capital gains obtained by a Spanish-resident entity (e.g. an intermediate holding) from the sale of interests in other entities (SPVs) to be exempt from Corporate Income Tax, provided that determined requirements are met (a minimum 5% ownership held for over one year and active business operations by the investee).
However, paragraph 3 introduces an important limitation: the exemption does not apply if more than 50% of the investee’s assets consist of securities or non-business-related assets. This clause has been subject to interpretation by the Spanish Directorate General for Taxation (DGT), particularly in the context of renewable energy, leading to administrative guidance that must be carefully considered in any divestment operation.
In recent years, the DGT has issued several binding rulings (e.g., V2265-21, V2200-23) analysing whether an SPV holding a solar plant can be regarded as carrying out economic activity. The general conclusion is that to qualify as such, the company must have a minimum operational structure—either in-house or outsourced—demonstrating active project management. This includes O&M contracts, responsibility over energy production and sales, risk management, and generally acting as a genuine business operator.
By contrast, if the SPV merely holds assets and outsources all services without effective oversight, the DGT considers that no economic activity exists, thereby disqualifying the exoneration. In such cases, the capital gain from the share transfer would be fully taxable.
Best practices to avoid tax risks
In our experience, the key to success lies not in the formal design of the structure but in the real economic substance of each participating entity. The holding must be capable of making real decisions and have its resources; the Spanish intermediate company should assume management and control functions; and the SPVs must operate as genuine project developers or operators, not merely passive asset holders.
It is also essential to document each strategic and operational decision, from the incorporation of the companies to contracts with third parties and intra-group transactions. This documentation will be key in any tax audit, both to prove business activity and to justify the application of exemptions under Spanish and international law.
Furthermore, intra-group services must be appropriately valued and supported by a documented transfer pricing policy.
Finally, it is advisable to address the tax aspects of the divestment from the start. The sale of an SPV may result in very different tax outcomes depending on compliance with Article 21 LIS requirements. Early-stage planning can make the difference between a tax-efficient transaction and a fully taxable one.
Conclusion: secure and efficient tax investment in renewables
In short, Spain offers a competitive legal and tax environment for international investment in renewable energy, particularly in the photovoltaic sector. However, structuring the tax aspects of these investments requires a professional and thorough approach, particularly in relation to the application of the capital gains exemption regime and the use of international holding companies.
At Mariscal Abogados, we support international investors throughout the entire investment cycle—from initial assessment and structuring to disinvestment planning—providing tax-efficient, legally sound solutions tailored to the operational reality of each project.
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