Spanish Central Economic-Administrative Court extends taxation as investment income to indirect shareholdings

Resolution RG 1348/2023 of 13 July 2026 issued by the Central Economic-Administrative Court (known by its Spanish acronym TEAC) clarifies doubts regarding a common issue in the taxation of holding and asset-holding companies: which personal income tax (PIT) regime applies when a shareholder, whether direct or indirect, derives an economic benefit from an entity without there being any clear consideration in return. The issue concerns both the free use of company assets and the payment of personal expenses on behalf of the company.

Indirect shareholding does not preclude the classification of the income

The first point addressed by the court is whether the lack of a direct shareholding prevents the income received from being taxed. The answer is no. When an individual controls a company through other intermediary entities, the financial benefits they receive from the latter may equally be classified as income derived from their position in the company, even if they are not formally listed as a shareholder.

The case in question concerned a taxpayer who did not hold direct ownership of the companies that had covered his and his family’s personal expenses, but who did exercise control over them through a chain of shareholdings. The TEAC ruled out the possibility that, in this context, the income should be treated as an unwarranted capital gain: there is an identifiable economic relationship between the taxpayer and the entities that explains the transfer of assets, and that relationship stems precisely from their status as the ultimate shareholder in the structure. The practical consequence is that such income is taxed as income from movable capital, regardless of whether the shareholding is held indirectly.

A corporate link does not, in itself, amount to a related-party transaction

The second key point of the ruling has a more general scope and applies to any shareholder, whether direct or indirect. The TEAC warns that the existence of a tax link between an individual and a company does not, in itself, permit the automatic application of the valuation rules for related-party transactions.

For Article 41 of the PIT Act, which refers to the corporate tax rules on arm’s-length valuation, to apply, there must be a genuine and specific transaction between the parties, not merely a subjective link arising from the ownership of shares. The court thus distinguishes between two distinct levels:

• the subjective link, which is limited to establishing that a corporate relationship exists between the parties; and
• the operational link, which requires the identification of a specific service, transfer or transaction capable of being valued in monetary terms.

Only when this second element is present does it make sense to apply the rules on related-party transactions. Otherwise, the income must be analysed in accordance with other personal income tax rules, such as those relating to remuneration in kind.

Criterion for demarcation: the allocation of the asset to the company’s business activity

To draw this line, the TEAC revisits the criterion it had established in Resolution RG 7312/2024 of 24 September 2025, in a ruling unifying doctrine on the free use of company assets by shareholders. The key lies in whether the asset forms part of the entity’s usual course of business:

• If the company utilises such assets as part of its ordinary business (for example, boats in a boat hire business), the transfer free of charge to the shareholder is treated as a transaction forming part of that business and must be valued in accordance with the rules on related-party transactions.
• If, on the other hand, the asset has no connection with the company’s business and is held solely for the shareholder’s private use, there is no genuine transaction between the parties to be valued under that regime.

In the case under consideration, the company was a holding company, limited to holding shares and financial investments. The vehicles and the boat in its assets bore no relation to that activity. The TEAC therefore concludes that this cannot be regarded as a related-party transaction, and that the shareholder’s use of these assets constitutes income in kind derived from his status as a shareholder, subject to the general rules on valuation at market price, in accordance with Articles 25.1.d) and 43 of the PIT Act..

The same reasoning applies to the payment by the company of the shareholder personal expenses: if there is no provision of services or other identifiable transaction underlying such payment, the benefit obtained is treated as income derived from the shareholder status and not as a related-party transaction requiring valuation.

Practical implications of the doctrine

This doctrine is of particular importance in the case of holding companies and asset-holding companies, as it requires an individual assessment of each entity’s activities, the extent to which the assets are tied up, and the economic rationale justifying their use by the shareholders.

The ruling sets out criteria of immediate application for groups with holding company structures or asset-holding companies:

• An indirect shareholding does not preclude the income received from being classified as investment income linked to shareholder status;
• Being a shareholder, in itself, does not automatically convert any benefit received into a related-party transaction;
• Before applying the arm’s length valuation regime under Article 41 of the PIT Act, a genuine and specific transaction between the shareholder and the company must be identified;
• Where the asset enjoyed is related to the entity’s economic activity, the rules on related-party transactions must be applied;
• Where the asset is unrelated to that activity and serves solely the shareholder’s private interest, the income is valued in accordance with the rules governing remuneration in kind.

It is therefore advisable for holding companies and asset-holding companies to review, on a case-by-case basis, the actual use of their assets and the economic rationale for their transfer to shareholders, regardless of whether the shareholders’ interest is direct or held through other entities.