Special Regime for Holders of Foreign Securities (ETVE)

Companies may adhere to the ETVE (holding) regime when their corporate object includes the activity of management and administration of securities representing the equity of entities that are not resident in Spanish territory, by the relevant organisation of material and human resources.

To adhere to the ETVE regime, the company must notify the Ministry of Finance. The regime shall be applied to the tax period that ends after this communication and the successive ones that are concluded before the Ministry of Finance is notified of renunciation thereof.

The yields from companies obtained from dividends from their subsidiaries, as well as revenue obtained from conveying such securities, pursuant to the requisites foreseen in Article 21 of the Company Tax Act (CT) are tax exempt, as long as the following conditions are fulfilled:

• If the stake in the entity paying the dividend or that conveyed is less than 5%, direct or indirect, of its equity, or when the acquisition value of the stake exceeds 6 million euros.

• The profit distributed, or that shared must be from entrepreneurial activities.

• The subsidiary has been subject to a foreign tax of an identical or similar nature to Company Tax in the financial year when the profit distributed was obtained, or that related to the share thereof.

Participation in the ETVE tax regime is not allowed for.

• Companies that have the main activity of managing real estate or moveable assets, thus holding companies.

• Spanish or European Economic Interest Groups.

• Temporary consortia.

• Companies whose partner or shareholder is resident in a territory Spain considers a tax haven.

• Companies whose non resident subsidiary was previously a Spanish company and that performed relocation for financial reasons.

Special Patent Box Regime

This is an incentive for exploitation of certain intangible assets.

The object of the Patent Box is to encourage creation, protection and exploitation of intangible assets with a potential to be commercialised by the company that innovates, that is, any innovation applied by a company, from a design, a means of production or commercialisation and, of course, a product or service.

The tax incentive consists of integrating 40% of the revenue from assignment of the right to use or exploit the intangible assets in the taxable base, so the regime leaves 60% of the revenue exempt (income minus expenses) arising from the assignment. This amounts to an effective company taxation of 10% (if the taxation rate to apply is 25%).

In addition to its advantages from a tax point of view, this regime is valid because it allows performance of innovative activities by small and medium companies (SMEs) to be valued, to know the cost of the resources applied and the profitibility oftheir results, as in order to adhere to it, it requires the company to be very exhaustive in determining the associated expenses and revenue.

This incentive is undoubtedly the most powerful of those that exist under the Spanish tax regulations, as the innovating company is allowed to recover 100% of the overall expenses and investments of the whole set of years of application. It is compatible with other tax incentives for Research, Development and Innovation (R&D&i) activities.and applicable both to individual or independent companies, as well as to corporate groups.