In 2009 and 2010 Global Nory, S.L. distributed a dividend of 7,000,000 euros to its parent company resident in Luxembourg, without declaring withholding taxes, as it considered that the dividend was exempt. In 2013, Global Nory, S.L. was notified of the commencement of general inspection proceedings, referring, among other items, to the dividend payments, and in 2014 the final assessment was issued, resulting in additional withholding taxes of 700,000 euros and 138,753.43 euros to late payment interest. The assessment was based on the following facts: The only relevant asset of Global Noray SL is a 5% stake in the listed company Corporación Logística de Hidrocarburos. This shareholding was acquired for a sum of 176,500,000 euros. Global Noray, S.L.’s income consists mainly of dividends received on these shares. Global Noray, S.L., is wholly owned by PSP Eur SARL, which in turn is wholly owned by PSP Lux SARL. The latter company is wholly owned by PSP IB. PSP stands for “Public Sector Investment Pension”. PSP IB stands for “Public Sector Pension Investment Board”, which is a Canadian Crown Corporation whose purpose is to manage the public pension funds of various groups of civil servants, military and police officers in Canada. PSP Eur SARL has provided a certificate of residence in Luxembourg. The tax authorities considered that the withholding tax exemption was not applicable, since those entities lacked any real economic activity, and considering that there were no economic reasons, but rather fiscal reasons, in the incorporation of the various European companies dependent on the Canadian parent company, since the ultimate owner of the group is a Canadian fund, eliminated the exemption in the settlement agreement. In the Inspectorate’s view, PSP Eur SARL has as its object the direction and management of the filial company without the appropriate organisation of material and personal resources, nor has it proved that it was set up for valid economic reasons, and not in order to take undue advantage of the scheme provided for in point (h). Since the filial company has no economic activity of any kind, merely collecting a dividend from CLH, there is no adequate organisation of human and material resources to manage an investee which does not carry out an economic activity. Appeals were filed by Global Noray but they were all subsequently dismissed by courts. Finally, an appeal was filed with the Supreme Court. Judgement of the Supreme Court The Supreme Court also upheld the assessment of additional withholding taxes and dismissed the appeal of Global Noray. The Court concluded that the Spanish anti-abuse clause which applies to dividend distributions by a Spanish subsidiary to its European parent company controlled, directly or indirectly, by shareholders not resident in the EU or in the EEA must be construed in such a way that the burden of proof of abuse falls on the tax authorities. However, in the case at hand the tax authorities had lifted this burden of proof. Click here for English Translation Click here for other translation ...