Spain introduced the ETVE in the mid-1990s to encourage foreign investment, and better compete with Luxembourg and Holland for international companies seeking tax-efficient European holding structures.
It also allowed for foreign companies to take advantage of Spain’s strong network of bilateral tax treaties with countries in Latin America, such as Argentina, Brazil and Mexico, which can offer more favourable tax rates than other countries.
Once the ETVE has been established all overseas dividends that are paid into it are exempt from tax in Spain, and can be easily moved on to a final destination, providing a small number of conditions have been met.
Most importantly, corporation tax must have been paid in the country of origin on the dividends being transferred, and companies using ETVEs to house shareholdings in foreign subsidiaries must not be resident in any country identified by Spain as a tax haven.