The Spanish Supreme Court, in its judgment of 12 January 2026 (cassation appeal 6111/2023, known as the VELCRO case), confirms that the concept of beneficial owner operates cross-cuttingly over the regime of intragroup royalty withholdings. Where the receiving company does not act as beneficial owner —because it is bound, contractually or in fact, to transfer the income to a third party— neither the exemption of article 14.1.m) of the Consolidated Text of the Non-Resident Income Tax Act (TRLIRNR), which transposes Directive 2003/49/EC —on a common system of taxation applicable to interest and royalty payments between associated companies of different Member States—, nor the reduced rate of the bilateral tax treaty, which in the case under review was the one between Spain and the Netherlands, applies. The applicable withholding is the general one of the TRLIRNR. The doctrine takes up the criterion that the Court of Justice of the European Union laid down in the Danish cases T Danmark and joined cases, where in 2019 it consolidated the beneficial owner as a specific manifestation of the general principle prohibiting the abuse of EU law.
The practical consequence for international groups with intermediate companies in Spain is direct: it is advisable to review case by case the economic justification of each structure, attending to the real substance of the receiving company —employees, operating offices, business decisions taken at its level—. For defensive purposes, it is advisable to preserve the contemporaneous documentation —intangible-licensing agreements, board minutes evidencing autonomous business decisions, budgets and annual accounts reflecting its own operations— that enables evidencing that the formal recipient does, in effect, have the powers of management and disposal over the royalties received. Mere formal interposition in a privileged jurisdiction is not sufficient.
Full analysis in → The Spanish Supreme Court confirms in the VELCRO case the cross-cutting reach of the beneficial-owner concept in international taxation