The European Commission has released its March infringements package: key decisions on 12 March 2025.

The European Commission decided to refer Spain to the Court of Justice of the European Union for having failed to remedy an infringement in relation to the free movement of capital (Article 63 TFEU) due to a discriminatory tax treatment of non-resident taxpayers.

Within the area of taxation, the package highlights two specific issues concerning Spain:

• The non-deductibility of expenses in calculating withholding tax on cross-border royalty payments to non-residents (Spain sent a reasoned opinion);
• Non-residents cannot defer tax on capital gains when payment for asset transfers is delayed beyond a year or paid in instalments over more than a year (Spain referred to the Court of Justice).

In its regular package of infringement decisions, the European Commission pursues legal action against Member States for failing to comply with their obligations under EU law. These decisions, covering various sectors and EU policy areas, aim to ensure the proper application of EU law for the benefit of citizens and businesses.

6. Taxation

Reasoned opinion

The Commission calls on SPAIN to allow for a deduction of directly related expenses when calculating withholding tax on cross-border royalty payments.

Today, the European Commission decided to send a reasoned opinion to Spain (INFR(2021)4042) for failure to align its rules on withholding taxes charged on royalty payments received by non-resident taxpayers with the freedom to provide services (Article 56 TFEU). The Spanish tax legislation provides that, for non-resident taxpayers, the withholding tax on royalty payments is levied on the gross amount of the income without the possibility to deduct directly related expenses. While case law of the Court of Justice of the European Union (Case C-290/04) allows a Member State to charge a withholding tax on cross-border royalty payments even if it does not levy withholding taxes on purely domestic payments, it must allow the deduction of directly related expenses when determining the tax due. Therefore, the Commission has decided to issue a reasoned opinion to Spain, which now has two months to respond and take the necessary measures. Otherwise, the Commission may decide to refer the case to the Court of Justice of the European Union.

Referral to the Court of Justice

Commission decides to refer SPAIN to the Court of Justice of the European Union due to discriminatory tax treatment of non-resident taxpayers

Today, the European Commission decided to refer Spain (INFR(2021)4035) to the Court of Justice of the European Union for having failed to remedy an infringement related to the free movement of capital (Article 63 TFEU) due to a discriminatory tax treatment of non-resident taxpayers. When a payment for transfer of assets is deferred for longer than a year or is paid in instalments over a period longer than a year, resident taxpayers may pay the tax either when the capital gain accrues or proportionally deferred on a cash flow basis. However, non-resident taxpayers are not offered this possibility of deferral and must pay the tax when the capital gains accrue at the time of the transfer of the assets. On 2 December 2021, the Commission sent Spain a letter of formal notice followed by a reasoned opinion on 23 May 2024. In its formal replies, and in subsequent technical exchanges with national authorities, Spain has maintained that its tax legislation is in line with EU law.

The Commission considers that efforts by the authorities have, to date, been insufficient and is therefore referring Spain to the Court of Justice of the European Union. More information is in the press release.