Spain’s DGT has ruled that publicly owned commercial entities are not automatically excluded from Pillar Two, with eligibility for governmental entity status requiring a case-by-case assessment against four statutory conditions.
Spain’s General Directorate of Taxes (DGT) has ruled that publicly owned commercial entities are not automatically excluded from the scope of Pillar Two, and that qualification as an excluded governmental entity must be assessed on a case-by-case basis.
Ruling background
The binding ruling, numbered V5057-26 dated 23 June 2026 and published on 13 August 2026, examined a multinational group headed by a Spanish public business entity responsible for air navigation and airspace management. Although the group fell potentially within the scope of Spain’s Pillar Two legislation under Ley 7/2024 (LIC), the taxpayer contended that the ultimate parent qualified as an excluded entity.
Four cumulative conditions
Citing Article 5.16 of the LIC and paragraph 28 of the OECD Pillar Two Model Rules Commentary, the DGT said a governmental entity must cumulatively meet four statutory conditions to secure excluded-entity status under Article 7.1.a of the LIC:
- it must form part of, or be wholly owned by, a public administration;
- it must not carry out commercial or business activities, its main purpose being to perform a government function or manage public assets;
- it must render accounts of its overall performance to a public administration and provide annual information; and
- upon dissolution, its assets must revert entirely to a public administration, with any distributed profits benefiting only that administration.
The DGT observed that public commercial entities do not automatically satisfy these conditions. Although generally wholly state-owned, EPEs are often financed through revenues from commercial activities, so their status must be assessed according to the facts and circumstances of each period rather than assumed from public ownership alone.
Application to the entity
On ownership, the DGT found that EPEs are public-law entities created under Article 91 and Article 103 of Ley 40/2015 (LRJSP) and classified as state public organisms, with their capital integrated into the patrimony of the General State Administration under Ley 33/2003 (LPAAPP).
On the commercial-activity test, the DGT relied on an opinion from the Spanish State Attorney’s Office (Abogacía del Estado), dated 4 March 2026, which concluded that the entity’s air navigation and traffic management functions constituted the exercise of public administrative powers rather than commercial activity. The DGT noted that the entity’s revenues derived mainly from regulated public-law fees, with mercantile income representing under one per cent of net turnover.
On accountability, the entity was found subject to auditing by the General Comptroller (IGAE) and the Court of Auditors, along with oversight by the Ministry of Transport, Mobility, and Urban Agenda, and a requirement to file a Multi-Year Action Plan and annual accounts.
On dissolution, its assets, being public domain property, would automatically revert to the Spanish State under the LPAAPP, ruling out any private benefit.
Determination
Having found all four conditions satisfied, the DGT concluded that the entity qualified as an excluded public entity under Spain’s implementation of Pillar Two and was therefore exempt from the complementary tax.
