Article 21 CIT: dividend and capital-gains exemption [2026]

Short answer: Article 21 of Spain's Corporate Income Tax Law can exempt dividends and positive gains on share disposals when its requirements are met. In 2026 the general minimum holding is 5%, subject to a one-year holding period. The exemption is normally 95% because the law reduces the qualifying amount by 5% for deemed management expenses, save for a narrow and temporary exception for certain dividends.

What Article 21 regulates

Article 21 of Law 27/2014 seeks to prevent the same business income from bearing successive corporate tax when it is distributed as a dividend or realised through a share disposal. Using a holding company does not make the exemption automatic.

Income	Main rule	When it is tested
Dividends	Direct or indirect holding of at least 5%	One year before the dividend becomes payable, or continued ownership afterwards to complete the year
Share disposal	Section 1 requirements plus the specific limits in section 5	The 5% threshold on the disposal date and ownership throughout the preceding year

Main requirements in 2026

Minimum 5% holding

The recipient company must directly or indirectly own at least 5% of the capital or equity of the subsidiary. Since 2021, paying more than €20 million for a stake below 5% has not been an alternative general test.

One-year holding period

For dividends, the stake must have been held continuously for the year before the dividend becomes payable. If the year has not yet elapsed, the company may continue to hold it until the period is completed. For a disposal, the time requirement must have been met during the preceding year.

Non-Spanish subsidiaries

Additional conditions apply to foreign subsidiaries, including exposure to a tax that is identical or analogous to Spanish corporate income tax and, as a general rule, a nominal rate of at least 10%. A double-tax treaty containing an information-exchange clause can be relevant. Rules on non-cooperative jurisdictions must also be checked.

The former €20 million threshold no longer applies in 2026

Law 11/2020 removed the alternative acquisition-cost threshold of more than €20 million. Transitional provision 40 preserved it, subject to conditions, for qualifying stakes acquired before 1 January 2021 and for tax periods starting in 2021, 2022, 2023, 2024 and 2025. That transitional timetable does not cover tax periods starting in 2026.

Why the exemption is usually described as 95%

Section 10 reduces qualifying dividends and gains by 5% for deemed management expenses. In a simplified example, if a company receives a qualifying dividend of 100, 95 is exempt and 5 enters the tax base. At a 25% tax rate, the theoretical cost is 1.25 before other adjustments, losses, credits or special rules.

Can it reach 100%?

Section 11 contains an exception to the 5% reduction, but being a small company is not enough. The combined conditions cover the recipient's turnover, non-asset-holding status, absence of a pre-existing group or material stake, a subsidiary incorporated after 1 January 2021, direct 100% ownership from incorporation and a limit to the next three tax periods. This exception concerns dividends and is not a general rule for disposal gains.

Disposals and asset-holding companies

Positive gains on disposals are subject to additional limits. Where the subsidiary is an asset-holding company under Article 5.2, section 5 limits the exemption for the part of the gain that does not correspond to undistributed profits generated during the holding period. A case-specific allocation is required; a blanket statement that all income is either exempt or excluded would be inaccurate.

A holding company is not an automatic safe harbour

A holding structure still has to satisfy the percentage, timing, foreign-tax and chain-of-ownership tests and every applicable exclusion. If a reorganisation preceded the sale or dividend, the Spanish tax-neutral reorganisation regime and the sequence of transactions also require separate analysis.

Practical checklist

1. Confirm the direct and indirect percentage on the relevant date.
2. Document acquisition dates and the continuous holding period.
3. Identify the profits underlying the dividend or disposal gain.
4. Review the taxation of foreign subsidiaries.
5. Check asset-holding status, lower-tier subsidiaries and statutory limits.
6. Calculate the 5% reduction and any exception separately.

Source and notice

Reviewed on 22 August 2026 against the consolidated text of Law 27/2014 published by Spain's Official State Gazette. This is general information and not a substitute for advice on the particular structure, jurisdictions, dates and income.