Decision Summary
Overall outcome based on all metrics
✓ Spain (for holding structures) wins
Spain wins for holding company structures through the ETVE regime (100% exemption versus France's 95%), lower standard WHT (19% versus 30%), the CDT Patent Box (10% on IP income) and the 23% SME rate. France wins for R&D-intensive businesses via the CIR payable credit (30% refundable R&D credit) and the 2024 abolition of CVAE. Both countries have identical 25% standard rates. Spain's ETVE is one of the EU's most competitive holding company regimes.
Holding company (foreign dividends)
🇪🇸 Spain ETVE
ETVE 100% exemption on qualifying foreign dividends versus France 95% (1,25% residual cost)
R&D-intensive business
🇫🇷 France
CIR 30% payable credit on R&D up to €100m. Spain 25% deduction less generous and not payable
IP income
🇪🇸 Spain
CDT Patent Box 10% on qualifying IP income. France has no equivalent simple IP box
SME (below €1m revenue)
🇪🇸 Spain
Spain 23% SME rate broadly applicable. France 15% only on first €42.500 profit at lower thresholds
Group simplification (CVAE)
🇫🇷 France
France abolished CVAE 2024. removed significant local business levy. Spain IAE minimal but still exists
25%
France corporate tax (IS)
Standard rate since 2022. Reduced from 33,33%. SME reduced rate 15% on first €42.500
25%
Spain corporate tax (IS)
Standard rate. Reduced rate 23% for SMEs below €1.000.000 revenue from 2023
95%
France participation exemption
95% of qualifying dividends and capital gains on shares held 2+ years exempt. 5% deemed non-deductible
Exempt
Spain ETVE regime
Entidad de Tenencia de Valores Extranjeros: full exemption on qualifying foreign dividends and gains
30%
France CIR R&D credit
Crédit Impôt Recherche: 30% of qualifying R&D expenditure up to €100.000.000. Powerful for tech companies
⚖️ Side-by-Side Comparison
Metric
🇫🇷 France
🇪🇸 Spain
Winner
Standard Corporate Tax Rate
On operating profits 2026
25% (standard). 15% SME rate on first €42.500 profit
25% (standard). 23% SME rate for revenue below €1.000.000 from 2023
🇪🇸 Spain
Spain's 23% SME rate more broadly applicable (revenue-based vs profit-based). Identical 25% at large company level
Participation Exemption (Dividends)
95% exempt. 5% deemed non-deductible cost (at 25% tax rate = 1,25% effective on dividends)
95% exempt (EU subsidiaries) or 100% exempt via ETVE for qualifying foreign dividends. 5% non-deductible for standard
🇪🇸 Spain
Spain ETVE can achieve 100% exemption on qualifying foreign dividends. France 5% deemed cost always applies
Capital Gains on Share Disposals
95% exempt on qualifying shareholdings held 2+ years (same 5% deemed cost applies)
95% exempt (standard) or 100% via ETVE for qualifying participations
🇪🇸 Spain
Spain ETVE 100% exemption superior to France's 95% (1,25% residual cost). For large exits: meaningful difference
R&D Tax Credit
CIR (Crédit Impôt Recherche): 30% on R&D up to €100m; 5% above. Payable tax credit. even generates refund
R&D deduction: 25% on qualifying R&D. Patent box: 10% rate on qualifying IP income (CDT Box)
🇫🇷 France
French CIR at 30% (payable credit, not deduction) more generous than Spanish 25% deduction. Payable nature is key advantage
Withholding Tax on Dividends (outbound)
30% standard (reduced by treaty / EU PSD). 0% within EU under PSD directive
19% standard (reduced by treaty / PSD). 0% within EU under PSD directive
🇪🇸 Spain
Spain standard WHT lower (19% versus France 30%) before treaties. Both achieve 0% within EU
CVAE / Local Business Tax
CVAE (Cotisation sur la Valeur Ajoutée) abolished from 2024. Significant simplification
IAE (Impuesto sobre Actividades Económicas): generally exempt for companies below €1m turnover. Limited impact
🇫🇷 France
France abolished CVAE in 2024. removed a significant additional local business levy. Spain IAE minimal impact
IP / Patent Box
No formal patent box. CIR covers R&D expenditure. Innovation box via CII at 20%
CDT Patent Box: 10% effective rate on qualifying patent and IP income. Well-established
🇪🇸 Spain
Spain's CDT Patent Box at 10% on IP income has no direct French equivalent of the same simplicity
ⓘ France IS: standard 25% from 2022. SME reduced rate 15% on first €42.500 profit (revenue below €10m, capital held by individuals). CVAE abolished 2024. CIR: 30% credit on R&D up to €100m. Participation exemption: 95% for holding 2+ years and 5% minimum holding. Spain IS: standard 25%. SME 23% for revenue below €1.000.000 (from 2023). ETVE (Entidad de Tenencia de Valores Extranjeros): full 100% exemption on qualifying foreign dividends and gains for qualifying holding structures. CDT (Comunidad de Madrid patent box) 10% rate on qualifying IP. Standard 5% non-deductible on 95% participation exemption = effectively 1,25% residual tax. All EU formatting.
🧠 Analysis
Spain's ETVE Is One of the EU's Most Competitive Holding Regimes. Full Exemption on Qualifying Foreign Income
Key Evidence
- ETVE (Entidad de Tenencia de Valores Extranjeros): Spanish holding company regime for foreign investment
- Full 100% exemption on qualifying dividends from foreign subsidiaries (meeting 5% shareholding and 1-year hold)
- Full 100% exemption on capital gains from qualifying foreign subsidiary disposals
- No Spanish withholding tax on ETVE distributions to non-resident shareholders in most cases
What This Means
Spain's ETVE provides a cleaner holding structure than France's participation exemption because it achieves true 100% exemption versus France's 95% (with 5% deemed non-deductible). For a holding company receiving €10m in qualifying foreign dividends: Spain ETVE = 0 corporate tax; France participation exemption = €125.000 tax (1,25% on €10m). For large holding structures managing significant international subsidiary income, Spain's ETVE is among the most efficient structures in the EU alongside Netherlands BV and Ireland.
Source: Agencia Tributaria Spain — ETVE regime Ley 27/2014 IS Art. 107-114. KPMG Spain holding company guide 2026
France Abolished CVAE in 2024. A Major Corporate Tax Simplification Not Yet Matched by Spain
Key Evidence
- CVAE (Cotisation sur la Valeur Ajoutée des Entreprises) was a local production tax of approximately 0,375% of value added
- France abolished CVAE from January 2024. removing a tax that cost companies approximately €8-9bn annually
- CVAE added approximately 0,3-0,5% effective corporate tax burden on large French companies
- Spain's IAE (local business tax) has much lower impact. most companies below €1m turnover exempt
What This Means
France's abolition of CVAE in 2024 was a significant simplification that improved France's corporate tax competitiveness. CVAE was a unique French tax on value added (not profit) that many multinationals found particularly burdensome as it created cost even in loss-making years. Its removal brings France's effective corporate tax burden closer to Spain's. Combined with the CIR R&D credit, France has materially improved its corporate tax environment since 2022. the old narrative of France as an uncompetitive corporate tax jurisdiction is increasingly outdated.
Source: French Ministry of Economy (DGFiP) — CVAE abolition 2024. KPMG France corporate tax reform analysis 2024
✓ Understanding Check
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🎯 Make Your Decision
France or Spain. which is better for your corporate structure?
Based on income type, R&D activity and holding company needs
International holding company
🇪🇸Spain ETVE
100% exemption on qualifying foreign dividends and gains versus France 95%. Cleaner, cheaper structure
R&D-intensive tech or pharma
🇫🇷France
CIR 30% payable credit. Refundable even for loss-making companies. Spain 25% deduction not payable
IP-intensive business
🇪🇸Spain
CDT Patent Box 10% on qualifying IP income. France has no equivalent simple IP box regime
SME below €1m revenue
🇪🇸Spain
Spain 23% SME rate applicable. France 15% only on first €42.500. Spain more accessible
Manufacturing or production company
🇫🇷France
CVAE abolished 2024. France removed significant production levy. CIR also benefits manufacturing R&D
⚖️ Related Comparisons
📊 Related Intelligence
🔬 Methodology
Comparison Methodology
France IS 25% standard. CIR 30% on R&D up to €100m. CVAE abolished January 2024. Participation exemption 95%. Spain IS 25% standard. SME 23% below €1m revenue. ETVE 100% exemption qualifying participations. CDT Patent Box 10%. Standard outbound WHT: France 30%, Spain 19%.
Formula
FR_holding_tax = dividend x 0.05 x 0.25 = 0.0125 x dividend | ES_ETVE_tax = 0 | FR_CIR = R&D_spend x 0.30 (refundable) | ES_RD = R&D_spend x 0.25 (deduction only)
❓ Frequently Asked Questions
Spain is better for a pure holding company structure through the ETVE regime, which achieves 100% exemption on qualifying foreign dividends and capital gains. superior to France's 95% participation exemption (1,25% residual cost). Spain also has lower standard withholding tax (19% versus France 30%) and the CDT Patent Box for IP income. France is better for R&D-intensive operating companies due to the 30% payable CIR credit. Netherlands and Ireland remain competitive alternatives to both for certain holding structures.
The CVAE (Cotisation sur la Valeur Ajoutée des Entreprises) was a local production tax charged on company value added, not profit. It was abolished from January 2024 as part of France's corporate competitiveness reforms. CVAE cost French companies approximately €8-9bn annually and was particularly resented because it applied even to unprofitable companies. Its abolition significantly improved France's effective corporate tax burden, particularly for manufacturing, logistics and service companies with large value-added bases relative to profit.
The ETVE regime is available to Spanish holding companies that hold qualifying foreign participations. For a UK group: a Spanish ETVE holding company that owns subsidiaries in third countries would benefit from 100% exemption on dividends and gains from those third-country subsidiaries flowing through Spain. The ETVE can then distribute these profits to the UK parent generally with limited or no Spanish withholding tax (subject to the Spain-UK double tax treaty position post-Brexit). Legal and tax structuring advice from a Spanish tax lawyer is essential. ETVE conditions are specific and must be met continuously.
✓ Key Takeaways
Key Takeaways
✓
Both France and Spain have identical 25% standard corporate tax rate
✓
Spain ETVE: 100% exemption on qualifying foreign dividends and gains. France: 95%. 1,25% residual cost
✓
France CIR: 30% payable R&D tax credit. Refundable for loss-making companies. Spain 25% deduction. not payable
✓
Spain CDT Patent Box: 10% on qualifying IP income. France has no equivalent simple IP box
✓
France abolished CVAE in January 2024. major simplification removing approximately €8-9bn annual corporate burden
✓
Spain 23% SME rate for revenue below €1m. France 15% only on first €42.500 profit. Spain more broadly applicable
✓
France standard outbound WHT 30%. Spain 19%. Both achieve 0% within EU under Participation and Interest Directive
✓
For holding structures: Spain wins. For R&D: France wins. For IP income: Spain wins
Sources & References
›
Direction générale des finances publiques (DGFiP) — IS rates, CIR and CVAE abolition 2024
Retrieved 2026-01-01
Comparison for informational purposes only. Results depend on individual circumstances. Last updated Jan 2026.
Disclaimer
Corporate tax planning requires specialist advice. BEPS Pillar Two affects large groups. Not tax advice.
Corporate tax planning requires specialist advice. BEPS Pillar Two affects large groups. Not tax advice.