The facts
Nutreco España S.A. is the Spanish holding subsidiary of the Nutreco group, a Dutch-headquartered animal nutrition multinational. In 2007, the Nutreco group acquired the animal nutrition businesses of Maple Leaf Inc. in Canada and the United States. Rather than making the acquisition directly, the group channelled the transaction through Nutreco España.
The structure was: (1) Nutreco Nederland BV (the Dutch parent) borrowed EUR 240m from a bank syndicate and on-lent it to Nutreco España; (2) Nutreco España used the funds to capitalise a newly formed Dutch holding company, Nutreco North America BV; (3) Nutreco North America BV on-lent those funds to newly formed entities in Canada and the USA, which made the actual acquisitions. Nutreco España deducted the interest on its EUR 240m loan from its Spanish taxable income in 2011–2013.
The Spanish tax authority challenged the interest deduction under Art. 15 LGT (conflicto en la aplicación de la norma, the general anti-avoidance rule). Its position: the entire structure was artificial. Nutreco España was not a party to the acquisition, was not involved in managing the acquired businesses, and its only function was to borrow money in Spain and pass it through to the Netherlands. The sole economic effect of its participation was to generate a Spanish interest deduction that would not have arisen had the acquisition been financed directly at the Dutch level. A further dimension was that Nutreco North America BV treated the loans to its Canadian and US subsidiaries as hybrid instruments under Dutch law, exempting the interest income from Dutch tax — producing a double deduction of the same financing costs.
The litigation
First and second instance — authority upheld
The TEAC and the Audiencia Nacional both upheld the authority’s position. The Audiencia Nacional found that the structure was artificial: the Spanish entity assumed a debt for an acquisition in which it had no commercial role, generated no economic benefit for the group beyond the tax deduction, and was used as a pure conduit. The interest deduction was disallowed under Art. 15 LGT.
Tribunal Supremo — key EU law principle established
The Tribunal Supremo upheld the Audiencia Nacional on the facts but reformulated the question and established a clear EU law principle:
- A cross-border element alone is never sufficient to declare a transaction artificial. The presence of non-Spanish entities in a structure does not make it suspicious or justify applying Art. 15 LGT. The authority must show artificiality by reference to substance, not geography. If the same transaction could have been carried out domestically and would not have been challenged, its cross-border execution cannot be the basis for disallowance.
- The authority must analyse taxation in other jurisdictions. When assessing whether a cross-border structure is artificial, the authority should consider whether the same economic result could have been achieved domestically and how it would have been taxed. The double deduction in Spain and Canada/USA — and the Dutch interest exemption on the hybrid instrument — were factors the court considered in confirming the artificial character of this specific structure.
- On the facts, this structure was genuinely artificial. The court upheld the disallowance — not because of the cross-border nature of the loan, but because Nutreco España assumed a debt for an acquisition in which it had no economic involvement and would not manage. It was a pure conduit with no commercial function; the sole effect was tax.
The court also confirmed that the Audiencia Nacional was not required to make a preliminary reference to the CJEU, since cassation was available and the EU law position was sufficiently clear from existing CJEU jurisprudence.
ajiho commentary
The EU law principle and its implications for Spanish TP practice
The most significant element of this ruling for FTTP practitioners is not the outcome on the specific Nutreco facts — a pure conduit structure with a documented double deduction is unlikely to survive scrutiny in any EU jurisdiction — but the explicit principle the Tribunal Supremo has now established: cross-border transactions cannot be subjected to anti-avoidance scrutiny simply because they are cross-border.
This principle, drawn from CJEU jurisprudence on the freedoms of establishment and capital movement, requires Spanish tax authorities applying Art. 15 LGT to intercompany financing structures to ask: would the same transaction have been challenged if it had been structured entirely within Spain? If not, what makes the cross-border version different other than its geography? If the answer is ‘nothing other than tax’, that supports a finding of artificiality. But if there are commercial reasons for the cross-border structure that are independent of tax, those reasons must be genuinely considered before Art. 15 is applied.
Implications for groups with Spanish entities in financing chains
Groups that route financing through Spanish entities — whether as borrowers on-lending to subsidiaries, as cash pooling participants, or as intermediate holding companies serviced by intercompany debt — need to ensure the Spanish entity’s role in the financing chain has genuine commercial substance beyond tax efficiency. The question the Tribunal Supremo is asking is: what does the Spanish entity actually do in this chain that could not be done without it? If the answer is ‘nothing, other than generate a Spanish interest deduction’, Art. 15 is available to the authority. Conversely, where the Spanish entity has genuine treasury, management, or operational functions justifying its role, the cross-border element should not trigger disallowance.
What this means for your business
The Nutreco ruling cuts both ways. It gives groups a basis for challenging any Spanish assessment that treats the cross-border nature of a transaction as inherently suspicious without engaging with its commercial substance. But it also confirms that a Spanish entity inserted into a financing chain purely to generate an interest deduction — with no operational role in the underlying acquisition or business — will not survive Art. 15 scrutiny, particularly where the structure produces a double deduction or exploits a hybrid mismatch. Groups with Spanish financing entities should be able to articulate, and document, what the Spanish entity genuinely does in the chain beyond creating a deduction.
Case reference
Nutreco España S.A. v Administración General del Estado · Tribunal Supremo, Sala de lo Contencioso-Administrativo, Sección Segunda · Sentencia 213/2025 · STS 904/2025 · ECLI:ES:TS:2025:904 · Rec. casación 1034/2023 · 27 February 2025
Judgment in Spanish. Tribunal Supremo is the final level; no further domestic appeal. Prior instances: TEAC (February 2019), Audiencia Nacional Sección Segunda (June 2022). Access via CENDOJ (Centro de Documentación Judicial) at www.poderjudicial.es.