Investing company cash in Spain: where an SL can invest and how to avoid patrimonial status

A Spanish SL can invest surplus cash in deposits, Treasury bills, government bonds, money market funds, ETFs, shares or property, taxed as company profit at 19–25%.

The main risk is patrimonial status: if more than half of the assets are not used in the business, the rate becomes 25% and the owner loses the wealth tax exemption.

This article is for the owner of a profitable Spanish SL or holding company with anywhere from €300,000 to several million euros sitting on the account beyond what the business needs.

Below: how much of that cash is really surplus, where a company can invest it and what it needs to open an investment account, how a corporate portfolio is taxed, when surplus cash turns an SL into a patrimonial company and what to do about it.

At the end there is an illustrative example with €1.5 million: leave it on deposit, buy government paper or pay it out as a dividend.

How much of the company’s cash is really surplus

Surplus cash is not the whole balance on the account. It is what is left after three reserves:

• Operating reserve. Payroll, rent, suppliers and taxes for 3–6 months ahead, or for the whole quiet season in a seasonal business. How to size it from the payment schedule is covered in Cash gap.
• Tax reserve. The year’s corporate income tax, its instalments (modelo 202), VAT and the quarter’s withholdings. That money is no longer yours, even while it sits on the account.
• Project reserve. Equipment, new premises, the purchase of another company — provided the decision has been made and there is a budget and a timeline.

The rest is surplus that does not work for the business.

To see it every month rather than only at year-end close, you need a simple cash-flow report and a 12-month forecast; see Management reporting.

Splitting cash into “working” and “surplus” affects not just the return but the company’s tax status, as explained below.

Where a company can invest surplus cash

A company can hold almost the same instruments as an individual. What differs is the tax treatment and the paperwork, not the choice itself.

Deposits are simple, but a large balance has a protection ceiling: the Spanish Deposit Guarantee Fund (FGD) repays up to €100,000 per depositor per bank, and this applies to companies just as to individuals.

A €1.5 million balance in one bank is almost entirely unprotected, so large amounts are spread across banks or held in government paper.

Letras del Tesoro are short-term Spanish Treasury bills. A company buys them through its bank or broker, at a Treasury auction or on the secondary market.

At the auction of 6 October 2026, 12-month bills yielded 2.999% a year on average.

For a company, bills have two advantages over a deposit: the risk is the Spanish state rather than a bank, and no tax is withheld on their income (art. 61.a RIS), nor on other book-entry securities traded on an official market (art. 61.q RIS).

The tax is still paid in the annual return, but no cash is tied up in withholdings.

Money market funds invest in bills, deposits and short-term debt and let you withdraw within one to three days, which makes them a convenient home for a project reserve.

Bond funds, equity funds and ETFs are for money the business will not need for several years.

Property held through the company is a separate decision.

Letting counts as a business activity only if at least one person is employed full-time under an employment contract to run it (art. 5.1 LIS).

Without an employee, a flat or office bought “with spare cash” is a passive asset and moves the company closer to patrimonial status.

A corporate investment account: what you need

The account with a broker or a bank’s investment desk is opened in the company’s name, not the owner’s.

Whether the broker is Spanish or based elsewhere in the EU, the paperwork is similar:

• Company documents — deed of incorporation (escritura), NIF tax number, Commercial Registry extract, the director’s powers.
• Beneficial owners. The broker must identify anyone who owns more than 25% of the capital or controls the company (art. 4 Ley 10/2010); those people provide ID and evidence of the source of funds, usually annual accounts and corporate tax returns.
• LEI — the global Legal Entity Identifier. Without an LEI, an EU broker cannot execute a company’s trades in shares and bonds (art. 26 MiFIR and art. 13(2) of Regulation 2017/590). In Spain it can be obtained from the Commercial Registry, among others, and is renewed every year.
• Tax forms — a self-certification of the company’s tax residence under the Common Reporting Standard (CRS) and, for US securities, form W-8BEN-E.

By default a company is a retail client with full protection: the broker checks whether complex products suit it and will not sell some of them.

A company is automatically a professional client if it meets two of three tests: total assets of €20 million or more, turnover of €40 million or more, own funds of €2 million or more.

Others can ask in writing to be treated as professional if two of three conditions are met: on average 10 significant trades per quarter over the previous four quarters, a portfolio including cash deposits above €500,000, or at least a year working in the financial sector in a role requiring that knowledge (art. 195 Ley 6/2023, arts. 112–114 RD 813/2023).

For a small SL, experience is assessed on the person who trades on its behalf.

Professional status opens up more products but removes part of the protection, so there is no point asking for it without a specific product in mind.

How a company’s portfolio income is taxed

A company has no separate tax on capital income: interest, coupons, dividends and gains on securities go into the same corporate income tax base as business profit.

In 2026 the general rate is 25%; a company with prior-year turnover under €1 million pays 19% on the first €50,000 of profit and 21% on the rest; a company with turnover under €10 million pays 23% (art. 29.1 LIS and transitional provision 44, as amended by Ley 7/2024).

The reduced rates keep falling until 2029, but they never apply to patrimonial companies.

• Dividends and share disposals. The art. 21 LIS exemption applies only if the company owns at least 5% of the capital and has held it for a year; 5% of the income is taxed as management expenses (art. 21.10). The alternative “stake costing over €20 million” test was abolished from 2021, and the transitional regime for older stakes ended with 2025 tax periods (transitional provision 40). A normal portfolio of shares and ETFs means stakes below 5%, so dividends and gains are fully taxed at the company rate.
• Funds. A company includes the gain on selling or redeeming fund units in its tax base and cannot switch between funds tax-free: such transfers (traspasos) exist only for individuals (art. 94 of the IRPF law), while companies fall under art. 53 LIS. For a company, changing funds is a taxable sale.
• Withholding. On deposit interest and dividends received by a company, the bank or payer withholds 19% (art. 128.6 LIS). This is a prepayment credited against the year’s tax.
• Foreign securities. Dividends from foreign companies often suffer withholding in the source country. It can be credited against Spanish tax, but not beyond the tax the company would pay in Spain on that income (art. 31 LIS); anything withheld above the treaty rate is reclaimed in the source country.

The helpful side of corporate tax is the capitalisation reserve (reserva de capitalización).

If the company’s equity grows during the year and the increase is kept for three years, 20% of the increase is deducted from the tax base, capped at 20% of the base (25% for turnover under €1 million); any excess carries forward for two years (art. 25 LIS).

Retained profit is exactly what increases equity, so part of the tax on cash left in the company comes back.

Patrimonial company: when surplus cash changes the tax

A company is a patrimonial entity (entidad patrimonial) if more than half of its assets are securities or are not used in a business activity.

The share is measured on the average of the year’s quarterly balance sheets, or on consolidated balance sheets for the parent of a group (art. 5.2 LIS).

Cash on the account, deposits, funds, shares and a flat let without an employee all count as “non-business” assets.

What does not count as non-business:

• cash from selling assets that were used in the business — in the year of sale and the following two years;
• stakes of at least 5% in other companies, held for over a year in order to manage them, with the people and resources to do so — provided the subsidiary itself is not patrimonial;
• securities the company must hold by law, and customer receivables from ordinary business.

There is no “profits of the last 10 years don’t count” rule in the corporate income tax law: it exists only in the wealth tax law (art. 4.Ocho.Dos Ley 19/1991).

For corporate tax, cash built up from ordinary profit counts as non-business unless the company can show the business needs it.

What changes for a patrimonial company:

• The rate is 25% on all profit, including income from the core business; the reduced 19/21% and 23% rates do not apply (art. 29.1 LIS).
• The incentives for small companies with turnover under €10 million are lost, including the tax base levelling reserve (reserva de nivelación) — up to 10% of the base with tax deferred for five years (arts. 101 and 105 LIS). The capitalisation reserve remains: it is tied to the art. 29.1 rate, and 25% is that rate too.
• The owner loses the wealth tax exemption for the shares: for wealth tax the company is tested on its own terms — more than half the assets non-business for more than 90 days in the year (art. 4.Ocho.Dos Ley 19/1991). The 95% inheritance and gift tax relief on shares relies on the same rule (art. 20.2.c Ley 29/1987).

The last point is usually the most expensive: for someone worth several million, wealth tax is an annual percentage of the value of the entire company.

How the share exemption works, and why it only covers the part of the value linked to the business, is explained in Holding company in Spain; we do not repeat it here.

Example: €1.5 million on a profitable SL’s account

An illustrative SL: turnover €4 million a year, pre-tax business profit €400,000, business assets (equipment, stock, receivables, operating reserve) €1.2 million.

On top of that, €1.5 million of surplus cash has built up.

Total assets are €2.7 million, of which €1.5 million, or 55.6%, are non-business: if that holds all year, the company is patrimonial.

Deposit yield is assumed at 2% a year, Treasury bills at 3%, as at the October 2026 auction. The owner is tax resident in Spain and has no other capital income this year.

What the numbers show:

• The corporate tax cost of patrimonial status alone is modest: 25% instead of 23% costs an extra €8,600 a year with the deposit and €8,900 with bills. Without patrimonial status, tax with the bills would be €102,350.
• Bills earn €11,250 a year more after tax than the deposit, with no withholding and no bank risk above €100,000.
• Paying everything out as a dividend means paying the owner’s savings income tax at the 2026 rates straight away: 19% up to €6,000, 21% up to €50,000, 23% up to €200,000, 27% up to €300,000 and 30% above (arts. 66 and 76 of the IRPF law), with 19% withheld by the company on payment. On €1.5 million that is €431,880, or 28.8%. The remaining €1.07 million in bills held personally would earn about €32,000 a year before tax, versus €45,000 inside the company.
• Option 3 sits in between: a dividend just large enough to bring non-business assets below half, with the rest in bills. The company keeps its 23% rate and the owner keeps a chance of the wealth tax exemption, if the other conditions are met.

The share is measured on the average of four quarterly balance sheets, so a December dividend fixes only the last quarter.

The decision belongs at the start of the year, or earlier, when the accounts are approved.

How salary and dividends compare for the owner personally is covered in Salary or dividends from a Spanish SL.

What to do with surplus cash: five decisions

1. Calculate the reserves and the non-business share. Operating, tax and project reserves from the cash-flow forecast; the share from quarterly balance sheets, not the year-end figure.
2. Invest what pays back in the business itself. New equipment, premises, buying a competitor — all business assets. Net present value is a convenient way to compare a project against 3% bills: NPV: net present value. If the project needs a model with several scenarios, that is our Financial modelling service.
3. Document the project reserve. A shareholders’ or director’s resolution with a budget and timeline is the main evidence that the cash is needed for the business; the tax authority looks at the facts, and the document is no guarantee. Until the project starts, the money sits in bills or a money market fund.
4. Pay out the excess as dividends or salary. If there is more cash than the business and its projects need for the next few years, paying part of it out costs less than keeping the company patrimonial for years.
5. Set up a holding company if the money will go into other companies. A holding receives dividends from the operating SL almost tax-free and invests them in new businesses with stakes of 5% or more — but a holding can also become patrimonial if it hoards cash. The conditions are in Holding company in Spain.

Whatever neither the business nor its projects need is invested to a plan: how much goes into bills and money market funds, how much into bonds and ETFs, and what share of assets stays non-business as a result.

If you are investing company cash in other people’s projects or startups, we review the project before the deal through our For investors service.

Frequently asked questions

Where should a Spanish company invest its surplus cash?

Cash needed within a year: Treasury bills (Letras del Tesoro), money market funds or deposits spread across several banks. Cash for several years: bonds, funds and ETFs. Before investing, check that non-business assets will not exceed half the balance sheet.

Can an SL buy Spanish Treasury bills?

Yes. The company buys bills through its bank or broker, at a Treasury auction or on the secondary market. No tax is withheld on the income; the company pays tax on it in its annual corporate tax return.

How are dividends on shares held by a company taxed?

If the stake is below 5%, as in a normal portfolio of shares and ETFs, dividends are fully taxed at the company rate of 19–25%. The 95% exemption applies only to stakes of 5% or more held for at least a year.

Can a company switch between investment funds without tax?

No. Tax-free fund transfers (traspasos) are available only to individuals. A company that sells units in one fund and buys another includes the gain in its corporate tax base.

What is a patrimonial company in Spain?

It is a company where more than half of the assets are securities or assets not used in a business activity, based on the average of the year’s quarterly balance sheets. It pays 25% corporate tax without small-company incentives, and its owner loses the wealth tax exemption on the shares.

Does cash on the account count as a non-business asset?

Yes, unless the business needs it. Cash from selling business assets does not count in the year of sale and the following two years. The rule about profits of the last 10 years exists only in the wealth tax law, not in corporate tax.

Is it better to keep cash in the company or pay a dividend?

While cash stays in the company, the owner’s 19–30% dividend tax is deferred and a larger sum is working. But if the surplus makes the company patrimonial, it is better to pay out enough to bring non-business assets below half.

Does a company need an LEI to buy bonds?

Yes. An EU broker cannot execute a company’s trades in shares and bonds without an LEI. Obtain it in advance and renew it every year, or the broker will suspend trading.

Key points on investing company cash in Spain

• Surplus cash is what remains after the operating, tax and project reserves; a cash-flow forecast shows how much that is.
• A company can invest in almost everything an individual can; on a large balance, a deposit is protected only up to €100,000 per bank, while Treasury bills are safer and free of withholding.
• Portfolio income is taxed as company profit at 19–25% in 2026; the 95% exemption applies only to stakes of 5% or more, and companies cannot switch funds tax-free.
• If more than half of the assets are not used in the business, the company becomes patrimonial: 25% rate, no small-company incentives, and the owner loses the wealth tax exemption.
• In the illustrative €1.5 million example, a €600,000 dividend restores the 23% rate, while paying out the full amount costs the owner €431,880 in tax.

Sources

• Corporate Income Tax Law (Ley 27/2014, LIS), arts. 5, 21, 25, 29, 31, 53, 101, 105, 128, transitional provisions 40 and 44 — BOE; Regulation (RD 634/2015), art. 61 — BOE.
• Wealth Tax Law (Ley 19/1991), art. 4.Ocho — BOE; Inheritance and Gift Tax Law (Ley 29/1987), art. 20 — BOE; Personal Income Tax Law (Ley 35/2006), arts. 66, 76, 94 — BOE.
• Securities Markets Law (Ley 6/2023), art. 195 — BOE; RD 813/2023, arts. 112–114 — BOE; Anti-Money Laundering Law (Ley 10/2010), art. 4 — BOE.
• MiFIR (EU) 600/2014, art. 26, and Delegated Regulation (EU) 2017/590, art. 13 — EUR-Lex.
• Spanish Treasury: Letras del Tesoro auction results and corporate tax on government securities — tesoro.es, tesoro.es, October 2026.
• Deposit Guarantee Fund — fgd.es.