Tax changes for Spanish investment companies: time to move?


The advantageous tax regime enjoyed by Spanish open-ended investment companies with variable capital (Sociedades de Inversión de Capital Variable, SICAV) was modified on January 1, 2022 by the entry into force of Spanish Law 11/2021 on measures to prevent and combat tax evasion (the new anti-fraud law), which transposes Council Directive (EU) 2016/1164 (ATAD) into Spanish law.

Previously, Spanish SICAVs reaching the minimum shareholding threshold (i.e. 100 shareholders) benefited from a corporate income tax (IRS) rate of 1% instead of the full rate of 25% IRS.

To continue to benefit from the reduced rate, the following additional requirements have been introduced in addition to the current threshold of 100 shareholders:

  • each shareholder is required to subscribe for shares with a net asset value equal to or greater than 2,500 euros ($2,700) per share, or 12,500 euros per share in the case of a SICAV with compartments;
  • the number of shareholders and the subscription value must be met for at least three quarters of the fiscal period (usually a calendar year).

Failure to comply with the above requirements will subject the SICAV concerned to a CIT rate of 25%.

In addition, the Spanish tax authorities (Dirección General de los Tributos, DGT) are empowered to verify compliance with the new rules under the new anti-fraud law; a power that until the date of entry into force of the law was held by the Spanish supervisory authority (Comisión Nacional del Mercado de Valores, CNMV).

These new requirements only apply to SICAVs governed by Law 35/2003 on undertakings for collective investment (IIC Law) and do not apply to hedge fund companies or listed index funds.

This article aims to provide an overview of the alternatives which SICAVs may wish to explore in light of the entry into force of the new anti-fraud law, in particular by highlighting the advantages of Luxembourg’s direct approach to the taxation of investment funds. investment, which is based on the net asset value of assets under management and is not linked to the number of shareholders or the amount of subscriptions.

Alternatives under the new Spanish anti-fraud law

Several options are available to the SICAVs concerned, with the optimal solution often being determined by the following factors:

  • the size of the SICAV’s assets and the number of investors;
  • restructuring costs and additional administrative burden (new service providers, refresh of customer knowledge);
  • continued additional tax burden relative to long-term savings;
  • tax implications of the restructuring for investors (possibility of tax neutrality for the investor resulting from the restructuring);
  • jurisdictions where the promoter has other funds;
  • shareholder profile and risk appetite.

Given the above, the first alternative would simply be to dissolve and liquidate the SICAV and take advantage of the transitional regime. In summary, SICAVs will be able to continue to apply the reduced rate of 1% without complying with the new requirements until the date of deregistration.

In order to clarify the applicable deadlines for dissolution/liquidation benefiting from the transitional advantageous tax regime, the DGT has published recent formal guidelines which can be consulted here. In summary, the company must be liquidated before December 31, 2022 and all legal acts and transactions necessary for the liquidation of the company until its removal from the register must be carried out before June 30, 2023.

When evaluating this option, Spanish shareholders should bear in mind that the liquidation proceeds will be taxed in accordance with the applicable tax regime – personal income tax if the shareholder is an individual or CIT if the shareholder is a company – unless the funds or assets received from the subscription are reinvested in other Spanish undertakings for collective investment, i.e. financial investment funds or SICAVs.

A second option to consider is to comply with the additional obligations imposed by the new anti-fraud law. The prospectus would include a minimum subscription/redemption amount linked to the new requirements. For large, widely distributed funds, compliance shouldn’t be an issue. For others, a turnaround plan would be needed to inject additional capital.

A third option would lead to a consolidation of SICAVs – national merger/absorption into other national SICAVs. Such an alternative would facilitate the application of the favorable tax regime envisaged in the new anti-fraud law. However, depending on the structure of the transaction, this may result in transfer fees (Transmisiones Patrimoniales y Actos Jurídicos Documentados) and additional costs for registration, notary and legal advice.

A fourth interesting option could be (i) the consolidation of the smaller fund in a third-party platform based in Luxembourg – a cross-border merger/absorption into a foreign UCITS (Organisme de Placement Collectif en Valeurs Mobilières), or (ii) migration of the SICAV in Luxembourg, where the tax regime applicable to UCITS has remained largely unchanged and simple for years, and ATAD has been put in place.

In the next section, we will look at the latter option from a tax perspective, providing an overview of the most relevant corporate and tax considerations for SICAVs looking to incorporate another SICAV or migrate to Luxembourg.

Migrate to Luxembourg

It should be noted that SICAVs are governed by the IIC law which transposes Directive 2009/65/EC on the coordination of legislative, regulatory and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS Directive).

The UCITS Directive (Chapter VI) expressly provides for the possibility of carrying out mergers between UCITS: In this respect, Spanish SICAVs could be merged with Luxembourg UCITS.

Similarly, in accordance with the spirit of the UCITS Directive, the SICAVs could be redomiciled into Luxembourg UCITS.

Luxembourg tax regime for UCITS

Luxembourg UCITS are exempt from direct taxes – corporation tax, municipal business tax and contributions to the unemployment fund – and wealth tax.

The liability of UCITS is limited to a subscription tax. The subscription tax is calculated on the net assets of the UCITS at the rate of 0.05% on the overall net assets of the UCITS valued on the last day of each quarter and is payable quarterly.

Certain assets may benefit from a reduced subscription tax rate (sustainable investments) or exempted (investments in other funds already subject to the subscription tax).

In addition, certain double tax treaties also apply to UCITS, allowing a reduction or exemption from withholding tax on income from the underlying investments. Distributions paid by UCITS to investors are not subject to Luxembourg withholding tax.


The entry into force of the new anti-fraud law has proven difficult for smaller and less owned SICAVs. Several options are available to SICAVs and their promoters, from liquidation to migration to another jurisdiction.

Ultimately, the particular commercial situation of each SICAV will lead to the restructuring decision, by considering a merger in a Luxembourg UCITS, or a possible continuation in Luxembourg, within the framework of the options considered.

Luxembourg is known for its long-standing traditions in the fund industry, its investment know-how and its reliable and flexible legal framework. The method of taxing Luxembourg funds is a long-established practice, which provides certainty in these difficult times. Luxembourg therefore offers an opportunity to explore suitable opportunities outside the Spanish legal framework.

This article does not necessarily reflect the views of the Bureau of National Affairs, Inc., publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Anne-Céline Navarro and Christophe Sicard are partners at Harneys.

Authors can be contacted at: [email protected];[email protected]


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