Taxation of Investment Funds in SpainUpdated on Monday 19th September 2016
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Those who are interested in setting up an investment fund in Spain should comply with a specific taxation system, which is different than the tax regime applicable to commercial companies incorporated in Spain. The tax system can also differ in accordance with the residency of the investors and our team of lawyers in Spain can offer guidance on the relevant tax regime applicable to a specific type of investment vehicle operating on the Spanish market.
Taxation of alternative investment funds in Spain
One of the ways in which a local or foreign investor can start an investment in Spain is through an alternative investment fund (AIF), which refers to a broad category of investment vehicles, such as hedge funds, private equity funds or real estate funds. As a general rule, AIFs refer to the funds which are not included in the category of undertakings for collective investment in transferable securities (UCITS).
Further on, the tax treatment depends on the one of the most important characteristics of an investment vehicle: whether it is incorporated as an open-ended or closed-ended fund.
Open-ended funds in Spain are regulated by the Spanish Corporate Income Tax Law, which prescribes a 1% rate on the fund’s corporate income. Open-ended funds are the ones in which the investors are not imposed with any restrictions referring to the issuance of shares.
Closed-ended funds are also regulated by the above mentioned legislation, but they are imposed with a 25% corporate income tax (CIT) for the income incurred at a worldwide level and our Spanish lawyers can provide more details on how the tax is applied in this case.
Spanish investment funds imposed with a 1% CIT
There are several investment vehicles which are imposed with a smaller corporate income tax (CIT), applicable at the rate of 1%. In this sense, we can mention the SICAV form, but only in the situation in which the total number of shareholders is of minimum 100.
Real estate investment vehicles registered as funds or as a corporate structure can also be imposed with this rate, but it is also necessary to have minimum 100 shareholders.
Investors who need further details on the taxation of Spanish investment funds are invited to contact our law firm in Spain for legal advice.