The Spanish parliament is currently debating a new law on undertaking for collective investment in transferable securities (UCITS), which contains the following tax measures.
Formal obligations of non-established UCITS
If non-established UCITS wish to commercialize products in Spain in the frame of the freedom to provide services, they will have to appoint a tax representative (either an individual or a legal entity) obliged to:
withhold taxes (15%) on the net gain realized by the investor, whether resident or not (however, investors resident in exchange-of-information-treaty countries, and holding participations in Spanish-listed UCITS, will be tax exempt); and
report to the tax authorities a number of operations related to interests in UCITS.
Corporate income tax for established UCITS
Fixed-capital UCITS will no longer be allowed under Spanish law. However the draft grants them a two-year transitional period to adapt or liquidate, during which they may apply the special tax regime for UCITS.
The tax rate will still be 1%. However, being listed will no longer be a qualifying requirement. Instead, the UCITS should have at least 100 investors (real-estate UCITS should also have at least 50% of their total assets invested in qualifying dwellings).
UCITS will not be able to apply any method for avoidance of international double taxation or the asset-holding companies tax regime.
Capital duty - the draft clarifies the treatment of corporate operations; virtually all operations carried out by established UCITS (including real-estate UCITS investing in qualifying dwellings) will be tax exempt, as nowadays, but the new Law skips an important operation - the capital reduction, subject to 1% tax on the value of the cash or assets distributed to the shareholders.
Transfer tax - acquisition of qualifying dwellings by real-estate UCITS receives a 95% tax credit (such as an effective tax burden ranging from 0.3% to 0.35% on the real value of the asset).
The law should enter into force during the second half of the year and will mainly bring in new tax obligations for non-established UCITS. On the other hand, the new regulatory and tax regime of established UCITS should also give rise to the amendment of the non-resident, capital-gains-tax exemption on the disposal of interests in listed UCITS, as listing will no longer be a requirement of the reduced 1% corporate-income-tax rate.
Álvaro de la Cueva (alvaro.de.la.cueva@garrigues.com), Madrid
