There are numerous types of investment funds available in Spain, addressed to various types of investors. The Spanish legislative framework has incorporated the regulations provided by the European Union, because the country has been a member state of the Community since 1986. Our team of Spanish lawyers can offer assistance on the requirements that should be met by foreign investors when registering an investment fund here.
Alternative investment funds in Spain
Spain provides two main types of alternative investment funds (AIFs), which can be incorporated as open-ended or closed-ended. The difference between the two is given by the rights referring to the issuance of shares. For example, open-ended AIFs can issue an unlimited amount of shares, while for the closed-ended funds, the investors are limited to a certain value. At the same time, they are also regulated by different legislations.
Open-ended AIFs in Spain are controlled by the Law 35/2003 referring to the collective investment schemes. Another regulation applicable for this category of funds is the Royal Decree 83/2015. Closed-ended AIFs are regulated by the Law 22/2014, which gives the legal framework for the activity of private equity investment funds.
Such entities must be managed by alternative investment fund managers (AIFMs), who have to follow the regulations imposed by the Spanish National Securities Market Commission (CNMV), which have to approve their activities.
The CNMV is the main regulatory institution for this type of funds and our team of attorneys in Spain can offer more details about the registration requirements.
Hedge funds in Spain
Another way to start a financial business in Spain is through a hedge fund, which is mainly addressed to professional investors, such as banks, credit institutions or insurance companies.
This type of fund allows its investors to invest with no restrictions in various financial assets. They also need prior approval from the CNMV.
Collective investment structures in Spain
Collective investment schemes (CIS) in Spain can be registered under several types of legal entities. Spanish CIS are regulated by the Collective Investment Schemes Act, which incorporated in its national requirements the provisions imposed by the European Union (EU), under the Directive 2011/61/EU.
A financial CIS in Spain is incorporated with the purpose of investing in financial assets and it can be set up as a securities company with variable capital (SICAV). Also, such structures can be registered as non-financial CIS.
Non-financial CIS can be registered as a closed-ended real estate investment company or as a real estate investment fund. Their main purpose is to invest and manage assets deriving from the real estate market.
Furthermore, CIS can also be registered as private equity entities performing temporary investments in the share capital of non-listed companies; our team of attorneys in Spain can provide more details on the regulations referring to private equity companies.
Open-ended funds in Spain
An open-ended fund in Spain is a legal structure in which the investor is not imposed with any restrictions referring to the issuance of shares. Alternative Investment Funds (AIFs) in Spain, registered following the regulations imposed by the Collective Investment Schemes Act, can be set up as closed-ended or open-ended funds.
The open-ended funds follow the regulations prescribed by the Law 35/2003, as well as the Royal Decree 83/2015.
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.
Businessmen interested in receiving further information on the investment funds can address to our law firm in Spain.