Spanish Sicavs in the eye of the hurricane

Eugenia Jiménez
Spanish Sicavs in the eye of the hurricane

Spanish government latest proposal to transfer the supervision of Sicavs back to the Treasury is causing a stir in the local fund industry.

The Spanish executive recently announced plans to return the control of Sicavs to the Ministry of the Treasury, 14 years after this was granted in exclusivity to the National Securities Market Commission (CNMV).

The measure was included in the government's budget plan for 2019 which was defeated in Parliament on 14 of January, forcing the Spanish president Pedro Sánchez to call a snap election for the 28 of April.

Should the proposal finally be approved, the CNMV would lose its current tax scrutiny powers. However, it would continue to have the power to decide whether any action is to be taken on irregularities after receiving reports from the Treasury.

It is the assumption that the tests Sicavs would need to pass in order to qualify for such status and consequently to apply for their "special" tax regime will become harder to pass in the hands of the Treasury that has caused concern within the industry. If an increasing number of Sicavs fail to meet the requirements supervised by the Treasury, the survival of this investment vehicle could be in question. 


Under current Spanish tax legislation, investors using Sicavs or investment funds pay 1% tax on capital gains as long as they hold their investment, and provided that certain requirements are met. However, when they sell their holding - whether in a SICAV or fund - they pay the same progressive tax rate of 19% (€0-€6,001), 21% (€6,000-€50,000) or 23% (over €50,000).

The minimum capital threshold for Sicavs in Spain is €2.4m, and in order to qualify for the tax regime already mentioned, a Sicav needs to have at least 100 shareholders. However, there is no maximum percentage a single shareholder can own, which means this supposedly collective investment vehicle can be therefore controlled by a single family or wealthy individual by naming a series of surrogate investors, known as "mariachis".

The requirement of having at least 100 shareholders to be considered collective investment institutions is exclusive to Spain and Portugal across Europe. In France it is required that they have a minimum of two.

According to the latest data from the CNMV, corresponding to the third quarter of 2018, over 70% of Sicavs in Spain would have to pass the tax examination, as they meet the 100 shareholders' requirement narrowly.

Specifically, from the 2,735 Sicavs registered in the CNMV, almost 2,000 have between one and 150 shareholders. These figures call into question the legitimacy of the shareholders' status as registered Sicav participants, a key nuance which has lead the industry to fear a potential "witch hunt" by the Treasury.


The Spanish investment and fund association Inverco has warned the business could fall 12% this year if the government's proposal is approved, with Sicavs' AUM dropping to €25bn by December 2019. This would be its lowest level since 2013, when they collectively managed €27.33bn.

Inverco's president Ángel Martínez Aldama urges the government to equal Spanish Sicavs' requirements to those of Europe in order to avoid a potential capital flight.

According to the law firm Ashurst, Spanish Sicavs are planning to move to other jurisdictions for fear of greater tax pressures in Spain and also with the aim of finding more legal certainty.

"Luxembourg has been chosen as the best destination, because its tax regime is advantageous. Luxembourg Specialised Investment Funds (SIFs) are taxed at a 0.01% CIT rate on net assets," points out a report from the firm.

With regards to the government's proposal Martínez Aldama said: "The recent defeat of the budget plans for 2019 in Parliament has given us some peace. And although the fall could be lower, uncertainty remains."