Taxation in Private Capital investment: individuala

Taxation of Hedge Funds: the taxation of an individual investor residing in Spain who invests in Hedge Funds (HF) is the basic taxation of savings income: dividends and capital gains are taxed at the current rates of 19% or 28%; it is a progressive taxation scale.

The particularity of Hedge Funds is the possibility of applying the transfer regime, which means that when an investor recoups or transfers their participation and reinvests it in another collective investment undertaking, the capital gain is not subject to tax.

This means that if I receive a distribution from my fund and I reinvest it, I will not be taxed.

RCC/RCF taxation: as regards the RCC, taxation again involves dividends and gains and is part of the savings tax base at a rate of 19% to 28%, according to the Personal Income Tax progressive scale.The transfer regime does not apply.

That is, if I redeem my investment from a Hedge Fund and I reinvest it, I will not be taxed, but if I do the same with an RCC or RCF, I will. For example, if I invest €100,000 in a fund and I receive €140,000, what happens with the gains?

That capital gain of €40,000 will generally be taxed at around a rate of approximately 20%. So I would be left with €132,000. However, if I had invested through an HF, they could be transferred and I would not have to pay tax for it. Since a Hedge Fund is a vehicle suitable for transfers, when applying the regime, the earnings of €40,000 would not be taxed.

It is an automatic procedure regulated by law, and it involves the requirement of reinvesting these €140,000 in another investment vehicle. You can transfer the funds as many times as you want, and do so perpetually, that is, there is no time limit in time or amount.

But this does not apply to RCCs or RCFs; if I receive €140,000, I have to pay tax for that amount and I would keep €132,000. I would generate a gain of €40,000, which at a rate of 20% gives rise to a tax payment of around €8,000.

Taxation of ETILFs: it is expected to be a very powerful investment vehicle for retailers, but we are waiting for the Tax Agency to define a special tax regime.

Non-residents pay taxes in Spain simply because the income is generated in Spain. In terms of vehicles, dividends or capital gains from a Hedge Fund (HF) will generally be taxed at a rate of 19%. However, domestic exemptions or agreements on exemptions may be applied based on the investor's tax residence.

With respect to Risk Capital Funds (RCF) and Risk Capital Companies (RCC), it is a very powerful vehicle for investments of non-residents, because the regulation establishes that it is exempt from taxes, regardless of the investor's tax residence (unless they are non-cooperative jurisdictions, the traditionally so-called tax havens).

With regard to ELTIF, again, we are waiting for the Tax Agency to define a special tax regime.

Si quieres saber más sobre la fiscalidad en el capital privado, puedes descargar la guía de Aprende y Crece aquí. 

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