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Stay or run? The alternatives to the sicavs for the great patrimonies

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Javier Vinuesa analyses alternatives to sicavs for large estates in an article published by El Confidencial

It has been eight months since the General Budget Bill gave the first warning: The Treasury proposed to increase the control of the sicavs. It was only a measure, far from a dismantling of this type of investment vehicles, very popular among large estates. But in each electoral campaign - and now everything indicates that another one is approaching - the sicavs and their fiscal treatment are debated. And even if there are no elections, and Pedro Sánchez gets Podemos to back him in exchange for a programmatic agreement, high income taxation has many ballots to be part of the package of measures.

A measure that at first glance may seem harmless: if the sicavs comply with the minimum number of investors, whether they are lying (the so-called 'mariachis'), there should be no problem. But in practice the story is different: "While the CNMV has a more quantitative understanding of investors, the expectation is that the Treasury would watch from the qualitative prism if the participants fulfill their role as shareholders," explains Javier Vinuesa, international partner of Andersen Tax & Legal in the tax department of the firm. Treasury could then consider that many of the investors do not behave as shareholders and require that the sicavs in question become taxed at the general type of companies.

The alternatives

Many investors start from sicav as a basis to avoid political 'evil eye': mergers with other sicavs to dilute the risk of concentration (although therefore the influence of the participation), mergers with investment funds (being at the mercy of the manager who owns the product), convert sicav into a limited company (losing tax advantages) or take the company to Luxembourg or Ireland, where the fiscal and legal treatment is more flexible.

Investors tend to domicile this type of product in Luxembourg because, according to Spanish law, the assets do not formally belong to the investor, but to the insurance company with which the product is contracted and to which management is delegated. In other words, in the event of bankruptcy, the client cannot recover his money, but rather enters the liquidation process of the company. Although Vinuesa insists that these do not usually go bankrupt, it is true that Luxembourg law allows the segregation of the managed assets from the insurer's assets, which eliminates this risk. Furthermore, going to the Grand Duchy offers the extra attraction of being protected from political scares that may appear in the future in Spain.

Read the article in El Confidencial.

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