Nerea Llona, Tax and Legal Counsel for Spain and Latin America, outlines a recent client scenario involving cross-border property investment and the evolving Spanish tax landscape.
Drawing on her expertise, Nerea explains how tailored wealth structuring and proactive planning helped the client address regulatory challenges and optimise their position under current and proposed tax rules.
The Client
John, a 55-year-old divorced British national and UK-resident HNWI, is preparing to relocate to Madrid. His wealth is held in a complex investment structure that includes private company shares and alternative assets.
To streamline and optimise this transition, he requires a solution that will comply with Spanish regulations while simplifying his investment framework while ensuring compliance with Spanish tax and legal regulations.
John’s investment portfolio includes a 100% shareholding in a Maltese holding company (“Malta Holdco”). The company is managed and controlled by a professional services firm in Malta, which also acts as the appointed company director. Within Malta Holdco, there is a diversified investment portfolio comprising private equity, hedge funds and other financial assets. This portfolio is managed by a discretionary asset manager based in Switzerland.
The Solution
To support John’s move to Spain, the proposed solution involves transferring 100% of his Malta Holdco shareholding into a Spanish-compliant life insurance policy as a premium in kind. This is executed via a share transfer agreement with the insurer.
Neither the policyholder nor their immediate family may, directly or indirectly, influence the management of the private company or the assets it holds.
Key features of the policy include:
- Whole-of-life unit-linked Spanish-compliant policy
- John is both the policyholder and life assured
- His children are named as beneficiaries on death
- Follows a fixed investment strategy, as required under Spanish tax law to ensure eligibility for tax deferral. This structure is essential for accepting private company shares within the policy. (This corresponds to the “Type A” investment option under Utmost’s product framework.)
- The same discretionary asset manager is appointed at policy level to follow the selected strategy
- Any cash or assets distributed from Malta Holdco to the insurer are managed under the same strategy
- A Swiss bank acts as custodian
- Special conditions can be added to optimise the tax treatment of death benefit payments for Spanish-resident beneficiaries
Once the shares are transferred into the policy, Malta Holdco can be liquidated to further simplify the current structure and reduce associated costs.
The Benefits
This solution offers multiple advantages for John and his advisers:
- Simplifies the current investment structure, reducing administrative complexity and cost.
- Ensures compliance with Spanish tax and regulatory requirements, enabling tax deferral.
- Avoids potential exit tax implications if John chooses to leave Spain in the future.
- Provides legal and tax certainty regarding the treatment of his investments as a Spanish resident.
- Supports succession planning, enabling a smooth and tax-efficient wealth transfer to his children in both the UK and Spain.
Note: Each case involving private company shares must be assessed individually. Requirements may vary depending on the specific circumstances.