Friday, February 23

Private banking activates the dismantling of the sicavs but there are alternatives

More than 80 percent of the 2,300 sicavs that operate in Spain may have their days numbered.

The entry into force on January 1 of the law on prevention and fight against tax fraud, which tightens the requirements for these companies to pay 1 percent tax, has made private banks begin to plan with their clients the dismantling of the sicavs.

As an alternative, the transfer of its capital to other financial products, such as investment funds, is proposed. Until now, to benefit from the 1 percent tax incentive, sicavs had to have a minimum of 100 shareholders who did not require a minimum investment.

As of January, each one will be required to invest a minimum of 2,500 euros, which rises to 12,500 in sicavs by compartments. Otherwise, they must pay 25 percent of their profits as corresponds to public limited companies.

Sicavs: from liquidation, to transfer of capital to funds

The countdown has begun to avoid the increase in taxes and the banks are meeting with the owners of the sicavs that they manage and administer to offer them alternatives, among which the liquidation of the companies stands out.

But it is not the only option, the majority shareholders can also keep the company or relocate it to countries with more lax legislation, including Luxembourg, where, according to Luis Sánchez de Lamadrid, general director of Pictet WM in Spain, “a sicav from 20 or 30 million euros “.

Those who rule out moving their company abroad can merge it with other sicavs to comply with the requirements required by law, “although most of the large estates choose to channel their savings to other investment vehicles,” says Rodrigo Yagüe, professor at OBS Business School. The most popular are investment funds.

Other alternatives for which the majority shareholders are choosing are to transform the sicavs into limited companies or direct their capital to products such as unit linked -life insurance savings linked to an investment fund-.

But in those cases in which the sicav has a disability, “the most appropriate thing is to liquidate or dissolve it,” sources from the sector point out.

The most punished by the norm

The companies most penalized by the new regulation are those with assets of between three and ten million euros, so many of them are being liquidated, the same sources point out.

While, according to Félix López Esteban, professor at the Center for Financial Studies (CEF), those that will be least affected by the regulation are “those with a high number of participants, more than 500, who will be able to continue operating as up to now”.

The majority partners who choose to dissolve their sicavs have a transitory six-month tax-exempt regime, conditional on transferring “their investment to other collective investment institutions.”

Incessant trickle of sicavs closings

The current avalanche of liquidation of sicavs occurs after a process of continuous closings that began in 2015, the year in which 3,400 companies were counted, 1,100 more than those that exist today.

Its assets have also been reduced from 34,000 million euros in 2015 to 29,330 million today.

“This decline has been caused by the continuous probe balloons launched by the Government and by the rest of the political parties that advocate a tightening of investment in sicavs, something that, without a doubt, has been the beginning of the end of their current status”, Felix López points out.