SPAIN Law and Practice Contributed by: Álvaro Paniagua Rico and Borja López Pol, Anaford Abogados
It is possible to create valid trust structures in Spain, although they are more limited compared to other legal entities. This requires a combination of civil law and common law. 3.4 Exercising Control Over Irrevocable Planning Vehicles The trust is not recognised under Spanish law, hence no specific development should be undertaken.
assets and rights received, reduced by any deduct - ible charges and debts; and • in inter vivos gifts and other comparable gratui - tous transfers, the taxable base is the net value of the assets and rights acquired, understood as the value of the assets and rights, reduced by any deductible charges and debts. For the purposes of this tax, the value of assets and rights will generally be considered their market value. However, if the amount declared by the interested par - ties exceeds the market value, the higher amount will be used as the taxable base. Market value shall be understood as the most prob - able price at which an asset could be sold between independent parties, free of any charges or encum - brances. Therefore, the fair market value of the partial interest must be established for the purposes of the transac - tion. Disputes that may arise as a result of inheritance are usually due to a poor understanding of the law, a lack of foresight, and sometimes an unwillingness to address any problems that may exist. In cases involving an international component, the issues can be even more complex, although instruments such as arbitration or mediation can help to resolve the situ - ation. 5.2 Mechanism for Compensation Compensation mechanisms are provided for in the legislation itself. Compensation mechanisms and penalties for this pur - pose may also be provided for from an inheritance perspective. 5. Wealth Disputes 5.1 Trends Driving Disputes
4. Family Business Planning 4.1 Asset Protection
As described in 3. Trusts, Foundations and Similar Entities , the trust is a concept that is not recognised under Spanish law. Consequently, Spain does not rec - ognise trusts settled either domestically or abroad. Therefore, this common legal instrument used in other jurisdictions – often for purposes such as asset pro - tection – is not available under Spanish law. Spain does not have an instrument that is as effective or comparable to a trust for asset protection purpos - es. However, certain structures, such as unit-linked life insurance policies, which tie benefits (both at maturity and upon death) directly to the performance of invest - ment funds chosen by the policyholder, may, in some cases, provide asset protection functions. 4.2 Succession Planning As indicated in 1.2 Exemptions , stakes in family com - panies or business assets may benefit from a 95% to 99% tax relief under the inheritance and gift tax regime, provided that the abovementioned require - ments are met. Therefore, a key element of family business succession planning is ensuring compliance with the “family company” requirements in order to apply these tax reliefs and transfer the business to the next generation without a significant tax burden. 4.3 Transfer of Partial Interest The taxable base of the inheritance and gift tax is determined as follows: • in mortis causa transfers, the taxable base is the net value of the individual acquisition received by each heir or legatee, understood as the value of the
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