Confianz

Categoría: News

  • Tax planning for non-resident entities in Spain

    If your company is foreign and wants to operate in Spain, taxation is an issue that you cannot leave to chance. It’s not just about paying taxes, but about doing it right, avoiding unpleasant surprises and ensuring that everything is in order from the start. Good tax planning for non-resident entities in Spain will save you headaches (and money).

    First of all: What will your company do in Spain?

    Before you worry about taxes, you need to be clear about what your business will do here. It is not the same to sell products, provide services or manufacture something. Depending on the activity, taxation changes and so do the obligations.

    For example, if you sell products without an office or employees, you may only need a fiscal representative. But if you have a factory or an office, things get more complicated and you may need a more robust legal structure.

    Choosing the best structure to avoid problems

    Your company can operate in Spain in several ways. Depending on the level of presence you want to have, there are three main options:

    1. Fiscal representative: the basics

    If you only sell or provide services sporadically, you may only need a tax representative. This is someone who makes sure you comply with your tax obligations without the need to open a branch or subsidiary.

    2. Branch office: something more serious

    If you want a stable presence but without setting up a new company, a branch may be the option. It is not an independent entity, but it is taxed in Spain for what it earns here.

    3. Subsidiary: the full option

    If you want to operate in the long term and with total independence, the best option is to create a subsidiary. This means opening a Spanish company that will have its own tax and accounting obligations, but also more advantages to operate locally.

    Taxes you can’t ignore

    If you operate in Spain, there will be taxes. Some of the main ones are:

    1. Income Tax for Non-Residents (IRNR)

    If your company earns money in Spain without a permanent establishment, it will be taxed on each transaction. If it has a stable presence, it will be taxed as a resident company.

    2. Corporate Income Tax

    If you have a subsidiary in Spain, it will pay corporate tax (normally 25%). Depending on the activity, there may be tax reductions or benefits.

    3. VAT and other obligations

    If you sell or provide services here, you will probably have to register for VAT. Sometimes you will need a tax representative to handle this.

    Plan before you act

    It is not enough to just come in and start trading. Good tax planning will help you avoid penalties, reduce costs and maximise profits. Some key points to review:

    • Application of double taxation treaties.
    • Compliance with local and European regulations.
    • Strategies to optimise the tax burden.

    If you would like to learn more about tax planning for non-resident entities in Spain, our tax expert shares some key points with you in this video:

    At Confianz, we help you structure your business so that you can comply with regulations without complications. Need advice? Let’s talk

     

  • The ideal time to restructure a company

    Although no company is born with the need to be restructured, growth and diversification often create challenges that make it imperative to rethink the organisational structure. But when is the right time to restructure your company? Let’s look at the key signs and some practical examples.

    Why does growth drive the need for restructuring?

    As a company grows, it is common for it to diversify its business lines, broadening its portfolio beyond its core business. This diversification, while beneficial, introduces different types of risks that need to be properly managed. Manuel Urrutia of Confianz points out that growth can generate financial and operational stresses that require restructuring to be managed effectively.

    Signs indicating the need to restructure

    1. Financial risk: If different business areas have disparate payment and collection schedules or inconsistent cash flows, it is advisable to consider separating these units into different legal entities. This strategy facilitates negotiation with investors and financial institutions, allowing for more efficient management of financing needs.
    2. Labour risk: Companies with divisions that have significantly different labour requirements, such as variations in the number of employees or union obligations, may benefit from restructuring. By segmenting these units, the labour particularities of each can be managed more effectively.
    3. Commercial or operational risk: Different business units may serve different types of customers or have different profitability margins. A restructuring allows commercial and operational strategies to be tailored to the specific needs of each segment, thereby optimising the company’s overall efficiency and profitability.

    Practical cases of restructuring in Spain

    In Spain, several companies have successfully restructured to adapt. For example, Clínica Baviera, specialising in eye care, has experienced significant growth, expanding to 135 clinics in Europe and performing 180,000 interventions per year. This expansion has required a restructuring to efficiently manage its operations and maintain its focus on reliable techniques and continuing education.

    Another example is Caser, the Spanish insurer which, under the new leadership of Juan Estallo, has initiated an organisational transformation with a clear focus on the customer. This restructuring aims to create a more flexible and market-oriented organisation, strengthening key areas such as technology, human resources and strategy.

    In addition, Banco Sabadell decided to move its headquarters back to Catalonia after several years in Alicante. This strategic move, in the midst of a takeover bid by BBVA, seeks to secure the loyalty of Catalan shareholders and to take advantage of a more stable political climate in the region.

    Benefits of well-planned restructuring

    Adequate restructuring can offer multiple benefits:

    • Resource optimisation: Aligning the organisational structure with the specific needs of each business unit allows for a more efficient allocation of financial and human resources.
    • Improved risk management: By segmenting business units according to their risk profiles, it facilitates the implementation of more effective mitigation strategies.
    • Increased profitability: Tailoring operational and commercial strategies to the particularities of each segment can lead to improved profit margins.
    • Attracting investors: A clear and well-defined organisational structure can be more attractive to potential investors, facilitating access to capital for future expansion.

    It is important to stress that restructuring is not a one-off event, but a continuous process that must be aligned with the evolution and growth of the company. As our chairman, Manuel Urrutia, points out, «when you start with restructuring, you don’t stop seeing improvement actions, so it’s a virtuous circle».

     

     

    Are you considering a restructuring for your company? Our team of experts is ready to help you identify the opportunities and strategies that best suit your needs. Contact us for a personalised consultation and find out how we can boost the success and sustainability of your business.

  • Advantages of asset-holding companies in 2025

    Wealth management companies are essential tools for managing financial and real estate assets efficiently. In 2025, understanding how they work and their tax advantages can make all the difference in optimising your wealth. This article will guide you through the key aspects you need to know.

    What are asset-holding companies?

    Holding companies are defined by their focus on asset management without direct economic activity. More than 50% of their assets must consist of securities or real estate not used for economic activities.

    These vehicles are common among individuals and families with significant wealth who wish to protect their assets and benefit from more favourable tax treatment.

    Examples of assets under management include

    • Real estate for rental or personal use.
    • Financial investments such as stocks or bonds.
    • Family estates seeking succession efficiency.

    Tax and structural advantages of asset-holding companies

    1. Favourable taxation

    One of the main reasons for setting up an asset-holding company is its tax treatment. Instead of paying personal income tax as an individual, asset-holding companies are taxed at the general corporate income tax rate of 25%, which can result in significant savings. In addition:

    • Property maintenance costs are deductible for corporate income tax purposes.
    • Non-productive real estate is not subject to this tax, although it is subject to personal income tax.
    • The sale of assets within the company allows for optimised tax planning by deferring taxes.

    2. Protection of family assets

    The creation of an asset-holding company allows personal assets to be decoupled from business activities or personal risks. This minimises the impact of potential debts or litigation.

    For example, a family property company facilitates the generational transition by allowing shares to be inherited instead of direct assets. This simplifies succession and reduces potential conflicts.

    3. Flexible and professionalised structure

    Wealth management companies offer a structure to manage assets in a professional manner. This is especially relevant for financial investments or diversified portfolios, where centralised management improves efficiency and control.

    For example, in a property rental holding company, rental income can be reinvested directly into new assets, generating a sustainable growth cycle.

    Key considerations before setting up an asset-holding company

    While the advantages are clear, it is also important to bear in mind some aspects:

    • Administrative and legal costs: The incorporation and management of these companies involves notary, registry and accounting fees.
    • Tax limitations: As these companies do not carry out any economic activity, they cannot benefit from tax incentives such as small company tax credits.
    • Strict legal requirements: It is essential to ensure that the company meets the criteria of an asset-holding entity under the Corporate Income Tax Act.

    A tax advisor can be crucial in assessing whether this structure is suitable for your objectives.

    Case studies of asset-holding companies

    Family property company

    A family with several properties and a financial portfolio decides to set up an asset-holding company. This step allows them to:

    • Centralise asset management.
    • Reduce the tax burden on rental income.
    • Simplify generational succession by transferring shares rather than specific assets.

    Holding company for holding securities

    An investor with a diversified portfolio of stocks and bonds creates a holding company to:

    • Manage investments in a professional manner.
    • Reducing taxation by reinvesting profits.
    • Protect your assets from potential personal risks.

    Property rental holding company

    A landlord with several rented properties forms an asset-holding company in order to:

    • Take advantage of the deduction of expenses related to the maintenance of real estate.
    • Simplify the financial management of rents.
    • Optimise taxation on the profits obtained.

    Wealth companies are strategic tools for those seeking to optimise the management and taxation of their wealth. Their creation allows them to protect assets, reduce risks and plan for the long term, especially in a tax environment such as that of 2025, where efficiency and compliance are key.

    If you are considering the next step in managing your wealth and need expert advice. You can count on our help.

     

  • Importance of cash flow in the sale and purchase of companies

    Cash flow is the financial indicator that reflects the ability to generate revenue and thus ensures the viability of the business. Understanding its relevance not only facilitates a successful transaction, but also improves the negotiation strategy and increases the confidence of buyers.

    What is cash flow and why is it key to valuing companies?

    Cash flow, or cash flow, is the movement of money in and out of a company in a given period. This indicator covers:

    1. Operating income: from commercial activities.
    2. Necessary expenditures: operational and financial expenses.

    A positive and stable cash flow indicates that the company can generate sustainable income, an essential factor for investors looking to recoup their investment and secure a profitable return. It also provides a clear picture of the financial risks and growth opportunities that are key in a business sale and purchase.

    Relevant types of cash flow in a sale

    To understand the impact of cash flow on the valuation of a company, it is essential to understand the three main types of cash flow:

    1. Operating cash flow

    This measures income and expenses derived from the core operations of the business, such as the sale of products or services.

    • A positive operating cash flow demonstrates that the company is able to cover its operating costs and generate profits.

    2. Investment cash flow

    Related to the acquisition or sale of long-term assets, such as real estate or equipment, this flow indicates the potential growth of the company.

    • Strategic investments show buyers that the company is prepared to scale in the future.

    3. Financing cash flow

    This flow details movements related to financing, such as loans, issuance of shares or payment of dividends.

    • A negative cash flow from financing can be an indicator that the company is reducing debt, an attractive aspect for buyers.

    Relevance of cash flow in the sale and purchase of companies

    Why is cash flow so crucial when valuing a company for sale? Here are the main reasons:

    ¿Por qué el flujo de caja es tan determinante al valorar una empresa en venta? Estas son las razones principales:

    1. Return on investment

    A positive cash flow gives buyers confidence that they can recoup their investment in a reasonable time. It also facilitates the projection of future financial returns.

    2. Financial stability

    Stable cash flow reflects an efficient business model, able to operate without excessive reliance on external financing. This reduces the financial risks perceived by investors.

    3. Ease of financing

    Companies with positive cash flows are better able to obtain financing on favourable terms. For buyers, this translates into a less risky asset with greater potential for expansion.

    Discounted cash flow and its role in valuing companies

    The discounted cash flow method projects the future cash flows of the company and adjusts them to their present value, using a discount rate that reflects the associated risks.

    For example, suppose a company generates an annual operating cash flow of 200,000 euros and has annual investments of 50,000 euros, leaving a net cash flow of 150,000 euros. If we project these flows out five years at a discount rate of 10%, we can estimate their net present value. This calculation provides an accurate and realistic valuation for informed negotiations.

    Current trends in company valuation 

    Company valuation has evolved, incorporating new approaches that complement traditional methods. An emerging trend is the consideration of ESG (environmental, social and governance) factors in valuation. Companies with sustainable and responsible practices can command higher valuations, as investors positively value their commitment to the environment and society.

    In addition, the growing importance of intangible assets, such as intellectual property, brands and human capital, has led to a reassessment of valuation methodologies. These assets, although not always reflected in traditional financial statements, can represent a significant part of a company’values, especially in technology and service sectors.

    The role of Confianz in company valuation

    Cash flow is a critical indicator that ensures informed and successful transactions in the sale and purchase of businesses. From financial stability to return potential, understanding it enables strategic decisions to be made.

    At Confianz, we are experts in advising companies in the sale and purchase process, helping our clients to optimise the value of their business and attract the right buyers. If you are looking for a detailed cash flow analysis and professional guidance at every step of the process, do not hesitate to contact us. Together we can ensure the success of your transaction.

  • All about Corporate spin-offs

    As a company grows, the challenges, issues and problems not only increase, but change. The organisation can become more complex, partners’ interests diverge and business risk threatens the accumulated wealth. This is where corporate spin-offs come in, a strategic operation, which we have discussed before and which allows companies to restructure, protect assets and improve operational efficiency.

    As this is a topic of great interest to our readers, in this article we explain what a spin-off is, what it is used for and how to carry it out successfully.

    What is a company spin-off?

    Corporate spin-off is the process by which the assets of a company are divided into two or more parts. These parts are transferred to new or existing companies, and the partners receive shares or participations in the resulting companies. In the case of a full spin-off, the original company is extinguished, but not liquidated, as its assets are not divided, but transferred.

    The decision is regulated by articles 68 to 80 of the Law on Structural Modifications of Commercial Companies, and its main objective is to adapt to the needs of the growing company, protect assets and optimise the management of the business.

    In which cases is a business decision useful?

    The reasons for demergers are as varied as the companies themselves, but the most common include:

    1. Protecting business assets
      High-value assets, such as real estate, are often exposed to business risk. A spin-off allows these assets to be separated from the day-to-day business by placing them in a risk-free company.
    2. Division of activities
      When a company operates in different lines of business, the spin-off facilitates their separation for more efficient management. For example, a business that combines manufacturing and distribution can split these activities into two separate companies.
    3. Resolving conflicts between partners
      In situations of disagreement or deadlock, the spin-off allows the assets to be divided and each partner to manage a new company according to his or her own interests.
    4. Simplifying complex structures
      Large companies can benefit from a decision to reduce organisational complexity and increase efficiency.
    5. Diversifying risks
      If one branch of the business is riskier than another, the spin-off helps to protect the overall financial stability of the business group.
    6. Facilitating the sale or attracting investors
      Separating a separate business unit from the rest of the enterprise can make it more attractive to potential buyers or investors.

    Types of corporate spmpany divisions

    There are three main types of spin-off, each with specific characteristics:

    1. Full spin-off

    The assets of the company are completely divided into two or more parts. The original company disappears, and its assets are distributed among new or existing companies.

    2. Partial spin-off

    One or more parts of the business assets are transferred to other companies, but the original company continues to exist. To be valid, the transferred parts must constitute separate economic units, such as a specific branch of activity.

    3. Segregation

    In this case, one or more parts of the assets are transferred to other companies, but the difference is that the hived-off company receives shares or participations in the resulting companies.

    Steps to carry out a company spin-off

    Making a business decision is a complex process that requires a series of steps to be followed precisely. Here are the main stages:

    1. Drawing up the draft terms of the spin-off

    This document is essential and should include:

    • Identification data of the companies involved.
    • Type of exchange of shares or units.
    • Economic reasons for the operation.
    • Valuation of assets and liabilities.
    • Articles of association of the resulting companies.
    • Accounting effect date.

    2. Independent expert report

    If any of the participating companies is a public limited company, an expert will assess the operation to ensure transparency and fairness.

    3. Preparation of the decision balance sheet

    This document details the financial situation of the company prior to the transaction and must be audited if the company is required to do so.

    4. Approval at the General Meeting

    The spin-off must be approved by the shareholders at a general meeting. The resolution must be published in the Official Gazette of the Commercial Registry (BORME) or in a widely circulated newspaper.

    5. Communication to workers

    It is mandatory to inform employees about the operation and its implications.

    6. Public disclosure and registration

    The spin-off agreement is notarised and entered in the commercial register.

    7. Subsequent formalities

    They include the tax and labour deregistration of the original company, and the communication to the Tax Agency about the application of the tax neutrality regime.

    Advantages of a well-excecuted spin-off

    1. Wealth protection : Separates strategic assets from business risk.
    2. Operational efficiency: Facilitates management and allows specific decisions to be made for each business unit.
    3. Strategic flexibility : Makes it possible to adapt quickly to changes in the market.
    4. Conflict resolution : It is an effective tool for overcoming social blockages.
    5. Attractive for investors: A clear and segmented structure improves the valuation of the business.

    Spin-offs in family businesses as a strategic tool

    In the context of family businesses, spin-offs have additional value. These companies often face challenges such as generational succession, conflicts between family members and the need to protect the wealth accumulated over the years.

    With a split, it is possible:

    • Separate activities so that each family branch manages its own business unit.
    • Ensure that historic assets, such as real estate, are protected from risk.
    • Prepare the company for succession, facilitating the transition to the next generation.

    Why do you need expert advice?

    Spin-off is a transaction that can transform your business, but it is also a technical process and fraught with legal requirements. Hiring experts in corporate restructuring ensures that:

    • All legal and fiscal requirements are met.
    • The operation is efficient and risk-free.
    • The full benefits of the tax neutrality regime are exploited.

    At Confianz , we have been accompanying companies in their spin-off processes for 30 years, ensuring that every step is aligned with their strategic and operational objectives.

    Is spin-off the step your company needs?

    If your company has grown, faces conflicts between partners or is simply looking for a more efficient structure, the decision could be the solution. Contact us and we can work together on a strategy that protects your assets and optimises your business.

  • The importance of corporate spin-offs

    Company spin-offs are an essential tool in corporate restructuring, allowing companies to adapt to new environments and improve their operational efficiency. This process, currently regulated by the Law on Structural Modifications of Commercial Companies, offers practical solutions to optimise resources and reduce risks. What types of spin-offs are there and why should you consider them?

    Types of corporate spin-offs

    Corporate spin-offs fall into three main categories: full, partial and segregation. Each offers specific benefits depending on the business objectives:

    1. Full spin-off: Divides all of the company’s assets into two or more separate parts. For example, a multinational company may create two separate entities to focus on different geographic markets. This strategy encourages specialisation and allows for better adaptation to local needs.
    2. Partial spin-off: Transfers only part of the assets, allowing the original company to continue operating. A typical case would be a technology company spinning off its consulting division into a new independent entity, while continuing to focus on its core business.
    3. Segregation: This involves transferring a specific business unit to a new entity, such as a food manufacturer creating a subsidiary to manage its beverage line. This approach allows diversifying risks and developing new business areas without compromising the core operation.

    Strategic advantages of corporate spin-offs

    Opting for a spin-off is not just an administrative issue; it implies a strategic transformation that can be decisive for business competitiveness. The main advantages include:

    • Greater operational efficiency: The specialisation of the resulting entities optimises resource management, maximising profits and enabling a more agile response to market demands.
    • Flexibility and adaptability to change: Companies can adjust their structure to address regulatory, economic or market changes. For example, implementing specific business policies according to business areas is easier after a spin-off.
    • Risk reduction: Separating business lines with different levels of risk protects the company’s assets. In case of problems in one unit, the others are not affected.
    • Attracting investors: Specialised entities are often more attractive to investors, especially in competitive markets. A clear and segmented structure increases confidence in the business model.

    How to start with a spin-off

    The first step in a corporate spin-off is to develop a detailed plan that addresses strategic objectives, resource requirements and legal and tax implications. This includes:

    1. Internal audit: Analyses the current state of the company to identify areas for improvement and potential risks.
    2. Spin-off project design: Defines how assets and liabilities will be distributed, ensuring transparency and fairness for the partners.
    3. Legal compliance: Ensures that the process complies with applicable regulations, including notifying authorities and obtaining necessary approvals.
    4. Implementation and monitoring: Carry out the spin-off as planned, making adjustments as necessary to maximise results.

    At Confianz, we have accompanied more than 400 companies in restructuring processes, including complex spin-offs. Our team combines legal and strategic expertise to offer customised solutions, ensuring that each client successfully achieves its objectives.

    If you are considering a spin-off, leave nothing to chance. Planning, compliance and flawless execution are essential to ensure positive results. We would be happy to discuss this with you in person if you wish.

  • How to avoid tax surprises with the new TEAC guidelines

    2024 is proving to be a year of change for companies that use holding companies as part of their structure. Recent TEAC rulings have put the spotlight on restructuring operations, and family and corporate companies are under the spotlight.

    Understanding the new criteria is the key to avoiding problems

    The TEAC’s message is clear: it is not about demonising holding companies, but about regularising operations that really represent a tax abuse. When a holding company acts as a mere vehicle for channelling dividends for personal use, the tax authorities act. But if the dividends are reinvested in business assets, the scenario is completely different.

    The intention of the tax authorities is not to prosecute all companies, but to focus on cases where corporate structures are used to avoid tax improperly.

    The importance of tax planning

    Proper planning is more important than ever. Companies with a sound investment plan and a clear structure are less likely to face problems. This not only avoids conflicts with the tax authorities, but also enhances long-term stability and growth.

    For example, reinvesting dividends in business assets, expanding shareholdings or developing new projects are strategies that strengthen a holding company’s tax position. Conversely, using dividends for personal investments, such as investment funds, can open the door to penalties and adjustments.

    What companies must do now

    1. Audit your current structure : Identify possible areas of risk in the use of holding companies.
    2. Define a sound investment plan: Channelling resources into business activities with clear objectives.
    3. Consult with experts: Specialised advisors such as Confianz can offer practical solutions adapted to each case.
    4. Ensure clear documentation: Keeping records of all business transactions and decisions is essential to demonstrate legitimate intentions.

    At Confianz, we understand the complexities of the new tax landscape and have successfully completed over 400 business restructurings. Our focus is http://www.confianz.esnot just on helping you comply, but on strengthening your business.

    The combination of strategy, planning and a thorough analysis of your business structure is the key to minimising risks and maximising profits. If you want to be prepared for the challenges of 2025, we are here to help.

  • What we have learned in these two years of insolvency reform in Spain

    Time goes by, and with it, the evolution of the legal and practical framework surrounding Law 16/2022 on insolvency reform. Two years after its entry into force, it is time to take stock, but not with a superficial view. The reality of corporate restructuring in Spain has changed, and this change is accompanied by lessons learned, challenges overcome and challenges to be solved.

    Pre-bankruptcy practice

    It is not news that restructuring plans are now the central focus to avoid insolvencies in Spain. However, numbers and experiences make it clear that we are not facing an easy path. Three out of four plans are still non-consensual, a fact that reflects the fact that reaching agreements between creditors and debtors is more complicated than it seemed.

    In addition to this, there has been a marked increase in litigation. Increasingly, courts are the arena where the limits and possibilities of restructuring plans are defined. Is this a bad thing? Not necessarily. This litigiousness has served to clarify key concepts, such as the perimeter of affectation or class formation, fundamental elements that are still under debate.

    At Confianz, we have seen first-hand how these disputes can become opportunities. Anticipation and clarity of strategy are key to avoiding problems that can otherwise escalate quickly.

    Innovations that have made a difference

    Internal financing and new financing have become undeniably important. This not only means more options for distressed companies, but also a change in how the affected credits are structured within aircraft. This type of financing has proven to be a lifesaver for many companies, although there is still room for simplification and standardisation in its application.
    Another element that deserves attention is the figure of the restructuring expert. Their role has established itself as an essential part of ensuring that aircraft are viable and have a real impact on business survival. But not all experts are the same. Experience and practical insight make the difference between a successful restructuring and one that falls by the wayside.

    The future of restructuring

    Increasing judicial scrutiny is a double-edged sword. On the one hand, it ensures that restructuring plans meet high technical and legal standards. On the other hand, it increases the complexity and time needed for approval. This brings an uncomfortable reality to the table: companies that act late have less room for manoeuvre.

    The tendency for creditors to file aircraft is still limited. Although this could change in the future, for now, the burden of initiative lies with the debtor. This fact underlines the importance of being well advised from the outset. At Confianz, we have learned that acting quickly and clearly in the early stages can make the difference between saving a company or letting it fall.

    Finally, the capitalisation of claims, although not widespread, offers an interesting horizon for certain companies. This mechanism, together with the strategic design of creditor classes, remains an under-utilised tool with enormous potential.

    The insolvency reform is not a magic solution, but it has opened doors that were previously closed. It has moved terms such as «restructuring plans», «scope of affectation» or «internal financing» out of the technical realm and into the day-to-day business world. However, its practical application remains as much an art as a science.

    At Confianz, we understand that every company is different and that standard solutions do not work in such complex contexts. That’s why we focus on offering customised strategies that combine technical robustness and flexibility. Experience has taught us that, although laws are important, what really makes the difference is how we apply them.

  • The TEAC ruling and its impact on family businesses

    The recent ruling of the Central Economic-Administrative Court (TEAC), linked to the tax treatment of family businesses, has set alarm bells ringing in this important sector of the Spanish economy. This decision, published on 24 September, introduces new requirements for accessing Wealth Tax and Large Fortune Tax exemptions. At Confianz, we have analysed its implications and how it affects both families and business structures.

    With more than two years since the introduction of the new Insolvency Act and other legislative changes, such as this TEAC ruling, the tax landscape for family businesses continues to evolve, requiring constant adaptation by business owners and their advisors.

    What does the TEAC ruling establish?

    The key to this resolution lies in how the functions of directors or administrators working in related companies are valued. Until now, it was common for directors of a family company to represent the company in subsidiaries or investee companies without receiving additional remuneration, assuming that this labour was included in their salary as directors. However, the TEAC has determined that these functions should be considered as a related-party transaction and remunerated separately, at arm’s length.

    This means that, if a director represents his company in other investees and does not receive a specific salary for this work, the tax authorities could quantify this activity, impute it to him in his personal income tax return and, furthermore, affect his right to the tax exemptions of the Wealth and Large Fortunes Tax.

    How does this affect family businesses?

    Tax exemptions for family businesses are designed to protect family businesses, which are a pillar of the national economy. These exemptions allow business assets not to be taxed under Wealth Tax and Large Fortune Tax, provided that certain requirements are met: that the manager receives remuneration for his or her burden and that this represents more than 50% of his or her total income.

    With the TEAC’s new interpretation, if it is considered that the administrator should receive a salary for his functions in subsidiaries or investees, and this salary exceeds what he receives from the main company, he could lose access to the exemptions. This does not only affect the administrator, but also all the partners of the family business, as the exemption is collective.

    For example, if the administrator’s salary in the main company is 100,000 euros per year and the tax authorities value his activity in other companies at 110,000 euros, the requirement that the main income comes from the family company would no longer be fulfilled. This would jeopardise the tax exemptions of the entire family structure.

    A challenge for tax and business planning

    This change represents a challenge for family businesses, which must review their tax structures and strategies to avoid future problems. The Tax Agency has already indicated that this resolution opens the door to more rigorous inspections, focusing on the role of directors in related companies and the correct assessment of their functions.

    In this context, a clear and detailed plan to comply with the new requirements is essential. Revising corporate agreements, ensuring adequate remuneration for directors and adjusting corporate structures to these new interpretations are essential steps.

    What can be done about this situation?

    While the TEAC ruling introduces complications, it also provides an opportunity to strengthen the management of family businesses. Some key measures include:

    1. Internal audits : Review the functions of directors and their remuneration in all related companies.
    2. Tax restructuring : Adapt corporate structures to ensure compliance with the new criteria.
    3. Proactive communication with the tax authorities: Provide clear and robust documentation to support business and tax decisions.
    4. Specialised advice: Having experts in tax and business law who can guide family businesses through this process.

    Call for the protection of the family business fabric

    Family businesses represent an essential economic engine in Spain, generating employment and contributing to local development. However, changes such as this one highlight the need for a stable fiscal framework adapted to the particularities of these structures.

    This new scenario requires a combination of foresight, strategy and expert advice. We are here to help family businesses and ensure that they remain a key pillar of our economy.

  • How corporate restructurings have shaped 2024

    Corporate restructurings in Spain in 2024, especially spin-offs and holding companies, are booming strategies that companies are using to optimise operations and compete. Corporate restructurings, which have already grown by 15% in the first quarter of 2024. And we are not just talking about numbers, but about decisions that transform businesses, improve operations and prepare companies for what lies ahead.

    Why so many firms are turning to restructuring

    The reasons are clear and each company has its own reasons. Some of the factors driving these decisions are:

    • Accelerated digitisation: Failure to adapt means falling behind.
    • Regulatory changes: new laws require more efficient and clearer structures.
    • Competitive pressure: competing globally means optimising every resource.
    • Search for tax savings: the right structure can make a big difference to your taxes.

    What is important is that these restructurings are not just responses to problems. They are also a way of discovering opportunities and improving.

    Splits. When dividing means winning

    Sometimes a company works best when it is broken up into more manageable parts. This is what we call spin-offs, a growing trend that has increased by 22% this year. But why make this decision?

    What are splits?

    • Full demerger: a company is split up completely, with its parts forming new companies.
    • Partial spin-off: a part of the business is spun off, but the main company continues to exist.

    What are the advantages?

    • Specialisation: each part of the business focuses on what it does best.
    • Attracting investors: some areas are more attractive if presented independently.
    • Conflict resolution: Dividing may be the best way to resolve differences between partners.
    • Tax optimisation: a clearer structure usually means fewer tax complications.

    Splits are not a retreat, but a strategy to move forward with more strength.

    Holding companies: are increasingly popular structure

    Another big trend this year is holding companies, which have grown by 18%. This type of structure allows a company to control several subsidiaries, centralising management and reducing risks.

    Why do companies choose a holding company?

    • Centralisation: facilitates decision-making for business groups.
    • Equity protection: if something goes wrong in one subsidiary, it does not affect the rest of the group.
    • International growth: this structure is ideal for companies that want to expand outside Spain.
    • Tax optimisation: tax consolidation can save a lot of headaches (and money).

    New trends in corporate restructuring

    1. Commitment to sustainability

    Companies are restructuring with a more sustainable approach. By 2024, 65% of restructurings in Spain will include sustainability-related objectives. This is not just a trend, but a necessity.

    2. Digitisation does not stop

    78% of companies are investing in automation and digital transformation as part of their structural changes. Going digital is not an option, it is a must.

    3. Hybrid work as a standard

    More and more companies are incorporating flexible working models in their restructurings. Seventy per cent of companies that have restructured this year have implemented telework or hybrid working policies.

    4. Focus on what matters

    Many companies are selling assets they no longer consider essential in order to concentrate on what really generates value for them. By 2024, 55% of restructurings have included the sale of non-strategic business units.

    Restructuring is not a decision to be taken lightly. They involve legal, tax and labour changes that, if not handled well, can be costly. This is where the support of an expert team comes in.

    At Confianz, we accompany our clients and design tailor-made solutions, adapted to the needs of each client.