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March, 2014
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  The Spanish ETVE – New Zealand Trust Structure for investment in Latin America


Spain’s onshore reputation and global network double taxation treaties provide Spain with an excellent platform from which to offer international onshore structures. In conjunction with the solid reputation of New Zealand, a Spanish ETVE-New Zealand trust structure can not only provide the Latin American market a 0% tax exit route, but a long-term solution as well1. For Latin American companies and individuals in need of an exit route to anywhere in the world, the ETVE - New Zealand trust structure can provide the following major advantages:

  • No withholding taxes on outgoing dividends and capital gains provided certain conditions are met;
  • Wide participation exemption at the level of the Spanish company (ETVE) for received dividends and capital gains;
  • No withholding tax (WHT) from the ETVE to our New Zealand trustee;
  • New Zealand foreign trusts (where the Settlor(s) and beneficiaries are not New Zealand residents) are not subject to taxation in New Zealand;
  • There is no capital gains taxation, transfer tax or stamp duty in New Zealand – providing for an excellent exit strategy and/or future restructuring.

The Spanish ETVE - New Zealand Trust Structure

The base for this strategy is founded on the Spanish ETVE tax regime (Spanish holding companies). The option for the tax regime must be notified to the tax authorities by the ETVE itself. The shares of the Spanish entity choosing to apply the ETVE regime must be in registered form.

The Spanish Limited Liability Company (Spanish S.L.) is a suitable entity for ETVE holding purposes. The S.L. provides its shareholders with limited liability, has a minimum capital requirement of only €3,005.06 (significantly lower then the Spanish S.A.) and is more flexible than a Spanish S.A. from the perspective of commercial law.

Under the ETVE regime, dividends and capital gains are exempt at the level of the Spanish holding company provided certain conditions are satisfied. An exemption from withholding tax is provided for the distribution of dividends realized from the income (exempt) and capital gains from the transfer of the Spanish holding company’s shares. In broad terms the requirements are the following:

  • A minimum participation of 5% (directly or indirectly) in the equity of the foreign subsidiary or where the acquisition value is in excess of €6 million;
  • The participation must be held for an uninterrupted period of at least 12 months;
  • A foreign participation (subsidiary) must be subject to a tax regime equivalent to that of Spain. This is generally satisfied when the foreign participation is resident in a country that has concluded an income tax treaty with Spain that includes an exchange of information clause (all except the Swiss treaty); and
  • At least 85% of the income of the foreign participation must originate from an active trade or business. A participation with passive income in excess of 15% will not qualify.

A Spanish company needs to be established with at least one individual or corporate director appointed. An Amicorp (in house) New Zealand Trustee Company will hold the shares of the Spanish company through a trust that should be established prior to, or on the same date that the shares of the Spanish company are transferred to the Amicorp trustee. The Spanish ETVE must have enough human and material resources to manage the foreign subsidiary.

The New Zealand tax authorities have formally approved the use of foreign trusts as outlined above.

Prior to the date that the New Zealand Trust is established the Settlor can select his choice of Trustee, so long as such Trustee is either an Amicorp New Zealand Trustee or a Private Trust Company that is New Zealand resident. The Settlor can retain the authority to appoint and remove Trustees, during his lifetime, although it is highly recommended that a Protector be appointed with such authority instead. The Settlor may also advise / request that distributions should be made and the Trustee would usually follow such requests so long as the person benefiting is a beneficiary of the trust or the funds are paid to a third party for the benefit of a beneficiary of the trust.

Pursuant to New Zealand trust law, the Trustee usually has the discretionary authority to manage the trust fund and its investments, as well as to administer distributions to trust beneficiaries. However, subject to the agreement of the Trustee, it is also possible for investment management authority to be delegated to the Settlor or a person with investments expertise, as nominated by the Settlor. However, the authority to "distribute" should always be retained by the Trustee. In the case of a PTC, the Settlor may have more control over distributions if he is the sole director of the PTC.

The tax efficiency of the structure is based on the fact that, with regard to the payment of dividends by the ETVE to the New Zealand Trust, the trustee is considered to be the beneficiary. This is determined by the Protocol to the Tax Treaty between New Zealand and Spain.

The following diagram illustrates this structure:

A possible addition to this trust structure can be an investment entity (e.g., a Netherlands C.V.) holding the shares of the Spanish E.T.V.E. Such investment entity can hold for instance a portfolio account with a foreign bank. For the purpose of distributions from the Spanish E.T.V.E. to the trust the investment entity will be considered transparent by the Spanish tax authority and as such the E.T.V.E can make tax free distributions of dividends to the investment entity.

In such case, the structure will be as follows:

  For more information:  
  Wayne Pearson
Amicorp New Zealand Ltd.
Tel.: +64 9 304 2640
Dorian Burzaco
Amicorp de Espana S.L. (Barcelona)
Tel.: +34 (93) 241 7563
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This document is prepared for general information purposes only. Amicorp Group does not provide tax or legal advice to its clients. Any opinions contained herein should not be construed or interpreted as advice provided by Amicorp Group.