December 2013

corporate & commercial LAW


We recently referred to the changes brought about by Law 16/2013 of 29 October, which introduced the possibility of marketing Spanish investment funds by using omnibus accounts, implementing a system similar to that applied in other neighbouring countries.

The use of omnibus accounts enables investments in a Spanish Collective Investment Scheme to appear in the register of shareholders of the fund manager under the name of the distributor, who acts on behalf of its clients, the ultimate investors. The use of omnibus accounts will facilitate cross-selling of investment funds among different distributors, thus maintaining the identity of the ultimate investor confidential.

In this context, the recently approved Royal Decree 960/2013 of 5 December ("Royal Decree 960/2013") develops and specifies the distributor’s withholding and information obligations.

In particular, according to Royal Decree 960/2013, the distributor in whose name the shares are registered, on behalf of the investors, will be required to make the relevant tax withholdings or payments on account attributable to the final investor, thus replacing the management company as withholding agent. As the distributor is the only entity that has information about the final beneficial owner of the shares of the collective investment Schemes, it will also have to comply with the reporting obligations to the tax authorities.

These reporting, calculation and payment of withholdings obligations will always be based on the data contained in the internal registries of the distributor, with no obligation for the distributors to provide information on the identity of the final investors to the management company, thus preserving the confidentiality sought by the use of omnibus accounts. Meanwhile, the managing entity must maintain a general registry with the aggregate global position of those distributors acting on behalf of third parties.

Finally, Royal Decree 960/2013 provides a special rule for determining the taxable amount subject to withholding tax or payment on account applicable to redemptions made by an investor who had simultaneously maintained participations in the same investment fund through two or more distributors.

The reform entered into force on 7 December 2014.

The information contained in this Newsletter is of a general nature and does not constitute legal advice