Tax treatment of Carried interest in Spain for Personal Income Tax purposes


The Spanish Parliament has approved on 1 December 2022 the Law to foster the start-up ecosystem in Spain, also known as the “Start-up Law”. The main goal of the Start-up Law is to establish a specific regulatory framework to support the creation and growth of start-ups. This Law will probably be published in the Spanish Official State Gazette in the first months of 2023 and will enter into force the day after its publication.

Although they are not linked to the investment in start-up companies, special rules regarding the taxation of  carried interest for Spanish Personal Income Tax (“PIT”) purposes are introduced for the first time at a country level by this Law.

As a general definition, carried interest is a performance fee (i.e. share of profits) earned by general partners/managers of private equity, venture capital, and hedge funds. It is generally due based on a role rather than on an initial investment in the fund and its purpose is to align the general partner’s/managers’ compensation with the fund’s return.

This carried interest will be regarded as labor income (and not as capital gains) for PIT purposes and will benefit from a 50% exemption without limitation if the following requirements are met:

  • It derives from the participation or certain rights in one of the following entities:
  • Closed-ended alternative investment funds regulated by Directive 2011/61/UE included in one of the following categories:
  1. Venture capital entities included in Article 3 of Law 22/2014;
  2. European venture capital funds regulated by Regulation (EU) 345/2013;
  3. European social entrepreneurship funds regulated by Regulation (EU) 346/2013;
  4. European long-term investment funds regulated by Regulation (EU) 2015/760; or
  • Other investment undertakings analogous to those defined in point (i) above.
    • The recipient shall be a director, manager or employee from one the entities described above, the management entity of one those entities, or one entity within the group of those entities;
    • The carried interest is conditioned to the rest of the investors receiving a minimum return guaranteed in the entity’s legal regulation or bylaws and the participation from which the carried interest derives shall have been maintained for a minimum period of 5 years from the first moment that such return is obtained.

Impact of the carried: marginal tax rates for labor income under PIT ranges between 47%-54% approximately in Spain, depending on the region. Now due to the application of the 50% exemption, it will be between 23% and 26% (similar to tax rates applicable to capital gains).


Andrés Máiz | Senior Associate of the Tax Department

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