Family Office: Protect and Transfer Business Wealth Across Generations

A family office is a private advisory structure that coordinates the management, protection, and inter-generational transfer of the wealth held by a business-owning family, integrating tax planning, legal structuring, investment management, succession planning, and governance advisory into a single framework. In Spain, family wealth management intersects multiple tax regimes: Corporate Income Tax (LIS) and Wealth Tax (IP/ITSGF) on the holding structure, Personal Income Tax (LIRPF) on distributions, and Inheritance and Gift Tax (ISD) on transfers — where Article 20.2.c LISD provides a reduction of up to 95% on the taxable base for transfers of qualifying family business interests, subject to maintaining the conditions for five years post-transfer. Family holding companies (sociedades holding familiares) are the most common structural vehicle, providing participation exemption on dividends under Article 21 LIS, asset protection, and a cleaner architecture for succession planning.

Business-owning families face singular challenges that private banking alone is not equipped to resolve: the separation of personal and business wealth, managing inter-generational interests and conflicts, tax optimisation of holding structures, and succession planning in its legal, fiscal, and emotional dimensions.

Why Business Families Need a Professional Structure to Protect and Transmit Their Wealth

Business-owning families accumulate wealth through decades of entrepreneurial effort, yet rarely have the professional structures needed to protect and transmit it. Wealth concentrated in operating companies carries concentration risk and generates annual wealth tax exposure. Holding structures that were never properly designed produce unnecessary tax leakage on dividend flows. Succession has not been planned, meaning that a founder’s death or incapacity triggers family conflict, inheritance tax bills that force asset sales, and uncertainty about business continuity — all simultaneously. No single adviser has ever looked at the complete picture. Our family office service is built precisely to fill that gap — a single point of coordination across tax, legal, finance, real estate, and private banking, with continuity of knowledge about the family’s full situation.

Our Family Wealth Diagnostic and Family Office Structuring Process

The engagement begins with a comprehensive wealth diagnostic: mapping the full family balance sheet, identifying structural inefficiencies, and quantifying the tax cost of the current arrangement against optimised alternatives. This diagnostic frequently reveals that the family business exemption for Inheritance and Gift Tax is not being fully maintained — either because the qualifying conditions were never formally verified, or because they have been inadvertently eroded as the founder’s active involvement changed. We then design and implement the recommended structure — holding companies, family investment vehicles, succession plans — and develop the family protocol that articulates governance rules across generations. The protocol covers admission of family members to the business, remuneration of active and passive shareholders, dividend policy, and exit mechanisms for those who do not wish to continue. The succession planning and tax planning teams work in close coordination to ensure legal structure and tax optimisation are designed as a coherent whole.

Real Results in Family Office: Tax Efficiency and Generational Continuity

• Comprehensive wealth diagnostic with full family balance sheet mapping and tax cost quantification of current vs optimised structure.
• Holding company design and implementation: participation exemption on dividends, asset protection, and family business exemption maintenance for ISD purposes.
• Family protocol drafted and formalised: admission rules, remuneration, dividend policy, and exit mechanisms agreed in writing before conflict arises.
• Succession plan integrating legal structure, tax efficiency, and family consensus — the generational transfer becomes a managed transition, not an existential risk.
• Next-generation onboarding programme: financial education, governance training, and structured involvement pathways that prepare heirs to take on responsibilities.

Family wealth management in Spain sits at the intersection of Corporate Income Tax (LIS), Personal Income Tax (LIRPF), Wealth Tax (IP/ITSGF), and Inheritance and Gift Tax (ISD). The family business exemption under Article 20.2.c ISD can reduce ISD by up to 95% on qualifying family business transfers — but requires active maintenance of qualifying conditions for five years post-transfer. Anti-avoidance rules in the LGT and LIS restrict the use of purely interposing holding structures without genuine economic substance. For families with international connections, EU and OECD rules on cross-border estate planning and exchange of information create additional complexity requiring specialised advisory. Our wealth tax specialists ensure that the IP and ITSGF dimensions of the family structure are managed alongside the ISD and corporate tax dimensions.

Regulatory Framework Governing Family Office Structures in Spain

Family office advisory in Spain operates at the intersection of five distinct tax regimes and the corporate law framework that governs holding structures:

Holding company legislation (LSC and LIS): Family holding companies (sociedades holding familiares) are typically structured as Sociedades de Responsabilidad Limitada or Sociedades Anónimas under the Ley de Sociedades de Capital (RDL 1/2010, LSC). The tax efficiency of a holding depends principally on Article 21 LIS (participation exemption on dividends and capital gains from qualifying holdings ≥ 5% or acquisition cost ≥ EUR 20M, held at least one year) and Article 100 LIS onwards (tax consolidation for groups, enabling intra-group dividends without withholding tax). Anti-avoidance provisions in Arts. 15(e) and 17 LIS restrict holding structures that lack genuine economic substance.

Inheritance and Gift Tax — the empresa familiar regime: Article 20.2.c) LISD provides a 95% reduction in the ISD taxable base for transfers (inter vivos or mortis causa) of qualifying family business interests, subject to: (i) the transferred business being the principal source of income for the transferor; (ii) assets qualifying as empresa familiar — i.e., management functions exercised and remuneration constituting more than 50% of the transferor’s business and professional income; (iii) the transferee maintaining the position for at least five years post-transfer. Article 20.6 LISD extends the 95% reduction to business assets transferred to descendants even where no reduction was applied at the prior generation.

Wealth Tax (IP) and the Impuesto Temporal de Solidaridad de Grandes Fortunas (ITSGF): The empresa familiar exemption also applies to IP under Article 4.8 LIIP, exempting qualifying business interests from the 0.2%–3.5% IP scale. The ITSGF (Law 38/2022) applies a 1.7% rate on net worth above EUR 3M (1.7%), EUR 5M (2.1%), and EUR 10M (3.5%) at state level, partially crediting IP paid at regional level. For families in high-IP-bonification regions (Madrid 100% IP bonification), the ITSGF has significantly altered the family wealth tax position.

IRPF — distributions and salary design: Dividends received by family shareholders from the operating company are subject to IRPF savings tax rates (19%–28% scale). Salary payments for management services are deductible in the operating company (reducing IS) but taxed as employment income in the shareholder (up to 47% marginal IRPF). The optimal split between dividends and salary requires annual recalculation. Contributions to pension plans (individual and employment) provide IRPF deductions up to regulatory limits and are a standard tool in family office compensation planning.

International dimensions — CRS/FATCA and trusts: Spain’s obligations under the Common Reporting Standard (OECD CRS) and FATCA mean that financial accounts, trusts, and foundations held by Spanish residents outside Spain are automatically reported to AEAT. Model 720 (overseas asset declaration) imposes substantial penalties for non-declaration. Families with international assets — Swiss accounts, English trusts, US investments — require coordinated advice from BMC’s international tax team to ensure CRS/FATCA compliance while maintaining legitimate structures.

Sectors and Family Business Profiles Served

Industrial and manufacturing family groups: Multi-generational manufacturing businesses — often in food processing, construction materials, chemicals, or industrial components — with turnover between EUR 10M and EUR 200M. Key issues: holding structure for participation exemption on dividends, succession planning across second and third generations, separation of real estate assets from operating companies, and private equity entry or exit.

Real estate family groups: Families whose principal wealth is concentrated in commercial and residential property portfolios (EUR 5M–EUR 100M). Key issues: SOCIMI conversion analysis, IP exposure on property assets, tax-efficient management of rental income under the holding, succession to descendants, and non-resident family members’ IRNR compliance.

Technology and services founders: Founders of tech-enabled businesses approaching exit (EUR 5M–EUR 50M enterprise value). Key issues: pre-exit holding restructuring to access the participation exemption on the capital gain (Art. 21 LIS), IRPF capital gains deferral through reinvestment or holding-level retention, Beckham Law analysis for founder and key team members, and post-exit family office construction.

Agri-food and agricultural families: Murcia Region horticultural exporters, Andalucía olive oil producers, and Castilla grain farming families with significant land and processing assets. Key issues: empresa familiar exemption qualification for agricultural assets, cooperative versus company structure optimisation, EU PAC subsidy tax treatment, and succession to heirs who may have already emigrated.

International families with Spanish connections: UK, German, French, and Latin American families with Spanish real estate, business interests, or residency. Key issues: tax residency determination (Hacienda residency test — 183-day physical presence plus centre of economic interests), IRNR vs IS on Spanish-source income, DTA planning, and multi-jurisdiction estate planning.

Company and Wealth Size Segmentation

Family wealth EUR 5M–EUR 20M (family office foundation): Holding company design, empresa familiar qualification diagnostic, family protocol drafting, IP/ITSGF mitigation, and ISD succession plan. Typically a one-time engagement (EUR 12,000–EUR 30,000) plus annual maintenance retainer (EUR 3,000–EUR 6,000).

Family wealth EUR 20M–EUR 100M (comprehensive family office): Full single-family-office equivalent service: holding architecture, multi-entity compliance, investment portfolio oversight, international tax compliance (M-720, CRS reporting), family governance design, and succession implementation. EUR 6,000–EUR 15,000 per month depending on complexity and number of entities.

Family wealth above EUR 100M: Dedicated senior partner-led team, dedicated holding entity management, CNMV-level disclosures if any entity is listed, cross-border estate planning, and philanthropy advisory. Fees by agreement based on scope.

Worked Example: Industrial Group Holding Restructure and Succession Planning

A second-generation family owned a Valencian industrial components manufacturer (EUR 48M annual turnover, EUR 22M EBITDA) through personal shareholdings held directly by four siblings. The business was founded by their father, who retained 30% and the four siblings held 70% combined. No holding company existed. The founder was approaching 72 with no formal succession plan.

Diagnosis: The four siblings each paid personal IRPF on dividends at 28% (above EUR 300K threshold). Wealth Tax (IP) exposure on the business shareholding was not exempted because the founder’s involvement (now part-time) did not clearly meet the empresa familiar test. No family protocol existed; governance decisions required unanimous agreement among five shareholders with divergent views on dividend policy, reinvestment, and a potential private equity process.

Recommended structure:

• Creation of a family holding company (Nuevas Inversiones, SL) to hold 100% of the operating company, enabling dividends to flow to the holding free of withholding tax (intra-group exemption under Art. 21 LIS).
• Restructuring via a tax-neutral exchange of securities (Art. 83 LIS) so that all five siblings transferred their shares to the holding in exchange for holding shares — IS and IRPF neutral.
• Founder’s holding shares structured with a usufruct retained by him and bare ownership transferred to heirs, with ISD calculated only on the usufruct value.
• Family protocol negotiated and formalised over 3 months: equal voting rights in the family council but weighted board representation for active shareholders; 40% dividend policy; 3-year lock-up for any sale process; buy-out mechanism at trailing 12-month EBITDA x 6 for any shareholder exiting.
• Empresa familiar qualification formalised: founder’s remuneration from the operating company documented to exceed 50% of his net employment and business income, IP exemption secured.

Outcomes: Annual dividend tax saving (IS 0% vs IRPF 28%): EUR 1.54M per year on EUR 5.5M dividends flowing through the holding. IP exemption secured for four active siblings (IP exposure eliminated on approximately EUR 28M in total shareholding value). Family governance operational. Succession plan in place: estimated ISD on founder’s 30% stake reduced by 95% empresa familiar reduction from approximately EUR 2.1M to EUR 105,000. Private equity process initiated 18 months later on a clean, governance-compliant structure.

Five Common Mistakes in Family Office Advisory

1. Not formally verifying empresa familiar qualification. Many families assume the 95% ISD reduction will be available at succession without ever formally confirming the qualifying conditions are met. The test — principal source of income, management functions exercised, relevant remuneration — requires annual documentation. A founder who has become passively involved risks losing qualification and exposing the family to ISD of 30%–34% on the full business value.

2. Holding dividends in the operating company rather than flowing them to a holding. Families that have not established a holding pay IRPF at up to 28% on dividends received personally. A holding receiving the same dividends from a 5%+ qualifying subsidiary pays IS of 0% under the participation exemption. The annual tax cost of this difference on a EUR 3M dividend distribution is up to EUR 840,000.

3. Drafting a family protocol without a dispute resolution mechanism. Many family protocols address admission to the business, remuneration policy, and dividend distribution — but omit a compulsory buyout mechanism for shareholders who wish to exit. When a shareholder later wishes to sell to a third party or is in conflict with the family, the absence of a buyout mechanism creates an impasse that is resolved by expensive litigation rather than the protocol itself.

4. Failing to manage IP/ITSGF exposure on non-business assets within the family. The empresa familiar exemption protects qualifying business interests from IP, but real estate held outside the business, financial portfolios, and other non-business assets remain fully exposed. Families whose net worth is split between business (IP-exempt) and other assets (IP-taxable) often have IP/ITSGF exposure on the non-business component that has never been formally assessed or structured.

5. International assets not declared under Model 720. Spain’s overseas asset declaration requirement (Model 720, introduced by Law 7/2012) requires Spanish tax residents to declare overseas accounts, securities, and real estate above EUR 50,000 by 31 March annually. AEAT’s access to CRS data means that undeclared overseas assets are increasingly detected. Penalties for late or incorrect Model 720 declarations, while reduced by the ECJ ruling in Case C-788/19, remain significant.

How We Work: Our Family Office Advisory Process

Phase 1 — Wealth diagnostic (weeks 1–4): We map the complete family balance sheet: operating companies (with enterprise values), real estate, financial assets, private equity interests, and overseas holdings. We calculate current IP/ITSGF exposure, annual dividend tax cost, and ISD exposure on the current structure. We identify whether the empresa familiar conditions are currently met and, if not, what remediation is needed. The diagnostic report sets out the quantified gap between current and optimised positions and recommends a structural roadmap.

Phase 2 — Structural design (months 2–4): We design the recommended holding architecture and succession structure in detail, including the tax-neutral restructuring mechanism (Art. 83 LIS exchange, Art. 87 LIS non-monetary contribution), the IP/ITSGF exemption maintenance plan, and the ISD succession plan for each generation. Legal documentation is prepared in coordination with the notarial team.

Phase 3 — Family protocol and governance (months 3–6): We facilitate and draft the family protocol through a structured negotiation process with all family stakeholders. The protocol addresses: business entry and exit criteria, remuneration of active and passive shareholders, dividend policy, buyout mechanisms, and dispute resolution. The completed protocol is formalised as a binding shareholder agreement.

Ongoing — Annual family office retainer: Annual retainer services include: IS/IRPF/IP/ITSGF compliance for the holding and family members, empresa familiar qualification review, investment portfolio oversight, CRS/Model 720 compliance, and family governance support. We provide an annual family wealth report summarising the full financial and tax position across all family entities.

The family office model: structures and services

A family office is a professional structure dedicated to managing the financial affairs, investments, legal obligations, and administrative requirements of a wealthy family or individual. The model originated among the ultra-high-net-worth families of 19th-century America but has become the dominant wealth management approach for families with significant assets — typically above EUR 5 million in investable assets — across Europe and Spain.

The distinction between a single family office (SFO) and a multi-family office (MFO) is significant. An SFO is dedicated exclusively to one family and requires sufficient assets (typically EUR 30-50 million or above) to justify the fixed cost of dedicated professional staff. An MFO, by contrast, provides family office services to multiple client families through a shared cost structure — which is the model BMC employs for most of our family office clients in Spain, the Canary Islands, and internationally.

Investment advisory and portfolio management

At the core of family office services is investment management: constructing and maintaining a portfolio of financial assets (listed equities, bonds, funds), alternative investments (private equity, real estate, infrastructure), and direct business holdings that meets the family’s return objectives and risk tolerance over a long-term horizon.

Our investment advisory does not compete with private banks or asset managers — we work alongside them, acting as an independent investment controller and adviser. Our role is to provide independent oversight of investment performance, manage the relationship with multiple investment providers, and ensure that the overall portfolio is coherently structured rather than being the accidental accumulation of individual products sold by various institutions.

For families with direct business holdings, we integrate corporate finance and valuations advisory to ensure that private company assets are assessed on a comparable basis to market-priced financial assets.

Tax and fiscal planning for wealthy families

Wealthy families face a specific tax planning challenge: the intersection of personal income tax (IRPF), Wealth Tax (IP), Inheritance and Gift Tax (ISD), and corporate taxation of holding structures creates a multi-dimensional optimisation problem that requires coordinated advice from specialists across all dimensions.

In Spain, the specific fiscal geography — the Comunidad de Madrid offers a 100% IP exemption; the País Vasco and Navarra apply their own foral regimes; the Canary Islands’ ZEC offers IS advantages — means that residency and asset location decisions have material and permanent fiscal consequences. Our wealth tax and inheritance tax teams work closely with our family office advisers to ensure that structure decisions are always made with a full understanding of the long-term fiscal consequences.

For international families, non-resident tax advisory and treaty planning are central to the family office engagement — particularly for clients who split time between Spain and other countries and must manage the risk of inadvertent Spanish tax residency or double taxation.

Succession and governance

One of the most important and underserved aspects of family wealth management is the transition of control and ownership from one generation to the next. Without a formal succession structure — a succession plan, a family protocol, and the institutional governance mechanisms to implement it — even well-constructed wealth structures can be damaged by the conflicts and inefficiencies that arise when family members have incompatible expectations about ownership, management roles, and distributions.

Our succession planning and corporate governance teams provide the institutional design work that underpins effective multi-generational wealth transfer. This includes family constitution design, family assembly and family council structures, and the legal documentation (wills, shareholder agreements, usufruct arrangements) needed to implement the agreed succession plan.

Contact our family office team for a confidential discussion of your family’s wealth management and succession planning needs.