Tax advisor Alex Algarci asserts that Economic Interest Groups (AIEs) offer a tax yield of up to 130%, allowing for a drastic legal reduction in income tax.
Tax advisor Alex Algarci revealed in an interview on Quorvm Podcast two legal ways to pay almost nothing or zero income tax in Spain, particularly highlighting investment in Economic Interest Groups (AIEs). According to the expert, this vehicle offers a tax yield that can reach 130%, far exceeding any traditional financial return.
"There are projects where the economic return can be practically nil, but the tax yield reaches 130%," Algarci states. The key is that AIEs allow tax incentives to be transferred to investors, so the tax savings more than compensate for any potential lack of economic benefit.
What is an AIE and how does it reduce income tax
Economic Interest Groups are legal entities outlined in Spanish regulations that group individuals or companies to develop a common economic activity. Their main fiscal appeal lies in the fact that investors can deduct a significant portion of their investment on their income tax return.
Algarci gives an example: "The company could generate zero euros in profit for five years, and you would still achieve a very significant return thanks to the tax effect." This means that the taxpayer does not need the project to generate economic profits to benefit; merely investing provides a tax saving.
The expert explains that the savings depend on the amount invested and the situation of each taxpayer, but the impact can be very significant. "If you invest a certain amount in this product, you eliminate 50% of your income tax; you only have to pay the other 50%," he assures.
Requirements and warnings for investing in AIEs
However, Algarci warns that this is not a valid formula for every taxpayer. The main requirement is to have sufficient liquidity to make the initial investment. "The major barrier, besides fully understanding the product, is liquidity," he points out.
The advisor insists that no one should invest without first understanding how the operation works and what its risks are. In fact, before launching this type of project, he consulted the structure with several specialists in the legal and tax fields. "I wanted them to tell me where I was going wrong. If I wasn't wrong, it was a huge project," he recalls.
For a long time, there were only solutions for people moving abroad or for large estates
Algarci acknowledges that one of his biggest frustrations was not being able to offer tax alternatives to those who conduct all their economic activity in Spain. "Many called us saying: 'There are only solutions for the rich or for those going abroad.' And we wanted to find an answer for those people," he explains.
This search led to the development of new strategies aimed at Spanish residents who wish to reduce their tax burden by taking advantage of incentives provided by current legislation. The expert emphasizes that all strategies must be based on mechanisms recognized by the regulations and properly structured.
What it means for the taxpayer
For a taxpayer with high income, investing in an AIE can mean a tax saving of up to 50% of income tax, provided that liquidity requirements are met and the product is understood. However, Algarci insists that each case must be analyzed individually and that these types of operations are not universal.
The Spanish tax system offers incentives that many taxpayers are unaware of, but taking advantage of them requires planning, specialized advice, and a clear understanding of what is being invested in. "I don't want anyone to invest without understanding what they are doing," he concludes.
Those interested in exploring this avenue should consult with a specialized tax advisor and assess their liquidity capacity before committing. The 130% tax yield may be tempting, but it requires a deep understanding of the product and its risks.
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