How Spain's wealth tax became an unexpected boon for Britain

Yahoo

2 days ago

Amancio Ortega, Spain's richest man, is not a household name on Teesside. But the billionaire entrepreneur, best known for founding Zara, now looms large over the area.
The 89-year-old's €110bn (£95bn) family office, Pontegadea Inversiones, last week snapped up a 49pc stake in PD Ports, paying an undisclosed sum to Canadian investment giant Brookfield for the shares. PD operates major ports at Tees and Hartlepool.
The Spaniard already has a property portfolio in Britain worth £2.5bn, but until now he has mostly stuck to hotels, shops and offices. The PD Ports deal is his first major British foray into infrastructure and logistics.
Ortega's family office insists the investment is simply about good business. But observers note that the push into ports could have an advantageous side effect: lowering the billionaire's wealth tax bill.
Spain's notorious wealth tax was first introduced in 1977 as an 'emergency' measure, and was reintroduced in 2011 after a three-year hiatus as a 'temporary' measure. It takes an annual slice of between 0.2pc and 3.5pc of the value of every Spanish resident's worldwide assets.
The rules say that a Spaniard's combined tax bill on wealth and income should not exceed 60pc of their taxable income. That shifts the tax net away from the asset-rich-cash-poor, old-money crowd and more towards the high-earning end of the wealth spectrum – where Ortega stands out.
Ortega's personal fortune, which Forbes estimates at almost $115bn (£86bn), largely derives from his 59pc shareholding in his company Inditex, which owns the Zara brand he founded 50 years ago.
After leaving school at 14, he began working for a clothes shop in Galicia and started his first rag-trade business in the early 1960s.
However, it is not just a paper fortune: he also regularly receives billions in dividends, a form of income, from his empire.
This year, his dividend bonanza will top €3bn for the first time thanks to his stake in Inditex, which is held via two of Pontegadea's three subsidiary companies. He tends to reinvest almost all of this in buying properties and companies.
Most of Ortega's British investments are in scope of Spain's wealth tax. However, the rules say that if a rich Spaniard has a stake worth more than 5pc in a productive or trading business (which does not include real estate), that won't count towards his or her taxable wealth.
PD Ports is exactly this kind of investment.
Sources close to Pontegadea say most of the family office's assets would still get caught in the wealth tax net. They say it is standard practice to redeploy the dividends and other income into economically productive assets.
Still, Pontegadea has been visibly broadening its portfolio away from purely property in recent years, taking the kind of 5pc-plus stakes in energy and infrastructure companies that, if structured in certain ways, could qualify for that wealth tax exemption.
Sources said some of these investments might qualify the exemption and lower the wealth tax liability. But they said this was not the motivation for the choice of assets, nor the timing of deals.
Ortega's strategic shift has mostly been aimed at energy. In 2023, the year after a reform that tightened the wealth tax net, Pontegadea pumped a reported €693m into energy projects, more than twice the amount of the year before.
In the past five years his family office has acquired 5pc stakes in both electricity major Redeia and gas grid operator Enagas. Among its dozen-plus energy investments, it also owns 12pc of Portuguese electricity and gas system operator Ren, and has stakes in several solar and wind farms in Spain and France.
Beyond energy, in 2022 Pontegadea bought a one-third stake in telecoms provider Telxius, and last December it took a 20pc chunk of Dutch parking operator Q-Park.
The 49pc stake in PD Ports looks to be one of Ortega's largest ownership positions, putting Britain at the centre of Pontegadea's diversification strategy.
The investment highlights how Britain is benefiting from a deal-making spree overseen by Spain's richest man. It could also be read as a sign of the distorting effects of a wealth tax, which critics say can often do more harm than good.
'I don't think this tax collects a lot of revenue,' says Christopher McCann, a Spain-based senior partner at financial advisers Blevins Franks.
Calls for UK wealth tax
It comes as Rachel Reeves comes under pressure to consider just such a wealth tax for Britain to help fill a multibillion-pound hole in the budget.
Lord Kinnock, the former Labour leader, has called for a 2pc tax on assets over £10m and the party's union backers have also spoken out in favour of the idea.
Anneliese Dodds, a former shadow chancellor, last week also urged Sir Keir Starmer and Reeves to look at 'how it would be possible' to impose a levy on the assets of the richest Britons.
On Friday, Dame Diana Johnson, the policing minister, said on Friday it was important 'all these issues are looked at and discussed and we look at the evidence about what will work and what won't work'.
Despite the growing calls, senior ministers have downplayed talks of a wealth tax amid concerns it would hasten the stampede of wealthy leaving Britain after the abolition of non-dom status. Depending on the structure of any regime, it could also put off investors like Ortega.
The businessman is a little-known but significant presence in the British property sector. His flagship is the imposing neoclassical Adelphi building on Victoria Embankment in central London, which he bought for a reported €680m.
Pontegadea's other London assets include the 1920s commercial edifice Devonshire House, opposite the Ritz on Piccadilly; the roof-gardened Post Building in Bloomsbury; and a former BBC office near Oxford Circus.
In Companies House filings, Pontegadea valued its British portfolio at £2.4bn in March 2024, yielding rental income of £98m.
His worldwide real estate empire, worth a reported €20bn, spans Spain, Portugal, Italy, Germany, the Netherlands, Luxembourg, Ireland, Britain, Canada and the United States. Ortega is a landlord to the likes of Amazon, Walmart and Primark.
Although Pontegadea denies the wealth tax has played the driving role in Ortega's shift from pure property into energy and infrastructure, advisers say the tax figures are large in the financial planning of even moderately wealthy Spanish residents.
'If you have investment income, then by using the right structures you can squeeze down your taxable income, and you can reduce your wealth tax liability,' McCann says.
'It is possible to live here and pay a more reasonable level of tax just by good planning.'
Whatever the motivation behind Ortega's PD Ports play, you can be sure he has plenty of good financial planning.
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