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Under recent changes introduced by the Spanish government, venture capital companies and funds (SCRs) are redefined as those whose main purpose is the promotion, through the acquisition of temporary shareholdings, of non-financial unlisted companies which are not more than 25% owned by companies listed on the Stock Exchange or companies considered to be 'financial entities' (qualifying companies). Under the new rules, qualifying companies are no longer required to be small or medium-sized companies or to be involved in technological or other innovative fields.

Qualifying companies may be financed not only through the acquisition of shareholdings but also through any other funding source, including participating loans. The importance of SCRs' advisory activity is expressly recognized.

With respect to SRCs' assets, at least 60% must be invested in qualifying companies' shares, and alternative funding sources may account for up to 15% of that percentage. The remaining assets must be invested in shares of non-qualifying companies and fixed assets (up to a maximum of 10% each), fixed-income securities traded in secondary markets, cash and short-term securities.

To avoid excessive concentrations of risk, SCRs may not invest more than 15% of their assets in any one company or more than 35% in companies belonging to the same group. Under no circumstances may they invest in companies belonging to their own group.

Lastly, the tax burden on SCRs is eased. An exemption of 99% is granted for capital gains deriving from the sale of qualifying companies' shares from the second year and until the 10th year of the holding. This exemption is not applicable if the capital gains are generated outside this period.

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