Concentration is almost never a decision. It is the residue of something that worked. A founder sells part of a business and keeps the rest. An executive accumulates twenty years of equity awards in one employer. An inheritance arrives as a single holding that the previous generation would not sell either. In each case the position is large, it is in gain, and the reason it has not been reduced is that reducing it costs money on the day.
The conversation that follows is usually framed as risk against tax, as though the two were being weighed on the same scale. They are not comparable quantities. The risk is a probability distribution over a long period; the tax is a certain payment in a known year. What can be done is to make the certain side of that comparison accurate, and to understand which of the standard answers actually reduce it and which only move it.
What the obvious answer costs
Selling is the complete solution to the risk and the most expensive solution to the tax. In Spain the savings income scale in article 66 of Ley 35/2006, the Personal Income Tax Act, as rewritten with effect from 1 January 2025 by the seventh final provision of Ley 7/2024, runs at 19 per cent up to 6,000 euros of savings base, 21 per cent to 50,000, 23 per cent to 200,000, 27 per cent to 300,000 and 30 per cent above that. Those are combined figures, because the Act splits the charge into a state scale in article 66 and a matching autonomous scale in article 76, each carrying half of the rate.
The shape of that scale matters more than its top rate. Because the bands are narrow relative to the size of a concentrated position, a single large disposal lands almost entirely in the highest band, and the effective rate on the whole gain converges on the marginal one. A holder whose average rate across smaller annual realizations might be materially lower pays close to the top rate for doing it once.
The other number that decides the outcome is the acquisition cost, and here the allocation rule is not optional. Article 37.2 of the same Act provides that where homogeneous securities exist, those transferred are deemed to be the ones acquired first. A holder who has accumulated the same line over two decades sells the oldest and cheapest lots first, so the early disposals carry the largest gains and the highest tax, precisely the opposite of the intuition that partial selling starts gently.
Selling in tranches, and what it does not solve
The standard response is to sell across several years. It works, within limits, and the limits should be stated honestly.
What it achieves is the use of lower bands more than once. What it does not achieve, in a first in, first out system, is a lower cost basis problem, because the cheapest lots go first regardless of how the sales are spread. And what it does not address at all is the reason for selling: a position sold over five years is a concentrated position for four of them, carrying the risk the exercise was meant to remove.
There is also a behavioural cost that advisers understate. A multi-year selling programme requires a decision every year, in a market that will be up in some of those years and down in others. Programmes agreed in a calm year are routinely suspended in a bad one, at exactly the point where the concentration is doing the damage it was expected to do.
Where tranching is used, it should be written as a rule with dates and quantities rather than as an intention, and the rule should say what happens when the price falls.
Losses, and the window that removes them
Offsetting gains with realized losses elsewhere in the portfolio is the one technique that reduces the tax without moving it. It is also the one most often executed incorrectly.
Article 33.5 of the Act disallows losses on the disposal of securities admitted to trading on an official secondary market where the taxpayer acquires homogeneous securities within the two months before or after the disposal, and extends the window to one year for securities not so admitted. The disallowed loss is deferred rather than forfeited, becoming available as the remaining securities are disposed of, but deferral is not what the exercise was for.
The practical constraint is that the loss position cannot be reinstated quickly. Selling a holding at a loss and restoring the same exposure within the window defeats the whole operation, so the portfolio has to tolerate either a gap in that exposure or a genuinely different one. Where the loss and the gain are being realized in the same year, the sequencing has to be planned across the whole portfolio and across both windows, not just the two-month one.
Contributing the position to a company
The alternative most frequently proposed is to place the shares into a holding company, so that future disposals occur inside a corporate structure and the proceeds can be reinvested before any personal tax arises.
It is a real technique and it is not a way of avoiding the charge on the way in. In most systems the contribution of shares to a company is itself a disposal at market value unless a specific reorganization or exchange regime applies, and those regimes carry conditions on the size of the holding, on the consideration received and on the business purpose of the transaction. Where the regime applies, the deferral is exactly that: the gain travels into the new shares and surfaces later.
Two consequences follow that clients dislike hearing. The first is that the money is now in a company, and getting it out is a second taxable event, so the structure suits reinvestment rather than consumption. The second is that a holding company assembled around a single financial position, with no employees, no premises and no activity, is the kind of entity anti-abuse provisions are drafted for, and its defensibility depends on it doing something.
Gifts, succession and the basis question
Transferring the position rather than selling it is the technique that most often survives contact with the numbers, and in Spain the mechanism is narrower than it is usually stated. Article 33.3 b) of the Act provides that no gain or loss is deemed to arise on a lucrative transfer on the death of the taxpayer, so the gain accumulated over a lifetime is never charged to the deceased, and article 36, on lucrative transfers, gives the recipient an acquisition value drawn from the inheritance and gift tax rules and capped at market value. Death therefore extinguishes the embedded gain and gives the heir a cost equal to the value taken for inheritance tax purposes, which is capped at market value but need not equal it. The case for holding and diversifying afterwards rests entirely on that figure, so it is the inheritance tax valuation rather than the market price on the day that decides how much of the gain the heir is actually free of.
Where that is the case, holding a low-cost position until death and diversifying afterwards is arithmetically powerful, and it is the quiet reason a great many concentrated positions are never reduced. It should still be said plainly what it costs: the family carries single-stock risk for a further period of unknown length, on an asset whose value at the relevant date is unknown, in order to save a tax computed on the value the asset does not yet have.
A lifetime gift does not work the same way, and it works in the opposite direction to the one commonly assumed. The relief in article 33.3 b) covers transfers on death alone, so a gift is a disposal on which the donor realises the accumulated gain in the year the gift is made, while article 33.5 c) denies any loss arising on a lucrative transfer between the living. The donee, meanwhile, takes the inheritance and gift tax value as cost under article 36, so the embedded gain is not handed on with the shares. A gift therefore accelerates the charge onto one taxpayer instead of spreading it over several.
The exception runs through article 33.3 c), which takes out of charge the lucrative transfer of a business or of shareholdings qualifying for the relief in article 20.6 of Ley 29/1987, the Inheritance and Gift Tax Act, and which article 36 completes by making the donee step into the donor’s own cost and acquisition date rather than take a fresh one. That door is far narrower than the word qualifying suggests, because the relief requires the donor to be sixty-five or older or in a state of absolute permanent incapacity, to have ceased exercising any management functions and to have stopped drawing any remuneration for them from the moment of the transfer, the recipient to be a spouse, a descendant or an adopted child, and the holding to be retained, with its wealth tax exemption intact, for the ten years following the deed of gift. A founder who still runs the business and is still paid for doing so meets none of that, and for such a donor the acceleration described above applies to the gift in full. Whether a gift is worth making depends on the recipient’s own residence and rates, and on gift and inheritance tax in the relevant jurisdictions, which vary enough within Europe that the answer changes with a change of address.
Moving, and the charge that follows
Changing residence to a state that taxes the disposal more lightly is the technique clients raise most often and the one where the sequence matters most, because departure itself can be the taxable event.
Article 95 bis of the Act treats the unrealized gain on shareholdings as a taxable gain when a person ceases to be a Spanish taxpayer, where they have been one for at least ten of the fifteen tax periods preceding the last one to be declared, and where either the aggregate market value of the shareholdings exceeds 4,000,000 euros, or the participation in an entity exceeds 25 per cent and the market value of that holding exceeds 1,000,000 euros.
A concentrated position of the size that prompts this conversation is usually inside those thresholds by definition. The move therefore has to be analyzed as a disposal at market value in the year of departure and compared against selling as a resident. It does not follow that nothing can be postponed, and the qualification matters for a move within Europe: paragraph 6 of the same article lets a taxpayer moving to another member state of the European Union, or to a European Economic Area state with effective exchange of tax information, elect instead that the gain falls to be self-assessed only if, within the ten tax years following departure, the shares are transferred by lifetime act, the taxpayer ceases to be resident in that area, or the reporting condition attached to the election is broken. Where the numbers still favour moving, the timing of the departure and the valuation date become the substantive planning question.
Giving the shares rather than the proceeds
Where a family already intends to make a substantial charitable commitment, the order in which it is done changes the tax outcome without changing what the charity receives. Giving cash raised by selling the shares means the gain is realized first and the donation is made from what is left. Giving the shares themselves, where the receiving body is able to accept and hold them, moves the position without a disposal by the donor.
The conditions are jurisdictional and they are not uniform. The recipient must qualify under the donor’s domestic rules, the relief available is usually capped by reference to income or to the value transferred, and some systems treat the transfer as a disposal at market value in any event, which removes the advantage entirely. The valuation of an unlisted holding is a further point of friction, because the relief is computed on a figure the authority may contest.
The technique is therefore narrow. It suits a family with a genuine philanthropic intention, a listed and readily valued position, and a recipient equipped to take securities. It is not a diversification strategy, and it should never be presented as one to a client whose objective is to keep the money.
Deciding what the position is for
The techniques above rearrange a cost. None of them removes it, and a client who is offered one that appears to should ask which of the four questions it is answering: when the gain is recognized, at what rate, by which taxpayer, and in which country.
The prior question is what the concentration is for. A founder who intends the holding to pass to the next generation intact is running a succession plan, and should be advised on control, liquidity for the tax on death, and the family agreement, rather than on selling programmes. A holder who simply has not got round to it is running an unmanaged risk, and the question worth putting is whether the tax cost of fixing it has ever been quantified against the exposure it leaves in place.
The two situations attract different work, and the mistake is to treat every concentrated position as the second. In one mandate the entire analysis turned out to be unnecessary, because the family had no intention of ever selling and the real requirement was liquidity to pay a future succession charge without touching the shares. That is a different instruction, and a cheaper one.
This article is informational and does not constitute investment, tax or legal advice. Asset management and investment advice are regulated activities and the treatment of any transaction depends on its facts. Each engagement is subject to scope and applicable regulation.