Foreign investments in Spain have contributed to the internalization of the economy and an improvement in the productivity of the business sector. Would you like to know more about the regulations involved? Read on and find out everything you need to know about FDI!
What are foreign investments?
Before explaining the regulations involved in foreign investments in Spain, we want you to know what this term means.
Foreign Direct Investments (FDI) refer to the placement of capital through economic entities from one country to another with the main purpose of establishing a business or obtaining a relevant participation in a foreign company.
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How are foreign investments in Spain classified?
Foreign investments in Spain can be classified horizontally or vertically, and taking into account the type of commercial relationship present, they can be:
Horizontal foreign direct investment
Refers to the transfer of capital aimed at establishing a company in a foreign country that is in the same line of business as the way it operates in the country of origin.
Vertical foreign direct investment
It takes into account capital flows from companies to businesses belonging to a foreign economy, thus operating within the same production chain.
Conglomerate foreign direct investment
In this case, we are talking about the transfer of capital of an entity to participate in a new business abroad that is not linked to the nature of the business in its country of origin.
Platform foreign direct investment
It involves investing in a new economy with the main purpose of exporting or conducting operations with a foreign country.
What are the regulations on foreign investments in Spain?
The first thing you should know is that, in order to make foreign investments in Spain, the interested party may freely invest in the country without being obliged to obtain any type of prior authorization or notification.
After the investment has been made, a maximum period of one month will be granted to notify the Directorate General of International Trade and Investment of the Secretariat of State for Trade. This is for administrative, statistical or economic purposes.
According to Royal Decree 664/1999, it adapts Spanish domestic legislation to the regulations on freedom of movement of capital, contemplated in articles 56 onwards of the Treaty of the European Union.
In this regard, it is worth highlighting three aspects to be taken into account regarding the regulations for foreign investments in Spain:
As mentioned above, foreign investments will be subject to an ex-post declaration regime with the competent authorities.
Exceptions are investments from tax havens subject to prior administrative declaration, and investments involving national defense or real estate by non-EU member states for their diplomatic headquarters.
The reporting regime involving investment or divestment transactions in marketable securities implies that this does not fall on the investor, but on the investment services companies or credit institutions.
It is understood that investors must declare the investment in the event that the securities account or deposit of securities of an entity domiciled abroad is maintained, is in the custody of the investment holder or acquires a participation of 3% or more in companies.
Finally, with regard to investments in sectors such as air transportation, radio, raw materials, television, telecommunications, private security, manufacturing, marketing or distribution of arms and explosives, it is necessary to comply with the requirements of the competent bodies established in the specific sectorial legislation.
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What are the characteristics of foreign investments in Spain?
If you are thinking of investing in Spain in the near future, it is important that you take into account the key characteristics and concepts involved in the process:
In this case, we are talking about 3 assumptions such as: non-resident individuals, legal entities domiciled abroad, or public entities of foreign sovereignty.
For the participation in Spanish companies, including their incorporation, subscription and acquisition of shares; as well as any legal transaction
Establishment and expansion of the number of branch offices
Subscription and acquisition of marketable securities representing bonds issued by residents
Participation in investment funds registered with the National Securities Market Commission (CNMV).
Acquisition by non-residents of real estate in Spain for an amount exceeding 3,005,060 euros, or in the event that the investment comes from tax havens, regardless of its amount.
The regulated entities
Obligated parties are understood to be the investors and the persons who give public faith when intervening in a transaction.
In addition, exceptionally, financial credit institutions, depositories or asset managers could be considered as obligors.
What are the advantages of foreign investment in Spain?
Spain represents an attractive country for investment, ranking 14th in the world in terms of GDP, and the 11th most attractive country for FDI.
In relation to the investor from a foreign country, we can mention benefits related to development, innovation, job creation, tax incentives, market share growth, among others.
Likewise, the Spanish territory offers unique opportunities for foreign investors in areas such as Information and Communication Technologies, renewable energies, biotechnology, tourism, automotive and mobility, transportation and logistics, chemical industry, aerospace, audiovisual and the agri-food sector.
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