After I discussed here the pros and cons of setting up a Spanish subsidiary instead of just opening a branch office, I then explained here what it takes, and most importantly, how long it takes to set up your company in Spain. I now want to shed light on the regulatory framework for investments in Spain. Initially, I focused this post on Spain’s extremely strict anti-money laundering rules. Now, I will look at the new regulation of foreign direct investments in Spain.
Until recently, Spain had a liberal regime, which opened the economy to foreign direct investments subject only to the obligation of subsequent reporting for statistical purposes and, if applicable, specific regulations of the respective industry.
In the wake of the Coronavirus Pandemic, Spanish lawmakers have passed a new law that requires certain investments to obtain prior authorisation. Hence, if you (or your company) have your residence outside the European Economic Area and consider investing in Spain, you will have to carefully assess whether your investment requires prior authorisation.
For the purposes of the new regulation, a direct investment in Spain is considered to be any transaction that results in an investor (i) holding a participation of at least 10% in a Spanish company or (ii) effectively participating in the management or control of the company in any other way.
However, the newly introduced rules do not apply for all foreign direct investments in Spain. The law lists the sectors, which require you to obtain a prior authorization for your investment, e.g.:
- Critical infrastructure (including energy, transport, health, communications, aerospace, defence, financial infrastructure)
- Critical technologies and dual-use products (including artificial intelligence, robotics, semiconductors, cyber security, nuclear, nano- and biotechnologies)
- Supply of essential resources
- Sectors with access to sensitive information, especially personal data
Furthermore, an exception from the obligation to obtain prior authorization was established for foreign direct investments with a volume of less than EUR 1 million.
Nevertheless, in the light of the vague and open scope of application, we expect that most foreign investments will likely require thorough review of the applicability of the new rules at the least. This is more evident keeping in mind that a transaction without a mandatory authorization is null and void under Spanish civil law and constitutes a serious offence under Spanish administrative law.
If you consider investing in Spain and want to know more about the new law, I invite you to check out my post on Monereo Meyer Abogados’ blog Business & Tax in Spain, which provides a detailed analysis of the new legal framework for foreign direct investments in Spain and its practical implications.