Policies Towards Foreign Direct Investment

Foreign investment in New Zealand is generally encouraged without discrimination.  New Zealand has an open and transparent economy, where businesses and investors can generally make commercial transactions with ease.  Successive governments accept that foreign investment is an important source of financing for New Zealand and a means to gain access to foreign technology, expertise, and global markets.  Some restrictions do apply in a few areas of critical interest including certain types of land, significant business assets, and fishing quotas. These restrictions are facilitated by a screening process conducted by the Overseas Investment Office (OIO), described in the next section.

New Zealand has a rapidly expanding network of bilateral investment treaties and free trade agreements that include investment components.  New Zealand also has a well-developed legal framework and regulatory system, and the judicial system is generally effective in enforcing property and contractual rights.  Investment disputes are rare, and there have been no major disputes in recent years involving U.S. companies.

The Labour Party-led government has embarked on a program of tighter screening of some forms of foreign investment.  It has also focused on different aspects of trade agreement negotiation compared with the previous government, such as an aversion to investor-state dispute settlement provisions, and moved to restrict the availability of permits for oil and gas exploration.  This will be discussed below in a later section.

Crown entity New Zealand Trade and Enterprise (NZTE) is New Zealand’s primary investment promotion agency.  In addition to its New Zealand central and regional presence, it has 40 international locations, including four offices in the United States.  Approximately half of the NZTE staff is based overseas. The NZTE offers to help investors develop their plans, access opportunities, and facilitate connections with New Zealand-based private sector advisors: https://www.nzte.govt.nz/investment-and-funding/how-we-help.  Once investors independently complete their negotiations, due diligence, and receive confirmation of their investment, the NZTE offers aftercare advice. The NZTE works to channel investment into regional areas of New Zealand to build capability and to promote opportunities outside of the country’s main cities. 

In recent years new visa categories were created for investors and for entrepreneurs, and measures introduced to allow foreign investors – under certain circumstances – to bid alongside New Zealand businesses for contestable government funding for research and innovation grants.  Most of the programs which are operated by NZTE, the Ministry of Business, Innovation, and Employment (MBIE), and Callaghan Innovation, provide support through skills and knowledge, or supporting innovative business ventures. Grants are available, but many are co-funded, requiring some investment by the business owner, and extra conditions apply to non-resident applicants.  For more see: https://www.business.govt.nz/how-to-grow/getting-government-grants/what-can-i-get-help-with/

The New Zealand-United States Council, established in 2001, is a non-partisan organization funded by business and the government.  It fosters a strong and mutually beneficial relationship between New Zealand and the United States through both government-to-government contacts, and business-to-business links.  The American Chamber of Commerce in Auckland provides a platform for New Zealand and U.S. businesses to network among themselves and with government agencies.

Limits on Foreign Control and Right to Private Ownership and Establishment

[Sectors:]

The New Zealand government does not discriminate against U.S. or other foreign investors in their rights to establish and own business enterprises.  It has placed separate limitations on foreign ownership of airline Air New Zealand and telecommunications provider Spark New Zealand (Spark).

Air New Zealand’s constitution requires that no person who is not a New Zealand national hold 10 percent or more of the voting rights without the consent of the Minister of Transport.  There must be between five and eight board directors, at least three of which must reside in New Zealand. In 2013 the government sold a partial stake in Air New Zealand reducing its equity interest from 73 percent to 53 percent.

Spark’s constitution requires at least half of its Board be New Zealand citizens, and at least one director must live in New Zealand.  It requires no person shall have a relevant interest in 10 percent or more of the voting shares without the consent of the Minister of Finance and the Spark Board, and no person who is not a New Zealand national can purchase a relevant interest in more than 49.9 percent of the total voting shares without approval from the Minister of Finance.  This telecommunications service obligation (TSO) – formerly known as the “Kiwishare obligation” – has been in operation since Spark’s privatization in 1990, and was motivated in part because of the vital emergency call service it provides. There are TSOs for charge-free local calling (provided by Spark and supported by Chorus), and for the services for deaf, hearing impaired, and speech impaired people (provided by Sprint International).

The establishment of telecommunications infrastructure provider Chorus resulted from a demerger of Spark in 2011.  Chorus owns most of the telephone infrastructure in New Zealand, and provides wholesale services to telecommunications retailers, including Spark.  The demerger freed Spark from the TSO, but obligated Chorus as a natural monopoly and infrastructure provider. To date the New Zealand government has granted approval to two private companies – in April 2012 and December 2017 – to exceed the 10 percent threshold, and increase their interest in Chorus up to 15 percent.

[National Security: TICSA]

New Zealand screens overseas investment mainly for economic reasons, but has legislation that outlines a framework to protect the national security of telecommunication networks.  The Telecommunications (Interception and Security) Act 2013 (TICSA) sets out the process for network operators to work with the Government Communications Security Bureau (GCSB) – in accordance with Section 7   – to prevent, sufficiently mitigate, or remove security risks arising from the design, build, or operation of public telecommunications networks; and interconnections to or between public telecommunications networks in New Zealand or with networks overseas.   In April 2019 the government signaled it would be considering a “national interest” restriction on foreign investment, when it issued a document for public consultation  .

[Economic Security: OIO]

New Zealand otherwise screens overseas investment to ensure quality investments are made that benefit New Zealand.  Failure to obtain consent before purchase can lead to significant financial penalties. The Overseas Investment Office (OIO) is responsible for screening foreign investment that falls within certain criteria specified in the Overseas Investment Act 2005. 

The OIO requires consent be obtained by overseas persons wishing to acquire or invest in significant business assets, sensitive land, farm land, or fishing quota, as defined below.

A “significant business asset” includes: acquiring 25 percent or more ownership or controlling interest in a New Zealand company with assets exceeding NZD 100 million (USD 68 million); establishing a business in New Zealand that will be operational more than 90 days per year and expected costs of establishing the business exceeds NZD 100 million; or acquiring business assets in New Zealand that exceed NZD 100 million. 

OIO consent is required for overseas investors to purchase “sensitive land” either directly or acquiring a controlling interest of 25 percent or more in a person who owns the land.  Non-residential sensitive land includes land that: is non-urban and exceeds five hectares (12.35 acres); is part of or adjoins the foreshore or seabed; exceeds 0.4 hectares (1 acre) and falls under of the Conservation Act of 1987 or it is land proposed for a reserve or public park; is subject to a Heritage Order, or is a historic or wahi tapu area (sacred Maori land); or is considered “special land” that is defined as including the foreshore, seabed, riverbed, or lakebed and must first be offered to the Crown.  If the Crown accepts the offer, the Crown can only acquire the part of the “sensitive land” that is “special land,” and can acquire it only if the overseas person completes the process for acquisition of the sensitive land.

The Waitangi Tribunal was established by the Treaty of Waitangi Act 1975 to hear Maori claims relating to the loss of land and resources as a result of historical breaches by the Crown of the Treaty of Waitangi signed in 1840.  Maori land claims may not be lodged relating to privately owned land and affect only land owned by the Crown. Some private land titles are noted with a memorial recording that the land, when Crown land, would be subject to a claim and therefore repurchased by the Crown for market value at some future time.  No land in New Zealand has to date been the subject of a repurchase decision.

Where a proposed acquisition involves “farm land” (land used principally for agricultural, horticultural, or pastoral purposes, or for the keeping of bees, poultry, or livestock), the OIO can only grant approval if the land is first advertised and offered on the open market in New Zealand to citizens and residents.  The Crown can waive this requirement in special circumstances at the discretion of the relevant Minister.

Commercial fishing in New Zealand is controlled by the Fisheries Act, which sets out a quota management system that prohibits commercial fishing of certain species without the ownership of a fishing quota which specifies the quantity of fish that may be taken.  OIO legislation together with the Fisheries Act, requires consent from the relevant Ministers in order for an overseas person to obtain an interest in a fishing quota, or an interest of 25 percent or more in a business that owns or controls a fishing quota.

For investments that require OIO screening, the investor must demonstrate in their application they meet the criteria for the “Investor Test” and the “Benefit to New Zealand test.” The former requires the investor to display the necessary business experience and acumen to manage the investment, demonstrate financial commitment to the investment, and be of “good character” meaning a person who would be eligible for a permit under New Zealand immigration law.

The “Benefit to New Zealand test” requires the OIO assess the investment against 21 factors, which are set out in the OIO Act and Regulations.  The OIO applies a counterfactual analysis to those benefit factors that are capable of having a counterfactual applied, the onus is upon the investor to consider the likely counterfactual if the overseas investment does not proceed.  Economic factors are given weighting, particularly if the investment will create new job opportunities, retain existing jobs, and lead to greater efficiency or productivity domestically.

For all four categories the threshold is higher for Australian investors.  Australian non-government investors are screened at NZD 530 million (USD 360 million) and Australian government investors at NZD 111 million (USD 75 million) for 2019, with both amounts reviewed each year in accordance with the 2013 Protocol on Investment to the New Zealand-Australia Closer Economic Relations Trade Agreement.  Separately, non-government investors from CPTPP countries face a screening threshold of NZD 200 million (USD 136 million).

The OIO Regulations set out the fee schedule for lodging new applications which can be costly, currently ranging between NZD 13,000 (USD 8,800) to NZD 54,000 (USD 36,700).  The Overseas Investment Act does not prescribe timeframes within which the OIO must make a decision on any consent applications, and current processing times regularly exceed six months.  In recent years some investors have abandoned their applications, and have been vocal in their frustration with costs and time frames involved in obtaining OIO consent.

The OIO monitors foreign investments after approval.  All consents are granted with reporting conditions, which are generally standard in nature.  Investors must report regularly on their compliance with the terms of the consent. Offenses include: defeating, evading, or circumventing the OIO Act; failure to comply with notices, requirements, or conditions; and making false or misleading statements or omissions.  If an offense has been committed under the Act, the High Court has the power to impose penalties, including monetary fines, ordering compliance, and ordering the disposal of the investor’s New Zealand holdings.

Other Investment Policy Reviews

New Zealand has not conducted an Investment Policy Review through the OECD or the United Nations Conference on Trade and Development (UNCTAD) in the past three years.  New Zealand’s last Trade Policy Review was in 2015 and the next will take place in 2021: https://www.wto.org/english/tratop_e/tpr_e/tp416_e.htm . 

Business Facilitation

The New Zealand government has shown a strong commitment to continue efforts to streamline business facilitation.  According to the World Bank’s Ease of Doing Business 2019 report New Zealand is ranked first in “Starting a Business,” “Registering Property,” “Getting Credit,” and is ranked second for “Protecting Minority Investors.”

There are no restrictions on the movement of funds into or out of New Zealand, or on the repatriation of profits.  No additional performance measures are imposed on foreign-owned enterprises, other than those that require OIO approval.  Overseas investors must adhere to the normal legislative business framework for New Zealand-based companies, which includes the Commerce Act 1986, the Companies Act 1993, the Financial Markets Conduct Act 2013, the Financial Reporting Act 2013, and the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT).  The Contract and Commercial Law Act 2017 was passed to modernize and consolidate existing legislation underpinning contracts and commercial transactions. 

The tightening of anti-money laundering laws has impacted the cross-border movement of remittance orders from New Zealanders and migrant workers to the Pacific Islands.  Banks, non-bank institutions, and people in occupations that typically handle large amounts of cash, are required to collect additional information about their customers and report any suspicious transactions to the New Zealand Police.  If an entity is unable to comply with the AML/CFT in its dealings with a customer, it must not do business with that person. For banks this would mean not processing certain transactions, withdrawing the banking products and services it offers, and choosing not to have that person as a customer.  This has resulted in some banks charging higher fees for remittance services in order to reduce their exposure to risks, which has led to the forced closing of accounts held by some money transfer operators. Phase 1 sectors which include financial institutions, remitters, trust and company service providers, casinos, payment providers, and lenders have had to comply with the AML/CFT since 2013.  Under Phase 2 the AML/CFT was extended to lawyers, conveyancers from July 2018, accountants, and bookkeepers from October 2018, and realtors from January 2019.

In order to combat the increasing use of New Zealand shell companies for illegal activities, the Companies Amendment Act 2014 and the Limited Partnerships Amendment Act 2014 introduced new requirements for companies registering in New Zealand.  Companies must have at least one director that either lives in New Zealand, or lives in Australia and is a director of a company incorporated in Australia. New companies incorporated must provide the date and place of birth of all directors, and provide details of any ultimate holding company.  The Acts introduced offences for serious misconduct by directors that results in serious losses to the company or its creditors, and aligns the company reconstruction provisions in the Companies Act with the Takeovers Act 1993 and the Takeovers Code Approval Order 2000.

The Companies Office holds an overseas business-related register, and provides that information to persons in New Zealand who intend to deal with the company or to creditors in New Zealand.  The information provided includes where and when the company was incorporated, if there is any restriction on its ability to trade contained in its constitutional documents, names of the directors, its principal place of business in New Zealand, and where and on whom documents can be served in New Zealand.  For further information on how overseas companies can register in New Zealand: https://www.companiesoffice.govt.nz/companies/learn-about/starting-a-company/register-an-overseas-company-other 

The New Zealand Business Number (NZBN) Act 2016 allows the allocation of unique identifiers to eligible entities to enable them to conduct business more efficiently, interact more easily with the government, and to protect the entity’s security and confidentiality of information.  All companies registered in New Zealand have had NZBNs since 2013, and are also available to other types of businesses such as sole traders and partnerships.

Tax registration is recommended when the investor incorporates the company with the Companies Office, but is required if the company is registering as an employer and if it intends to register for New Zealand’s consumption tax, the Goods and Services Tax (GST), which is currently 15 percent.  Companies importing into New Zealand or exporting to other countries which have a turnover exceeding NZD 60,000 (USD 40,800) over a 12-month period, or expect to pass NZD 60,000 in the next 12 months, must register for GST. Non-resident businesses that conduct a taxable activity supplying goods or services in New Zealand and make taxable supplies in New Zealand, must register for GST:  https://www.ird.govt.nz/index/all-tasks. From 2014, non-resident businesses that do not make taxable supplies in New Zealand have been able to claim GST if they meet certain criteria  . 

To comply with GST registration, overseas companies need two pieces of evidence to prove their customer is a resident in New Zealand, such as their billing address or IP address, and a GST return must be filed every quarter even if the company does not make any sales.

In 2016 mandatory GST registration was extended to non-resident suppliers of “remote services” to New Zealand customers, if they meet the NZD 60,000 annual sales threshold.  In 2018, the government introduced legislation that if enacted, will require non-resident suppliers of low-value import goods to register for GST, if they meet the NZD 60,000 annual sales threshold.  Both are discussed in a later section.

Outward Investment

The New Zealand government does not place restrictions on domestic investors to invest abroad.

NZTE is the government’s international business development agency.  It promotes outward investment and provides resources and services for New Zealand businesses to prepare for export and advice on how to grow internationally.  The Ministry of Foreign Affairs and Trade (MFAT) and Customs New Zealand each operates business outreach programs that advise businesses on how to maximize the benefit from FTAs to improve the competitiveness of their goods offshore, and provides information on how to meet requirements such as rules of origin.

Table 2: Key Macroeconomic Data, U.S.  FDI in Host Country/Economy

* Host country statistics differ from USG and international sources due to calculation methodologies, and timing of exchange rate conversions.  Almost a third of inbound foreign direct investment in New Zealand is in the financial and insurance services sector. Foreign direct investment data for 2017 was released in July 2018.   Statistics New Zealand data available at www.stats.govt.nz  

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Policies Towards Foreign Direct Investment

Norwegian lawmakers and businesses welcome foreign investment as a matter of policy and the government generally grants national treatment to foreign investors.  In 2013, the Government established “Invest in Norway,” the official investment promotion agency, to help attract and assist foreign investors, particularly in the key offshore petroleum sector and in less developed regions such as northern Norway .

While not a member of the European Union, Norway is an EEA signatory and continues to liberalize its foreign investment legislation to conform more closely to EU standards.  Current laws, rules, and practices follow below.

Limits on Foreign Control and Right to Private Ownership and Establishment

Norway’s investment policies vis-á-vis third countries, including the United States, will likely continue to be governed by reciprocity principles and by bilateral and international agreements.  The European Economic Area (EEA) free trade accord, which came into force for Norway in 1995, requires the country to apply principles of national treatment to EU members and the other EEA members – Iceland and Liechtenstein – in certain areas where foreign investment was prohibited or restricted in the past.  Norway’s investment regime is generally based on the national treatment principle, but ownership restrictions exist on some natural resources and on some activities (fishing/ maritime/ road transport). State ownership in companies can be used as a means of ensuring Norwegian ownership and domicile for these firms.

Government Monopolies

Norway has traditionally barred foreign and domestic investors alike from investing in certain industries, including postal services, railways, and the retail sale of alcohol.  In 2004, Norway slightly relaxed the restrictions, allowing foreign companies to bid on certain commercial postal services (e.g., air express services between countries) and railway cargo services (notably between Norway and Sweden).  In 2016, the government initiated a reform of the railway sector leading to the first railway line opening for competition in 2018. The government has a mandate to allow foreign investment in hydropower (limited to 20 percent of equity), but rarely does so.  However, the government has fully opened the electricity distribution system to foreign participation, making it one of the most liberalized power sectors in the world.

Ownership of Real Property

Foreign investors may generally own real property, though ownership of certain real assets is restricted.  Companies must obtain a concession to acquire rights to own or use various kinds of real property, including forests, mines, tilled land, and waterfalls.  Foreign companies need not seek concessions to rent real estate, e.g. commercial facilities or office space, provided the rental contract period does not exceed ten years.  The two major laws governing concessions are the Act of December 14, 1917, and the Act of May 31, 1974.

Petroleum Sector

The Petroleum Act of November 1996 (superseding the 1985 Petroleum Act) sets forth the legal basis for Norwegian authorities’ awards of petroleum exploration rights, production blocks and follow-up activity.  The Act covers governmental control over exploration, production, and transportation of petroleum.

Foreign oil companies report no discrimination in the award of petroleum exploration and development blocks in recent licensing rounds.  The Norwegian government has implemented EU directives requiring equal treatment of EEA oil and gas companies. The Norwegian offshore concession system complies with EU directive 94/33/EU of May 30, 1994, which governs conditions for awards and hydrocarbon development.  Norway’s concession process operates on a discretionary basis, with the Ministry of Petroleum and Energy awarding licenses based on which company or group of companies it views will be the best overall operator for a particular field, rather than purely competitive bids. A number of U.S. energy companies are present on the Norwegian Continental Shelf (NCS).

The Norwegian government has dismantled former tight controls over the gas pipeline transit network that carries gas to the European market.  All gas producers and operators on the NCS are free to negotiate gas sales contracts on an individual basis, with access to the gas export pipeline network guaranteed.

Norwegian authorities encourage the use of Norwegian goods and services in the offshore petroleum sector, but do not require it.  The Norwegian share of the total supply of goods and services on the NCS has remained at approximately 50 percent over the last decade.

Manufacturing Sector

Norwegian legislation granting national treatment to foreign investors in the manufacturing sector dates from 1995.  Legislation was repealed in July 2002 that formerly required both foreign and Norwegian investors to notify and, in some cases, file burdensome reports to the Ministry of Industry and Trade if their holdings of a company’s equity exceeded certain threshold levels.  Foreign investors are not currently required to obtain government authorization before buying shares of Norwegian corporations.

Financial and Other Services

In 2004, the Norwegian government liberalized restrictions on acquisitions of equity in Norwegian financial institutions.  Current regulations delegate responsibility for acquisitions to the Norwegian Financial Supervisory Authority and streamline the process. Financial Supervisory Authority permission is required for acquisitions of Norwegian financial institutions that exceed defined threshold levels (20, 25, 33 or 50 percent).  The Authority assesses the acquisitions to ensure that prospective buyers are financially stable and that the acquisition does not unduly limit competition.

The Authority applies national treatment to foreign financial groups and institutions, but nationality restrictions still apply to banks.  At least half the members of the board and half the members of the corporate assembly of a bank must be nationals and permanent residents of Norway or another EEA nation.  Effective January 1, 2005, there is no ceiling on foreign equity in a Norwegian financial institution as long as the Authority has granted permission for the acquisition.

The Finance Ministry has abolished remaining restrictions on the establishment of branches by foreign financial institutions, including banks, mutual funds and others.  Under the liberalized regime, Norway grants branches of U.S. and other foreign financial institutions the same treatment as domestic institutions.

Media

Media ownership is regulated by the Media Ownership Act of 1997 and the Norwegian Media Authority.  No individual party, domestic or foreign, may control more than 1/3 of the national newspaper, radio and/or television markets without a concession.  National treatment is granted in line with Norway’s obligations under the EEA accord. The introduction and growing importance of new media forms (including those emerging from the internet and wireless industries) has raised concerns that the existing domestic legal regime (which largely focuses on printed media) is becoming outmoded.

Other Investment Policy Reviews

The Organization for Economic Cooperation and Development (OECD) conducted an Economic Survey for Norway in 2018:  https://www.oecd-ilibrary.org/economics/oecd-economic-surveys-norway-2018_eco_surveys-nor-2018-en  

Business Facilitation

Altinn is a web portal that serves as a one-stop shop for establishing a company and contains the necessary forms; it also provides an electronic dialogue between the business/industry sector, citizens and other stakeholders, and government agencies.  The business registration processes are straight-forward, complete, and open to foreign companies. Please note, however, that registration of Norwegian Registered Foreign Business Enterprises (NUF) cannot be done electronically. A guide for establishing a business is available at the following address: https://www.altinn.no/en/start-and-run-business/  

Outward Investment

The government does not incentivize outward investment.  Norway’s Government Pension Fund Global, the largest sovereign wealth fund in the world, owns 1.4 percent of all listed companies in the world.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

* Source for Host Country Data: Statistics Norway (http://ssb.no/en/  )

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Policies Towards Foreign Direct Investment

Foreign direct investment (FDI) has played a significant role in modernizing the Spanish economy during the past 40 years. Attracted by Spain’s large domestic market, export possibilities, and growth potential, foreign companies set up operations in large numbers. Spain’s automotive industry is mostly foreign-owned. Multinationals control half of the food production companies, one-third of chemical firms, and two-thirds of the cement sector. Several foreign investment funds acquired networks from Spanish banks, and foreign firms control about one-third of the insurance market.

The Government of Spain recognizes the value of foreign investment. Spain offers investment opportunities in sectors and activities with significant added value. There have not been any major changes in Spain’s regulations for investment and foreign exchange under the current Spanish Socialist Workers Party (PSOE) administration, which took office in June 2018. Spanish law permits 100 percent foreign ownership in investments (limits apply regarding audio-visual broadcast licenses; see next section), and capital movements are completely liberalized. Due to its degree of openness and the favorable legal framework for foreign investment, Spain has received significant foreign investments in knowledge-intensive activities in the past few years. New FDI into Spain increased by 31.6 percent in 2018 according to Spain’s Industry, Trade, and Tourism Ministry data, continuing the growing path of gross FDI flow into Spain that began significantly in 2014. In 2018, 19.2 percent of total gross investments were investments in new facilities or the expansion of productive capacity, while 59 percent of gross investments were in acquisitions of existing companies. In 2018 the United States had a gross direct investment in Spain of EUR 984 million, accounting for 2.1 percent of total investment and representing a decrease of 52 percent compared to 2017. U.S. FDI stock in Spain stayed relatively steady between 2013 (USD 33.9 billion) to 2017 (USD 33.1 billion).

Limits on Foreign Control and Right to Private Ownership and Establishment

Spain has a favorable legal framework for foreign investors. Spain has adapted its foreign investment rules to a system of general liberalization, without distinguishing between EU residents and non-EU residents. Law 18/1992 of July 1, which established rules on foreign investments in Spain, provides a specific regime for non-EU persons investing in certain sectors: national defense-related activities, gambling, television, radio, and air transportation. For EU residents, the only sectors with a specific regime are the manufacture and trade of weapons or national defense-related activities. For non-EU companies, the Spanish government restricts individual ownership of audio-visual broadcasting licenses to 25 percent. Specifically, Spanish law permits non-EU companies to own a maximum of 25 percent of a company holding a digital terrestrial television broadcasting license; and for two or more non-EU companies to own a maximum of 50 percent in aggregate. In addition, under Spanish law a reciprocity principle applies (art. 25.4 General Audiovisual Law). The home country of the (non-EU) foreign company must have foreign ownership laws that permit a Spanish company to make the same transaction.

Spain is one of the 14 countries of the 28 EU member states that has established mechanisms to evaluate the possible risks of direct foreign investments. The cornerstone on which the control system is structured is the probable impact “on security and public order” of the arrival of foreign capital into Spain. Critical sectors include energy, transport, communications, technology, defense, and data processing and storage, among others.

The Spanish Constitution and Spanish law establish clear rights to private ownership, and foreign firms receive the same legal treatment as Spanish companies. There is no discrimination against public or private firms with respect to local access to markets, credit, licenses, and supplies.

Other Investment Policy Reviews

Spain is a signatory to the convention on the Organization for Economic Co-operation and Development (OECD). Spain is also a member of the World Trade Organization (WTO) and the United Nations Conference on Trade and Development (UNCTAD). Spain has not conducted Investment Policy Reviews with these three organizations within the past three years.

Business Facilitation

For setting up a company in Spain, the two basic requirements include incorporation before a Public Notary and filing with the Mercantile Register (Registro Mercantil). The public deed of incorporation of the company must be submitted. It can be submitted electronically by the Public Notary. The Central Mercantile Register is an official institution that provides access to companies’ information supplied by the Regional Mercantile Registers after January 1, 1990. Any national or foreign company can use it but must also be registered and pay taxes and fees. According to the World Bank’s Doing Business report, the process to start a business in Spain should take about two weeks.

“Invest in Spain” is the Spanish investment promotion agency to facilitate foreign investment. Services are available to all investors.

Useful web sites:

• Companies register: http://www.rmc.es/Home.aspx 
• Companies register for the Madrid region: https://www.rmercantilmadrid.com/RMM/Home/Index.aspx 
• More information on the Mercantile Registry: http://www.rmc.es/ 
• Investment promotion agency: http://www.investinspain.org/invest/es/cabecera/faq-s/establecimiento-de-una-empresa/index.html 

Outward Investment

Among the financial instruments approved by the Spanish Government to provide official support for the internationalization of Spanish enterprise are the Foreign Investment Fund (FIEX), the Fund for Foreign Investment by Small and Medium-sized Enterprises (FONPYME), the Enterprise Internationalization Fund (FIEM), and the Fund for Investment in the tourism sector (FINTUR). The Spanish Government also offers financing lines for investment in the electronics, information technology and communications, energy (renewables), and infrastructure concessions sectors.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

*Ministry of Industry, Trade, and Tourism, http://www.comercio.gob.es/es-ES/inversiones-exteriores/informes/Paginas/presentacion.aspx  

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Policies Towards Foreign Direct Investment

There are no laws or practices that discriminate or are alleged to discriminate against foreign investors, including and especially U.S. investors, by prohibiting, limiting or conditioning foreign investment in a sector of the economy [either at the pre-establishment (market access) or post-establishment phase of investment].  Until the mid-1980s, Sweden’s approach to direct investment from abroad was quite restrictive and governed by a complex system of laws and regulations. Sweden’s entry into the European Union (EU) in 1995 largely eliminated all restrictions. National security restrictions to investment remain in the defense and other sensitive sectors, as addressed in the next section “Limits on Foreign Control and Right to Private Ownership and Establishment.”

The Swedish Government recognizes the need to further improve the business climate for entrepreneurs, education, and the flow of research from lab to market.  Swedish authorities have implemented a number of reforms to improve the business regulatory environment and to attract more foreign investment.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are very few restrictions on where and how foreign enterprises can invest, and there are no equity caps, mandatory joint-venture requirements, or other measures designed to limit foreign ownership or market access.  However, Sweden does maintain some limitations in a select number of situations:

• Accountancy:  Investment in the accountancy sector by non-EU-residents cannot exceed 25 percent.
• Legal services:  Investment in a corporation or partnership carrying out the activities of an “advokat,” or lawyer, cannot be done by non-EU residents.
• Air transport:  Foreign enterprises may be restricted from access to international air routes unless bilateral intergovernmental agreements provide otherwise.
• Air transport:  Cabotage is reserved to national airlines.
• Maritime transport:  Cabotage is reserved to vessels flying the national flag.
• Defense:  Restrictions apply to foreign ownership of companies involved in the defense industry and other sensitive areas.

Swedish company law provides various ways a business can be organized.  The main difference between these forms is whether the founder must own capital and to what extent the founder is personally liable for the company’s debt.  The Swedish Act (1992:160) on Foreign Branches applies to foreign companies operating through a branch and also to people residing abroad who run a business in Sweden.  A branch must have a president who resides within the European Economic Area (EEA). All business enterprises in Sweden (including branches) are required to register at the Swedish Companies Registration Office, Bolagsverket.  An invention or trademark must be registered in Sweden in order to obtain legal protection. A bank from a non-EEA country needs special permission from the Financial Supervision Authority (Finansinspektionen) to establish a branch in Sweden.

Sweden does not maintain a national security screening mechanism for inbound foreign investment.  However, the government is currently considering how to implement the EU Commission’s recently approved investment screening framework, as well as tightening national investment policies.  Suggested regulations would not likely be in place until 2021 at the earliest. U.S. investors are treated equally relative to other foreign investors in terms of ownership and scrutiny of investments.

Other Investment Policy Reviews

The Organization for Economic Cooperation and Development (OECD) published an economic snapshot for Sweden in March 2019:  https://www.oecd.org/economy/surveys/OECD-economic-survey-Sweden-2019-executive-summary-brochure.pdf 

Business Facilitation

Business Sweden’s Swedish Trade and Investment Council is the investment promotion agency tasked with facilitating business.  The services of the agency are available to all investors.

At http://www.verksamt.se , a collaboration of several Swedish government agencies have posted relevant guides and services pertaining to registering, starting, running, expanding and/or closing a business.  Sweden defines a micro enterprise as one with less than 10 employees, a small enterprise with less than 50 employees, and a medium enterprise with less than 250 employees.  All forms of business enterprise, except for sole traders, must register with the Swedish Companies Registration Office, Bolagsverket, before starting operations. Sole traders may apply for registration in order to be given exclusive rights to the name in the county where they will be operating. Online applications to register an enterprise can be made at http://www.bolagsverket.se/en .  The process of registering an enterprise can take a few days or up to a few weeks, depending on the complexity and form of the business enterprise.  All business enterprises, including sole traders, must also register with the Swedish Tax Agency, Skatteverket, before starting operations. Relevant information and guides can be found at http://www.skatteverket.se .  Depending on the nature of business, companies may also need to register with the Environmental Protection Agency, Naturvårdsverket, or, if real estate is involved, the county authorities.  Non EU/EEA citizens need a residence permit, obtained from the Swedish Board of Migration, Migrationsverket, in order to start up and/or run a business.

Outward Investment

The Government of Sweden has commissioned the Swedish Exports Credit Guarantee Board (EKN) to promote Swedish exports and the internationalization of Swedish companies.  EKN insures exporting companies and banks against non-payment in export transactions, thereby reducing risk and encouraging expanding operations. As part of its export strategy presented in 2015, the Swedish Government has also launched Team Sweden to promote Swedish exports and investment.  Team Sweden is tasked with making export market entry clear and simple for Swedish companies and consists of a common network for all public initiatives to support exports and internationalization.

The Government does not generally restrict domestic investors from investing abroad.  The only exceptions are related to matters of national security and national defense; the Inspectorate of Strategic Products (ISP) is tasked with control and compliance regarding the sale and exports of defense equipment and dual-use products. ISP is also the National Authority for the Chemical Weapons Convention and handles cases concerning targeted sanctions.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Policies Towards Foreign Direct Investment

With the exception of a heavily protected agricultural sector, foreign investment into Switzerland is generally not hampered by significant barriers, with no reported discrimination against foreign investors or foreign-owned investments.  Incidents of trade discrimination do exist, for example with regards to agricultural goods such as bovine genetics products. Some city and cantonal governments offer access to an ombudsman, who may address a wide variety of issues involving individuals and the government, but does not focus exclusively on investment issues.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic enterprises may engage in various forms of remunerative activities in Switzerland and may freely establish, acquire, and dispose of interests in business enterprises in Switzerland.  There are, however, some investment restrictions in areas under state monopolies, including certain types of public transportation, postal services, alcohol and spirits, aerospace and defense, certain types of insurance and banking services, and the trade in salt.  Restrictions (in the form of domicile requirements) also exist in air and maritime transport, hydroelectric and nuclear power, operation of oil and gas pipelines, and the transportation of explosive materials. Additionally, the following legal restrictions apply within Switzerland:

Corporate boards: The board of directors of a company registered in Switzerland must consist of a majority of Swiss citizens residing in Switzerland; at least one member of the board of directors who is authorized to represent the company (i.e., to sign legal documents) must be domiciled in Switzerland.  If the board of directors consists of a single person, this person must have Swiss citizenship and be domiciled in Switzerland. Foreign controlled companies usually meet these requirements by nominating Swiss directors who hold shares and perform functions on a fiduciary basis. Mitigating these requirements is the fact that the manager of a company need not be a Swiss citizen and, with the exception of banks, company shares can be controlled by foreigners.  The establishment of a commercial presence by persons or enterprises without legal status under Swiss law requires an establishment authorization according to cantonal law. The aforementioned requirements do not generally pose a major hardship or impediment for U.S. investors.

Hostile takeovers: Swiss corporate shares can be issued both as registered shares (in the name of the holder) or bearer shares.  Provided the shares are not listed on a stock exchange, Swiss companies may, in their articles of incorporation, impose certain restrictions on the transfer of registered shares to prevent hostile takeovers by foreign or domestic companies (article 685a of the Code of Obligations).  Hostile takeovers can also be annulled by public companies; however, legislation introduced in 1992 made this practice more difficult.  Public companies must cite in their statutes significant justification (relevant to the survival, conduct, and purpose of their business) to prevent or hinder a takeover by a foreign entity.  Furthermore, public corporations may limit the number of registered shares that can be held by any shareholder to a percentage of the issued registered stock. In practice, many corporations limit the number of shares to 2-5 percent of the relevant stock.  Under the public takeover provisions of the 2015 Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading and its 2019 amendments, a formal notification is required when an investor purchases more than 3 percent of a Swiss company’s shares.  An “opt-out” clause is available for firms which do not want to be taken over by a hostile bidder, but such opt-outs must be approved by a super-majority of shareholders and must take place well in advance of any takeover attempt.

Banking: Those wishing to establish banking operations in Switzerland must obtain prior approval from the Swiss Financial Market Supervisory Authority (FINMA), a largely independent agency, administered under the Swiss Federal Department of Finance.  FINMA promotes confidence in financial markets and works to protect customers, creditors, and investors. FINMA approval of bank operations is generally granted if the following conditions are met: reciprocity on the part of the foreign state; the foreign bank’s name must not give the impression that the bank is Swiss; the bank must adhere to Swiss monetary and credit policy; and a majority of the bank’s management must have their permanent residence in Switzerland.  Otherwise, foreign banks are subject to the same regulatory requirements as domestic banks.

Banks organized under Swiss law must inform FINMA before they open a branch, subsidiary, or representation abroad.  Foreign or domestic investors must inform FINMA before acquiring or disposing of a qualified majority of shares of a bank organized under Swiss law.  If exceptional temporary capital outflows threaten Swiss monetary policy, the Swiss National Bank, the country’s independent central bank, may require other institutions to seek approval before selling foreign bonds or other financial instruments.  On December 20, 2008, government deposit insurance of individual current accounts held in Swiss banks was raised from CHF 30,000 to CHF 100,000.

Insurance: A federal ordinance requires the placement of all risks physically situated in Switzerland with companies located in the country.  Therefore, it is necessary for foreign insurers wishing to provide liability coverage in Switzerland to establish a subsidiary or branch in-country.

U.S. investors have not identified any specific restrictions that create market access challenges for foreign investors.

Other Investment Policy Reviews

The World Trade Organization’s (WTO) September 2017 Trade Policy Review of Switzerland and Liechtenstein includes investment information.  Other reports containing elements referring to the investment climate in Switzerland include the OECD Economic Survey of November 2017.

• Link to the WTO report: https://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm#bycountry  

• Link to the OECD reports / papers: https://www.oecd-ilibrary.org/economics/oecd-economic-surveys-switzerland_19990464;jsessionid=174m5wrgvwd7j.x-oecd-live-02  

Business Facilitation

The Swiss government-affiliated non-profit organization Switzerland Global Enterprise (SGE) has a nationwide mandate to attract foreign business to Switzerland on behalf of the Swiss Confederation.  SGE promotes Switzerland as an economic hub and fosters exports, imports, and investments. Larger regional offices include the Greater Geneva-Berne Area (that covers large parts of Western Switzerland), the Greater Zurich Area, and the Basel Area.  Each canton has a business promotion office dedicated to helping facilitate real estate location, beneficial tax arrangements, and employee recruitment plans. These regional and cantonal investment promotion agencies do not require a minimum investment or job-creation threshold in order to provide assistance. However, these offices generally focus resources on attracting medium-sized entities that have the potential to create between 50 and 249 jobs in their region.

References:

• The Swiss government’s online portal (“easygov”) is Switzerland’s online registration website and includes links to the main local interlocutors for business related questions: https://www.easygov.swiss/easygov/#/  
• Switzerland Global Enterprise connects companies with potential host regions: https://www.s-ge.com/en/investment-promotion  
• Some of the larger promotion offices are:
  • Invest Western Switzerland Area: https://www.ggba-switzerland.ch/  
  • Greater Zurich Area: https://www.greaterzuricharea.com  
  • Basel Area: https://www.baselarea.ch/  

Switzerland has a dual system for granting work permits and allowing foreigners to create their own companies in Switzerland.  Employees who are citizens of the EU/EFTA area can benefit from the EU Free Movement of Persons Agreement. U.S. citizens who are not citizens of an EU/EFTA country and want to become self-employed in Switzerland must meet Swiss labor market requirements.  The criteria for admittance, usually not creating a hindrance for U.S. persons, are contained in the Federal Act on Foreign Nationals (FNA), the Decree on Admittance, Residence and Employment (VZAE) and the provisions of the FNA and the VZAE.

• The Federal Act on Foreign Nationals (FNA) (unofficial English translation): https://www.admin.ch/opc/en/classified-compilation/20020232/index.html  
• Decree on Admittance, Residence and Employment (VZAE) (not available in English): https://www.admin.ch/opc/de/classified-compilation/20070993/index.html  
• Provisions of the FNA and the VZAE (not available in English): https://www.ejpd.admin.ch/dam/data/bfm/rechtsgrundlagen/weisungen/auslaender/weisungen-aug-d.pdf 

Setting up a company in Switzerland requires registration at the relevant cantonal Commercial Registry.  The cost for registering a company is typically USD 1,300 – USD 15,200, depending on the company type. These costs mainly cover the Public Notary and entry into the Commercial Registry.

Other steps/procedures for registration include: 1) placing paid-in capital in an escrow account with a bank; 2) drafting articles of association in the presence of a notary public; 3) filing a deed certifying the articles of association with the local commercial register to obtain a legal entity registration; 4) paying the stamp tax at a post office or bank after receiving an assessment by mail; 5) registering for VAT; and 6) enrolling employees in the social insurance system (federal and cantonal authorities).

The World Bank Doing Business Report 2019 ranks Switzerland 38th in the ease of doing business among the 190 countries surveyed, and  77th in the ease of starting a business, with a  six-step registration process and 10 days required to set up a company.

Outward Investment

While Switzerland does not explicitly promote or incentivize outward investment, Switzerland’s export promotion agency Switzerland Global Enterprise facilitates overseas market entry for Swiss companies through its Swiss Business Hubs in several countries, including the United States.  Switzerland does not restrict domestic investors from investing abroad.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Average exchange rate for 2017: 1 USD = 0.985 CHF
*Sources: Swiss National Bank   / Federal Office of Statistics  
**According to the OECD
***Significant statistical discrepancies are due to methodological differences in measuring foreign direct investment.  Data most recently available.

As the OECD Benchmark Definition of Foreign Investment concludes, there “are two possible approaches to identify the home country (of the direct investor) for inward FDI and the host country (of the direct investment enterprise) for outward FDI:

• by immediate host country/investing country (IHC/IIC)
• by ultimate host country/ultimate investing country (UHC/UIC)

Switzerland uses the immediate investing country approach (IIC) and the United States uses the more complex ultimate investing country approach (UIC).  The OECD  report explains in detail how the two different approaches generate different figures.

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Policies Towards Foreign Direct Investment

The UK encourages foreign direct investment.  With a few exceptions, the government does not discriminate between nationals and foreign individuals in the formation and operation of private companies.  The Department for International Trade actively promotes direct foreign investment, and prepares market information for a variety of industries. U.S. companies establishing British subsidiaries generally encounter no special nationality requirements on directors or shareholders. Once established in the UK, foreign-owned companies are treated no differently from UK firms.   The British Government is a strong defender of the rights of any British-registered company, irrespective of its nationality of ownership.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign ownership is limited in only a few national security-sensitive companies, such as Rolls Royce (aerospace) and BAE Systems (aircraft and defense).  No individual foreign shareholder may own more than 15 percent of these companies. Theoretically, the government can block the acquisition of manufacturing assets from abroad by invoking the Industry Act 1975, but it has never done so in practice.  Investments in energy and power generation require environmental approvals. Certain service activities (like radio and land-based television broadcasting) are subject to licensing. The Enterprise Act of 2002 extends powers to the UK government to intervene in mergers and acquisitions which might give rise to national security implications and into which they would not otherwise be able to intervene.

The UK requires that at least one director of any company registered in the UK must be ordinarily resident in the UK.  The UK, as a member of the Organization for Economic Cooperation and Development (OECD), subscribes to the OECD Codes of Liberalization, committed to minimizing limits on foreign investment.

While the UK does not have a formalized investment review body to assess the suitability of foreign investments in national security sensitive areas, an ad hoc investment review process does exist and is led by the relevant government ministry with regulatory responsibility for the sector in question (e.g., the Department for Business, Energy, and Industrial Strategy who would have responsibility for review of investments in the energy sector).  To date, U.S. companies have not been the target of these ad hoc reviews. The UK is currently considering revisions to its national security review process related to foreign direct investment. (https://www.gov.uk/government/consultations/national-security-and-infrastructure-investment-review ).

The Government has proposed to amend the turnover threshold and share of supply tests within the Enterprise Act 2002. This is to allow the Government to examine and potentially intervene in mergers that currently fall outside the thresholds in two areas: (i) the dual use and military use sector, (ii) parts of the advanced technology sector. For these areas only, the Government proposes to lower the turnover threshold from £70 million (USD 92 million) to £1 million (USD 1.3 million) and remove the current requirement for the merger to increase the share of supply to or over 25 percent.

Other Investment Policy Reviews

The Economist’s “Intelligence Unit”, World Bank Group’s “Doing Business 2018”, and the OECD’s “Economic Forecast Summary (May 2019) have current investment policy reports for the United Kingdom:

• http://country.eiu.com/united-kingdom 
• http://www.doingbusiness.org/data/exploreeconomies/united-kingdom/ 
• http://www.oecd.org/economy/united-kingdom-economic-forecast-summary.htm 

Business Facilitation

The UK government seeks to facilitate investment by offering overseas companies access to widely integrated markets.  Proactive policies encourage international investment through administrative efficiency in order to promote innovation and achieve sustainable growth.  The online business registration process is clearly defined, though some types of company cannot register as an overseas firm in the UK, including partnerships and unincorporated bodies. Registration as an overseas company is only required when it has some degree of physical presence in the UK.  After registering a business with the UK government body, named Companies House, overseas firms must register to pay corporation tax within three months. The process of setting up a business in the UK requires as few as thirteen days, compared to the European average of 32 days, which puts the country in first place in Europe and sixth place in the world for ease of establishing a business.  As of April 2016, companies have to declare their Persons of Significant Control (PSC’s).  This change in policy recognizes that individuals other than named directors can have significant influence on a company’s activity and that this information should be transparent.  More information is available at this link: https://www.gov.uk/government/publications/guidance-to-the-people-with-significant-control-requirements-for-companies-and-limited-liability-partnerships .  Companies House maintains a free, publicly searchable directory, available at this link: https://www.gov.uk/get-information-about-a-company .  

The UK offers a welcoming environment to foreign investors, with foreign equity ownership restrictions in only a limited number of sectors covered by the Investing Across Sectors indicators.  As in all other EU member countries, foreign equity ownership in the air transportation sector is limited to 49 percent for investors from outside of the European Economic Area (EEA). Furthermore, the Industry Act (1975) enables the UK government to prohibit transfer to foreign owners of 30 percent or more of important UK manufacturing businesses, if such a transfer would be contrary to the interests of the country.  While these provisions have never been used in practice, they are still included in the Investing Across Sectors indicators, as these strictly measure ownership restrictions defined in the laws.

• https://invest.great.gov.uk/int/ 
• https://www.gov.uk/government/organisations/department-for-international-trade 
• https://www.gov.uk/set-up-business 
• https://www.gov.uk/topic/company-registration-filing/starting-company 
• http://www.doingbusiness.org/data/exploreeconomies/united-kingdom/starting-a-business 

Special Section on the British Overseas Territories and Crown Dependencies

The British Overseas Territories (BOTs) comprise Anguilla, British Antarctic Territory, Bermuda, British Indian Ocean Territory, British Virgin Islands, Cayman Islands, Falkland Islands, Gibraltar, Montserrat, Pitcairn Islands, St. Helena, Ascension and Tristan da Cunha, Turks and Caicos Islands, South Georgia and South Sandwich Islands, and Sovereign Base Areas on Cyprus.  The BOTs retain a substantial measure of responsibility for their own affairs. Local self-government is usually provided by an Executive Council and elected legislature. Governors or Commissioners are appointed by the Crown on the advice of the British Foreign Secretary, and retain responsibility for external affairs, defense, and internal security. However, the UK imposed direct rule on the Turks and Caicos Islands in August 2009 after an inquiry found evidence of corruption and incompetence.  Its Premier was removed and its constitution was suspended. The UK restored Home Rule following elections in November 2012.

Many of the territories are now broadly self-sufficient.  However, the UK’s Department for International Development (DFID) maintains development assistance programs in St. Helena, Montserrat, and Pitcairn.  This includes budgetary aid to meet the islands’ essential needs and development assistance to help encourage economic growth and social development in order to promote economic self-sustainability.  In addition, all other BOTs receive small levels of assistance through “cross-territory” programs for issues such as environmental protection, disaster prevention, HIV/AIDS and child protection. The UK also lends to the BOTs as needed, up to a pre-set limit, but assumes no liability for them if they encounter financial difficulty.

Seven of the BOTs have financial centers:  Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Montserrat, and the Turks and Caicos Islands.  These Territories have committed to the OECD’s Common Reporting Standard (CRS) for the automatic exchange of taxpayer financial account information.  They are already exchanging information with the UK, and began exchanging information with other jurisdictions under the CRS from September 2017. 

The OECD Global Forum on Transparency and Exchange of Information for Tax Purposes has rated Anguilla as “partially compliant” with the internationally agreed tax standard.  Although Anguilla sought to upgrade its rating in 2017, it still remains at “partially compliant” as of April 2019. The Global Forum has rated the other six territories as “largely compliant.”  Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar and the Turks and Caicos Islands have also committed in reciprocal bilateral arrangements with the UK to hold beneficial ownership information in central registers or similarly effective systems, and to provide UK law enforcement authorities with near real-time access to this information.  These arrangements came into effect in June 2017. 

Anguilla:  Anguilla is a neutral tax jurisdiction.  There are no income, capital gains, estate, profit or other forms of direct taxation on either individuals or corporations, for residents or non-residents of the jurisdiction.  The territory has no exchange rate controls. Non-Anguillan nationals may purchase property, but the transfer of land to an alien includes a 12.5 percent tax.

British Virgin Islands:  The government of the British Virgin Islands welcomes foreign direct investment and offers a series of incentive packages aimed at reducing the cost of doing business on the islands.  This includes relief from corporation tax payments over specific periods but companies must pay an initial registration fee and an annual license fee to the BVI Financial Services Commission.  Crown land grants are not available to non-British Virgin Islanders, but private land can be leased or purchased following the approval of an Alien Land Holding License. Stamp duty is imposed on transfer of real estate and the transfer of shares in a BVI company owning real estate in the BVI at a rate of 4 percent for belongers and 12 percent for non-belongers.  There is no corporate income tax, capital gains tax, branch tax, or withholding tax for companies incorporated under the BVI Business Companies Act. Payroll tax is imposed on every employer and self-employed person who conducts business in BVI. The tax is paid at a graduated rate depending upon the size of the employer. The current rates are 10 percent for small employers (those which have a payroll of less than USD 150,000, a turnover of less than USD 300,000 and fewer than 7 employees) and 14 percent for larger employers. Eight percent of the total remuneration is deducted from the employee, the remainder of the liability is met by the employer. The first USD 10,000 of remuneration is free from payroll tax.

Cayman Islands:  There are no direct taxes in the Cayman Islands.  In most districts, the government charges stamp duty of 7.5 percent on the value of real estate at sale; however, certain districts, including Seven Mile Beach, are subject to a rate of nine percent.  There is a one percent fee payable on mortgages of less than KYD 300,000, and one and a half percent on mortgages of KYD 300,000 or higher. There are no controls on the foreign ownership of property and land.  Investors can receive import duty waivers on equipment, building materials, machinery, manufacturing materials, and other tools.

Falkland Islands:  Companies located in the Falkland Islands are charged corporation tax at 21 percent on the first GBP one million and 26 percent for all amounts in excess of GBP one million.  The individual income tax rate is 21 percent for earnings below USD 15,694 (GBP 12,000) and 26 percent above this level.

Gibraltar:  The government of Gibraltar encourages foreign investment.  Gibraltar has a buoyant economy with a stable currency and few restrictions on moving capital or repatriating dividends.  The corporate income tax rate is 20 percent for utility, energy, and fuel supply companies, and 10 percent for all other companies.  There are no capital or sales taxes. Gibraltar is currently a part of the EU and receives EU funding for projects that improve the territory’s economic development.

Montserrat:  The government of Montserrat welcomes new private foreign investment.  Foreign investors are permitted to acquire real estate, subject to the acquisition of an Alien Land Holding license which carries a fee of five percent of the purchase price.  The government also imposes stamp and transfer fees of 2.6 percent of the property value on all real estate transactions. Foreign investment in Montserrat is subject to the same taxation rules as local investment, and is eligible for tax holidays and other incentives.  Montserrat has preferential trade agreements with the United States, Canada, and Australia. The government allows 100 percent foreign ownership of businesses but the administration of public utilities remains wholly in the public sector.

St. Helena:  The island of St. Helena is open to foreign investment and welcomes expressions of interest from companies wanting to invest.  Its government is able to offer tax based incentives which will be considered on the merits of each project – particularly tourism projects.  All applications are processed by Enterprise St. Helena, the business development agency.

Pitcairn Islands:  The Pitcairn Islands have approximately 50 residents, with a workforce of approximately 29 employed in 10 full-time equivalent roles.  The territory does not have an airstrip or safe harbor. Residents exist on fishing, subsistence farming, and handcrafts.

The Turks and Caicos Islands:  The islands operate an “open arms” investment policy.  Through the policy, the government commits to a streamlined business licensing system, a responsive immigration policy to give investment security, access to government-owned land under long-term leases, and a variety of duty concessions to qualified investors.  The islands have a “no tax” status, but property purchasers must pay a stamp duty on purchases over USD 25,000. Depending on the island, the stamp duty rate may be up to 6.5 percent for purchases up to USD 250,000, eight percent for purchases USD 250,001 to USD 500,000, and 10 percent for purchases over USD500,000.

The Crown Dependencies:

The Crown Dependencies are the Bailiwick of Jersey, the Bailiwick of Guernsey and the Isle of Man.  The Crown Dependencies are not part of the UK but are self-governing dependencies of the Crown. They have their own directly elected legislative assemblies, administrative, fiscal and legal systems and their own courts of law. The Crown Dependencies are not represented in the UK Parliament.

Jersey’s standard rate of corporate tax is zero percent.  The exceptions to this standard rate are financial service companies, which are taxed at 10 percent, utility companies, which are taxed at 20 percent, and income specifically derived from Jersey property rentals or Jersey property development, taxed at 20 percent. VAT is not applicable in Jersey as it is not part of the EU VAT tax area.

Guernsey has a zero percent rate of corporate tax.  Some exceptions include some specific banking activities, taxed at 10 percent, utility companies, which are taxed at 20 percent, Guernsey residents’ assessable income is taxed at 20 percent, and income derived from land and buildings is taxed at 20 percent

The Isle of Man’s corporate standard tax is zero percent.  The exceptions to this standard rate are income received from banking business, which is taxed at 10 percent and income received from land and property in the Isle of Man which is taxed at 20 percent. In addition, a 10 percent tax rate also applies to companies who carry on a retail business in the Isle of Man and have taxable income in excess of £500,000 from that business.  VAT is applicable in the Isle of Man as it is part of the EU customs territory.

This tax data is current as of April 2019.  

Outward Investment

The UK is one of the largest outward investors in the world, often protected through Bilateral Investment Treaties (BITs), which have been concluded with many countries.  The UK’s international investment position abroad (outward investment) increased from GBP 1,696.5 billion in 2017 to GBP 1,713.3 billion in 2018. By the end of 2018 the UK’s stock of outward FDI was GBP 1,713 billion, a 52 rise percent since 2002.  The main destination for UK outward FDI is the United States, which accounted for approximately 23 percent of UK outward FDI stocks at the end of 2017. Other key destinations include the Netherlands, Luxembourg, France, and Ireland which, together with the United States, account for a little under half of the UK’s outward FDI stock.

Europe and the Americas remain the dominant areas for British FDI positions abroad, accounting for 16 of the top 20 destinations for total UK outward FDI.  The UK’s international investment position within the Americas was GBP 401.9 billion in 2017. This is the third largest recorded value in the time series since 2006 for the Americas.  The United States, at GBP 329.3 billion, continued to be the largest destination for UK international investment positions abroad within the Americas in 2017.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Table 3: Sources and Destination of FDI

Notes:

The UK Department for International Trade Core Statistics Book denominates these figures in GBP. Due to a volatile GBP/USD exchange rate in 2018, Post has decided to leave the numbers in their denominated currency as to maintain the highest accuracy.

The current fourth ranking for Inward Direct Investment is the UK offshore island of Jersey, a self-governing dependency of the United Kingdom. However, we have chosen to focus here on country-to-country FDI only.

Table 4: Sources of Portfolio Investment