A range of investment incentives exist in Spain; they are provided according to the authorities granting incentives and the type and purpose of the incentives. The national government provides financial aid and tax benefits for activities pursued in certain industries which are considered to be priority industries (e.g., mining, technological development, research and development, etc.) in view of their potential for growth and their impact on the nation’s overall economy. Additionally, regional governments provide similar incentives for most of these industries. Financial aid includes both nonrefundable subsidies and interest relief on loans obtained by beneficiaries, or combinations of the two.
The European Union:
Since Spain is an EU Member State, potential investors are able to access European aid programs, which provide further incentives for investing in Spain. The EU provides incentives primarily to projects that focus on economically depressed regions or that benefit the EU as a whole.
The European Investment Bank provides guarantees, microfinance, equity investment, and global loans for small and medium enterprises as well as individual loans focusing on innovation and skills, energy, and strategic infrastructure. Projects aiming at extending and modernizing infrastructure in the health and education sectors may also qualify for the EIB support.
The European Investment Fund (EIF) provides venture capital to small and medium-sized enterprises, particularly new firms and technology-oriented businesses, via financial intermediaries. It also provides guarantees to financial institutions (such as banks) to cover their loans to small and medium-sized enterprises. The EIF does not grant loans or subsidies to businesses, nor does it invest directly in any firms. Instead, it works through banks and other financial intermediaries. It uses either its own funds or those entrusted to it by the European Investment Bank (EIB) or the European Union.
There are various structural and investment funds designed to fund initiatives which reduce the wealth disparity between member states. Most autonomous regions of Spain qualify for structural funds under the EU’s 2014-2020 budget (EUR 454 billion). Investments under the European Regional Development Fund (ERDF) will be concentrated in four key priorities: innovation and research, the digital agenda, support for small and medium-sized enterprises (SMEs), and the low-carbon economy, depending on the category of region. Through the European Social Fund (ESF), Cohesion Policy will provide a significant contribution to EU priorities in the field of employment, as through training and life-long learning, education and social inclusion. The ESF allocation will be established according to the needs of each Member State. The new Youth Employment Initiative linked to the ESF will support the implementation of the Youth Guarantee.
Financial incentives are routed through major Spanish banks, such as the Instituto de Credito Oficial (ICO) and Banco Bilbao-Vizcaya Argentaria (BBVA), and must be applied for through the financial intermediary.
The Central Government:
Spain’s central government provides numerous financial incentives for foreign investment, generally designed to complement European Union financing. The Ministry of Economy and Competitiveness (MINECO) runs the Directorate General for International Trade and Investments and Directorate General for Innovation and Competitiveness to assist businesses seeking investment opportunities. They provide support to foreign investors in both the pre- and post-investment phases. Most grants are aimed at encouraging the development of certain economic sectors, but often for a given subsidy, there may be sectors that are not exclusive but are preferential. A comprehensive list of incentive programs is available at the website, www.investinspain.org . Using this tool, companies can gain access to updated information regarding the grants available for investment projects. Users can sign up to the automatic alert system which prompts a tailor-made newsflash as suitable grants or subsidies are published. Applications for these incentives should be made directly to the relevant government agency.
Spain provides certain subsidies for job training and job creation, although they have been recently reduced due to budget constraints. Projects designated as Investment and Employment may be eligible for further subsidies from the Government Public Employment Service (formerly the National Employment Institute). Labor law reforms adopted in 2012 increased hiring bonuses for youth and long-term unemployed. In 2014 the Council of Ministers approved a royal decree-law to promote employment and permanent contracts with a new “flat rate” for Social Security contributions. The measure applies to contracts signed after February 25, 2014. For the benefit to apply, the hiring must create net employment, although the benefit also can be applied for temporary contracts that are converted into permanent ones.
In March 2015, the government approved an extraordinary credit of €850 million to fund the Activation Program for Employment, which is aimed at long-term unemployed with family responsibilities. This program has been extended by a Royal Decree-Law to April 15, 2017.
Despite these measures, many small and medium enterprise (SME) owners report that hiring/firing laws and social security costs still pose a challenge to hiring more full-time employees. Much of the job growth during Spain’s recovery has been in temporary, rather than full-time, contracts in traditional sectors such as infrastructure and tourism.
Spain supports SMEs with a national program for innovative cluster networks to strengthen innovative business groups and competitiveness. In 2013, Spain passed the “Law of Entrepreneurs” which established an entrepreneur visa for investors and entrepreneurs. Entrepreneurs with a business plan, subject to approval by the Spanish Commercial Office, and with the intent to develop the project in Spain for at least one year may apply for the visa. Investors who purchase at least to EUR 2 million in Spanish bonds, or at least EUR 1 million in shares of Spanish companies or Spanish banks deposits may also apply. Foreigners who acquire real estate with an investment value equal to or in excess of EUR 500,000 are eligible as well.
In 2015, changes to the Personal Tax Law, Article 95 bis, affected the transfer of investments or SMEs outside of Spain by creating a tax on unrealized gains from investment. Spanish tax residents that have resided in Spain for at least 10 out of the previous 15 years are subject to a tax of 19-23% if they relocate their holdings or investments outside of Spain, if the market value of the shares held exceeds EUR 4 million or if the individual holds shares of 25% or more in a venture whose market value exceeds EUR 1 million.
The central government provides financial aid and tax benefits for activities carried out in certain industries which are considered to be priority sectors in view of their growth potential and their impact on the nation’s overall economy (e.g., activities in new industrial plants, as well as expansion of production capacity or relocations that industries decide to undertake to gain competitiveness, new infrastructure projects, and the extension of projects in mature sectors, such as transport, energy and environment, and social infrastructure and services sectors; creation/growth of Research &Development (R&D) and innovation; the acquisition, upgrading and maintenance of scientific-technological equipment for R&D activities, private technology centers and private centers of innovation located in science and technology parks, etc.). In addition, the regional governments provide similar incentives for most of these industries. Financial aid includes both nonrefundable subsidies and interest relief on the loans obtained by the beneficiaries, or combinations of the two.
Companies may qualify for these programs according to the size of their business. According to the current classifications, “micro” company refers to those employing fewer than 10 employees, with a turnover of less than EUR 2 million and with the same limit for its total assets. A “small” company has fewer than 50 employees, a turnover below EUR 10 million and total assets also below EUR 10 million. “Medium-sized” enterprises are those with fewer than 250 employees, annual turnover not exceeding EUR 50 million and total assets lower than EUR 43 million.
The state-owned corporate entity (Instituto de Crédito Oficial, ICO) attached to the Ministry of Economy and Competitiveness, has the status of State Financial Agency. Its activity seeks to boost small and medium companies and to encourage technological innovation and renewable energy projects as well as help to alleviate critical situations. ICO direct financing programs are aimed at financing large-scale investment projects in strategic sectors in Spain, backing large-scale investments by Spanish companies abroad, and supporting projects that are economically, financially, technologically and commercially sound and involve a Spanish interest.
Other government bodies that grant aid and incentives:
- MINHAP – Ministry of Finance and Public Administration
- MINETAD- Ministry of Energy, Tourism, and Digital Agenda
- ENISA – National Innovation Company S.A. (under MINECO)
- AXIS ICO Group (under MINECO)
- INVEST IN SPAIN (under MINECO)
- RED.ES (under MINETDA)
- IDAE – Institute for Energy Diversification and Saving (under MINETDA)
- CERSA – Spanish Guarantee Company S.A. (under MINETDA)
- CDTI – Center for Industrial Technological Development (under MINECO)
- Tripartite Foundation for training in employment (under Ministry of Employment and Social Security)
- CESGAR – Spanish Confederation of Mutual Guarantee Companies
The Regional Governments:
Spain’s 17 regional governments, known as autonomous communities, provide additional incentives for investments in their region. Many are similar to the incentives offered by the central government and the European Union (EU), but they are not all compatible. Additionally, some autonomous community governments grant investment incentives in areas not covered by state legislation but which are included in EU regional financial aid maps. Royal Decree 899/2007, of July 6 2007, sets out the different types of areas which are entitled to receive aid, and their maximum ceilings. Each area’s specific aspects and requirements (economic sectors, investments which can be subsidized and conditions) are set out in the Royal Decrees determining the different areas. Most are granted on an annual basis.
Generally, the regional governments are responsible for the management of each type of investment. This provides a benefit to investors as each autonomous community has a specific interest in attracting investment that enhances its economy. No investment project can receive other financial aid if the amount of the aid granted exceeds the maximum limits on aid stipulated for each approved investment in the legislation defining the eligible areas. Therefore, the subsidy received is compatible with other aid, provided that the sum of all the aid obtained does not exceed the limit established by the legislation of demarcation and EU rules do not preclude it (incompatibilities between Structural Funds).
Types of incentives available:
- Financial loans and subsidies
- Exemption from certain taxes
- Preferential access to official credit
- Reduction of burdens, with social security discounts to companies
- Bonuses for acquisition of certain material
- Customs exemption for certain imported goods
- Real estate grants, and gratuitous or favorable land grants
- Guarantees granted in credit operations
- Loans with low interest, long maturities, and grace periods
- Guarantee of dividends
- Professional training and qualification
- Indirect aid by means of supplying infrastructure facilities (access, services, communications, etc.)
Incentives from national, regional or municipal governments and the European Union are granted to Spanish and foreign companies alike without discrimination.
Municipal corporations may offer incentives to direct investment by facilitating infrastructure needs, granting licenses, and allowing for the operation and transaction of permits. Municipalities such as Madrid offer numerous support services for potential foreign investors. Local economic development agencies often provide free advice on the local business environment and relevant laws, administrative support, and connections to human capital in order to facilitate the establishment of new businesses. Spain recently made starting a business easier by eliminating the requirement to obtain a municipal license before starting operations and by improving the efficiency of the commercial registry.
Research and Development
Incentives from national, regional or municipal governments and the European Union are granted to Spanish and foreign companies alike without discrimination. These incentives include most notably those aimed at fostering innovation, technological improvement (TI) and research and development (R&D) projects, which have been one of the main priorities of the Spanish authorities in recent years. The Science, Technology and Innovation Law 14/2011, of June 1, 2011, establishes the legal framework for the fostering of scientific and technical research, experimental development and innovation in Spain. In 2013 the Council of Ministers approved “the Spanish Strategy for Science and Technology and for Innovation” for the 2013-2020 period, whose essential purpose is to promote the scientific, technological and business leadership of the country as a whole and to increase the innovation capacities of the Spanish company and the Spanish economy. The beneficiaries may be individuals, public research agencies, public and private universities, other public R&D centers, public and private health entities and institutions related to or assisted by the National Health System, certified health research institutes, public and private non-profit entities (foundations and associations) engaging in R&D activities, enterprises (including SMEs), state technological centers, state technological and innovation support centers, business groupings or associations (joint ventures, economic interest groupings, industry-wide business associations), innovative business groupings and technological platforms, and organizations supporting technological transfer and technological and scientific dissemination and disclosure.
The aid can take the form of subsidies, loans, venture capital instruments, and other instruments (tax guarantees and incentives).
Foreign Trade Zones/Free Ports/Trade Facilitation
Both the mainland and islands (and in most Spanish airports and seaports) have numerous free trade zones where manufacturing, processing, sorting, packaging, exhibiting, sampling and other commercial operations may be undertaken free of any Spanish duties or taxes. The largest free trade zones are in Barcelona, Cadiz, and Vigo, and the entire province of the Canary Islands is a Special Economic Zone. Others vary in size from a simple warehouse to several square kilometers. Spanish customs legislation allows companies to have their own free trade areas. Duties and taxes are payable only on those items imported for use in Spain. These companies have to abide by Spanish labor laws.
Performance and Data Localization Requirements
Performance requirements are not used to determine the eligibility or level of incentives granted to investors.
The Spanish Data Protection Agency and the Spanish Police request data from companies, although the companies may refuse unless required by court order.