2023 Investment Climate Statements: Spain

Policies Towards Foreign Direct Investment

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

The Government of Spain recognizes the value of foreign investment and sees it as a key part of its post-COVID-19 economic recovery and Spain’s continuing modernization. U.S. FDI is especially attractive as Spain deepens its transatlantic ties after Russia’s full-scale invasion of Ukraine. Spain offers investment opportunities in sectors and activities with significant added value. Spanish law permits 100 percent foreign ownership in investments (limits apply regarding audio-visual broadcast licenses and strategic sectors of the economy; see next section), and capital movements are completely liberalized. Due to its openness and the favorable legal framework for foreign investment, Spain has received significant foreign investments in knowledge-intensive activities.

New FDI (gross) into Spain increased by 13.9 percent in 2022 compared to 2021, reaching almost 34.2 billion euros, despite the cooling of the international economy, credit restrictions, high energy prices, and soaring inflation, according to data from Spain’s Ministry of Industry, Trade, and Tourism. European funds together with the increased focus on energy security are a catalyst for investment in Spain, especially in sustainability and digital transformation. In 2022, more than half of the total foreign investment in Spain (55.1 percent) went to the services sector, followed by the industrial sector (42.2 percent) and construction (2.5 percent). In 2022 the United States was the main foreign investor in Spain and had a gross direct investment in Spain of EUR 9.45 billion, accounting for 27.7 percent of total investment and representing an increase of 123.6 percent compared to 2021. According to the latest available Spanish data, U.S. FDI stock in Spain totaled about $95.3 billion in 2020.

Limits on Foreign Control and Right to Private Ownership and Establishment

Spain has a favorable legal framework for foreign investors. 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.

Spain adapted its foreign investment rules to a system of general liberalization, and its inbound investment screening mechanism is focused on protecting national security. Law 18/1992, which established rules on foreign investments in Spain, provides a specific regime for non-EU persons investing in defense, aerospace, gambling, television, and radio. For EU investors, the only sectors with a specific regime are the manufacture and trade of weapons or national defense-related activities. For non-EU investors, 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. 24.2 General Law of Audiovisual Communication). The home country of the (non-EU) foreign company must have foreign ownership laws that permit a Spanish company to make the same transaction in the audio-visual sector.

The Spanish government issued new regulations on foreign investment in March 2020 that stipulate prior authorization for foreign investments in critical sectors. Prior approval is also required if the foreign investor is controlled directly or indirectly by the government of another country, if the investor has invested or participated in sectors affecting the security, public order, or public health in another EU Member State, or if administrative or judicial proceedings have been initiated against the investor for exercising illegal or criminal activities. Failure to request authorization for a transaction is a serious infringement of the law. These new regulations are outlined below (see Laws and Regulations on Foreign Direct Investment).

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 undergone Investment Policy Reviews with these three organizations within the past three years.

Business Facilitation

To set up a company in Spain, the two basic requirements include incorporation before a Public Notary and filing a public deed with the Mercantile Register (Registro Mercantil). The public deed of incorporation of the company 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, it takes on average about two weeks to start a business in Spain.

“Invest in Spain” is the Spanish investment promotion agency to facilitate foreign investment. Services are available to all investors. It has partner offices in five major U.S. cities.

Useful web sites:

• Mercantile register: http://www.rmc.es/Home.aspx  
• Mercantile register for the Madrid region: https://www.rmercantilmadrid.com/RMM/Home/Index.aspx  
• 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.

Transparency of the Regulatory System

There is transparency throughout the rule making process at all levels of government. The Spanish government launched a transparency website in 2014 that makes more than 500,000 items of public interest freely accessible to all citizens ( http://transparencia.gob.es/transparencia/en/transparencia_Home/index.html ). The website offers details about the central government, public institutions such as the Royal House, the Parliament, the Constitutional Court, the Judicial Power, the Ombudsman, the Audit Court, the Central Bank, and the Economic and Social Council, and other organisms such as the European Commission. Regional and local authorities have developed their own transparency portals and related legislation. Spain’s Boletin Oficial de Estado ( https://www.boe.es/ ) publishes regulatory actions at national level. The official bulletins of the regional governments (autonomous communities) publish subnational laws and regulations.

Many large established Spanish companies have not yet fully adopted environmental, social, and governance (ESG) criteria, though companies are increasingly committed to making positive impact on society. New companies, especially startups, tend to incorporate ESG values into their operations from the start, acting with transparency and adopting innovative, modern technologies for continuous improvement. Several official Spanish certifications recognized at European and global level accredit companies that meet ESG and CSR criteria, such as Norma SGE21, B Corp Spain, and SDG Certificate (AENOR.) To promote transparency in the disclosure of non-financial information and its impact on corporate governance of companies, the Spanish government published Law 11/2018 on non-financial and diversity matters ( https://www.boe.es/boe/dias/2018/12/29/pdfs/BOE-A-2018-17989.pdf ). The law reinforces requirements that companies disclose relevant information about their management in five areas: environment; social impact and workers’ rights; respect for human rights; fight against corruption and bribery; and impact on society.

International Regulatory Considerations

Spain is a member of the European Union, and its local regulatory framework compares favorably with other major European countries, although permitting and licensing processes may result in significant delays. The efficacy of regulation at the regional level is uneven. With a license from only one of Spain’s 17 regional governments or two enclaves, companies can operate throughout Spanish territory. The measures are designed to reduce business operating costs, improve competitiveness, and attract foreign investment.

Legal System and Judicial Independence

The Spanish judiciary has a well-established tradition of supporting and facilitating the enforcement of both foreign judgments and awards. For a foreign judgment to be enforced in Spain, an order declaring it is enforceable or exequatur is necessary. Once the order is granted, enforcement itself is quite fast, provided that the assets are identified. First instance courts are responsible for the enforcement of foreign rulings.

Local legislation establishes mechanisms to resolve disputes if they arise. Spain’s civil (Roman-based) judicial system is fair and accessible, although sometimes slow-moving. Investigating judges are in charge of the criminal investigation, assuring independence from the executive branch of the government. The Spanish judicial system allows for successive appeals to a higher court.

The number of civil claims has grown significantly over the past decade, due in part to litigation stemming from Spain’s financial 2008 crisis, resulting in an increased openness to alternative dispute resolution mechanisms. Although ordinary proceedings are relatively straightforward, due to the significant number of cases within each court, it can take years for a case to come to trial. Domestic court decisions are subject to appeal, and the average time taken for a final judgment to be issued by the Court of Appeal can be anywhere from months to years. A decision may still be subject to appeal to the Supreme Court (although the grounds for appeal are quite limited), a process that generally takes two to three years to produce a final ruling. Due to the uncertainty surrounding the duration of appeals, disputes involving large companies or significant amounts of money tend to be resolved through arbitration.

Laws and Regulations on Foreign Direct Investment

The Spanish government issued new regulations on foreign investment in March 2020 (Royal Decrees 8/2020, 11/2020, and 34/2020) that require prior authorization for foreign investors seeking to acquire more than a 10 percent stake in the following critical sectors:

• critical infrastructure, both physical and virtual (energy industries, transportation, water, healthcare, communications, media, data storage and processing, aerospace, defense, financial services, and sensitive installations)
• critical technology and dual-use products;
• essential supplies (energy, hydrocarbons, electricity, raw materials and food and agriculture value chains);
• sectors with sensitive information such as personal data or with capacity to control such information and;
• the media.

Purchases of less than 10 percent are also subject to authorization if they result in participation in the control or management of the company. Under these new Royal Decrees, foreign investments in any industry must also receive prior approval if the foreign investor is controlled directly or indirectly by the government of another country; if the investor has invested or participated in sectors affecting the security, public order, or public health in another EU Member State; or if administrative or judicial proceedings have been initiated against the investor for exercising illegal or criminal activities. Investments of less than EUR 1 million are exempted, and investments between EUR 1 and 5 million are subject to a simplified review.

Spanish law conforms to multi-disciplinary EU Directive 88/361, which prohibits all restrictions of capital movements between Member States as well as between Member States and other countries. The Directive also classifies investors according to residence rather than nationality. However, Royal Decree 34/2020 temporarily requires residents of the European Union and European Free Trade Association to receive prior approval for investments into companies listed in Spain or investments exceeding EUR 500 million. This temporary requirement implemented during the COVID-19 pandemic has been extended several times and is valid until December 31, 2024.

Registration requirements are straightforward and apply equally to foreign and domestic investments. They aim to verify the purpose of the investment, not block any investment. On September 1, 2016, a resolution established new forms for declaration of foreign investments before the Investment Registry, which oblige the investor(s) to declare foreign participation in the company.

In 2015, changes to the Personal Income Tax Law affected the transfer of investments outside of Spain by creating a tax on unrealized gains from investment. Residents who have resided in Spain for at least 10 of the previous 15 years are subject to a tax of 19-23 percent 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 25 percent or more shares in a venture whose market value exceeds EUR 1 million.

A Protocol to the 1990 Income Tax Convention between the United States and Spain entered into force in November 2019. The Protocol significantly reduces taxes on interest, royalties, certain direct dividends, and capital gains. It also provides for mandatory binding arbitration to streamline dispute resolutions between the two countries’ tax administrations.

Spain’s digital services tax on companies, approved in January 2021, was dropped as of January 2022 in response to the OECD/G20’s multilateral agreement during international tax negotiations. Spain will credit amounts paid in excess of the global minimum tax from January 2022 against future taxes owed.

Useful websites:

• Ministry of Industry, Trade, and Tourism page on Foreign Investment: https://comercio.gob.es/InversionesExteriores/Paginas/control-inversiones.aspx
• Invest in Spain (investment promotion agency): http://www.investinspain.org/invest/en/index.html  
• Investment aid and incentives in Spain: https://guidetobusinessinspain.com/en/ 

Competition and Antitrust Laws

The parliament passed Act 3/2013 on June 4, 2013, by which the entities that regulated energy (CNE), telecoms (CMT), and competition (CNC) merged into a new entity: the National Securities Market Commission (CNMV). The law attributes practically all functions entrusted to the National Competition Commission under the Competition Act 15/2007, of July 3, 2007 (LDC), to the CNMV. The CNMV’s website ( https://www.cnmv.es/Portal/home.aspx ) provides information to the public about major cases.

Expropriation and Compensation

Spanish legislation set up safeguards to prevent the nationalization or expropriation of foreign investments. Since the 2008 economic crisis, Spain has altered its renewables policy several times, creating regulatory uncertainty and resulting in losses to U.S. companies’ earnings and investments. As a result, Spain accumulated more than 32 lawsuits, totaling about EUR 7.6 billion in claims. Spain now faces an array of related international claims for solar photovoltaic and other renewable energy projects. Spain registered four cases with ICSID in 2022 related to renewable energy generation.

Dispute Settlement

ICSID Convention and New York Convention

Spain is a member state of the International Centre for the Settlement of Investment Disputes (ICSID) and a signatory to the 1958 Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). The recognition and enforcement of awards is straightforward and implies the same guarantees and practicalities sought by the New York Convention and arbitration practitioners worldwide, with the additional advantage of the existence of a court specialized only in arbitration issues.

Investor-State Dispute Settlement

Contractual disputes between U.S persons and Spanish entities are handled according to Spanish law. U.S. citizens seeking to execute U.S. court judgments within Spain must follow the exequatur procedure established by Spanish law.

International Commercial Arbitration and Foreign Courts

Law 11/2011 of May 2011 (amending Law 60/2003 of December 2003) on Arbitration applies to national and international arbitration conducted in Spanish territory and aims to promote alternative dispute resolution (ADR) methods, particularly arbitration. The Arbitration Act says that the Civil Court and Criminal Court of Justice are competent to recognize foreign arbitral awards. The Spanish Arbitration Act is based on the UNCITRAL Model law.

In December 2017, the Chamber of Commerce of Spain, the Court of Arbitration of the Official Chamber of Commerce of Madrid (CAM), and the Civil and Commercial Court of Arbitration Court of Madrid (CIMA) signed a memorandum of understanding (MOU) to unify their arbitration activities and create a unified Arbitration Court to administer international arbitrations. The new International Center of Arbitration of Madrid (CIAM) began operating on January 1, 2020. It has modern and flexible rules that facilitate successful arbitration outcomes, and proceedings are resolved swiftly, allowing the parties to obtain an award in as few as six months. More information on the CIAM is available on its website ( https://madridarb.com/en/ ). The Barcelona Court of Arbitration (TAB) also offers services in the field of dispute resolution through arbitration or other similar mechanisms such as conciliation.

Bankruptcy Regulations

Spain has a fair and transparent bankruptcy regime. In 2014, the government approved a reform of the bankruptcy law to promote Spain’s economic recovery by establishing mediation mechanisms. These reforms – nicknamed the Second Chance Law – aimed to avoid the bankruptcy of viable companies and preserve jobs by facilitating refinancing agreements through debt write-off, capitalization, and rescheduling. However, declaring bankruptcy remains less prevalent in Spain than in other parts of the world.

Investment Incentives

A range of investment incentives exist at the national and regional levels, and they vary according to the authorities granting incentives and the type and purpose of the incentives. Because Spain is a European Union Member State, potential investors can access European aid programs, which provide further incentives for investing in Spain. Through 2027, European financing under the Multiannual Financial Framework and the “Next Generation EU” recovery instrument is expected to contribute about EUR 150 billion to help repair the COVID-19 pandemic’s economic damage and support digitalization and the green transition, two long-term EU goals. Spain is prioritizing funding for twelve strategic areas: 1) electric vehicles; 2) health; 3) renewable energy, renewable hydrogen, and storage; 4) agriculture; 5) language (including AI, science, and the promotion of the Spanish language); 6) circular economy; 7) naval industry; 8) aerospace; 9) digitizing the water cycle; 10) microelectronics and semiconductors; 11) social and caring economy; and 12) industrial decarbonization.

Spain’s central and region governments provides numerous incentives, financial aid, and tax benefits for activities pursued in certain priority industries, which are designed to complement EU financing and boost key economic sectors (i.e., mining, technology, and research and development), given these industries’ potential effect on the nation’s overall economy. Financial aid includes both nonrefundable subsidies and interest relief on loans obtained by beneficiaries, or combinations of the two. Some foreign investors report that tax and other incentives are slow to be applied or terms change after the fact.

The Ministry of Industry, Trade, and Tourism assists businesses seeking investment opportunities through the Directorate General for International Trade and Investments and the ICEX Spain Export and Investment office. These offices support foreign investors in both the pre- and post-investment phases. Most grants seek to promote the development of select economic sectors; however, while these sectoral subsidies are often preferential, they are not exclusive. A comprehensive list of incentive programs is available at the website: http://www.investinspain.org .

The Ministry for the Ecological Transition and Demographic Challenge, through the Institute for Energy Diversification and Saving (IDAE), makes grants to promote renewable installations for energy production, both thermal and electrical. These grants, financed by the European Regional Development Fund (ERDF), are executed through calls for proposals made by the IDAE in each autonomous community/regional government. The grants are non-refundable and are governed by the principle of competitive competition with the aim of optimizing their application as widely as possible.

In September 2022, Spain passed the “Law of the Science, Technology and Innovation,” which aims to provide resources, rights, and stability for research, development, and innovation, as well as ensure growing public funding and private investment, in support of meeting the EU’s research and development funding target of 3 percent. From the outset of the pandemic in 2020, the Ministry of Science and Innovation launched various lines of subsidies and special loans in the budget, targeted at research and development projects related to COVID-19.

In 2013, Spain passed the “Law of Entrepreneurs,” which established an entrepreneur visa for investors and entrepreneurs. Entrepreneurs may apply for the visa with a business plan approved by the Spanish Commercial Office. Entrepreneurs must demonstrate the intent to develop the project in Spain for at least one year. Investors who purchase at least EUR 2 million in Spanish bonds or acquire 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 of at least EUR 500,000 are also eligible.

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 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 sets out the areas entitled to receive aid, along with their ceilings. Each area’s specific aspects and requirements (economic sectors, investments which can be subsidized, and conditions) are established in the Royal Decrees. Most are granted on an annual basis. In addition, companies that set up business in Spain can gain access not only to the Spanish national market, but also to the markets of Europe, Middle East, North Africa, and Latin America, given its privileged geostrategic position, and the strong presence of Spanish companies in these regions.

Incentives from national, regional, or municipal governments and the European Union are granted to Spanish and foreign companies alike without discrimination. The most notable incentives include those aimed at fostering innovation, technological improvement, and research and development projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

Both the mainland and islands (and most Spanish airports and seaports) have free trade zones where manufacturing, processing, sorting, packaging, exhibiting, sampling, and other commercial operations may be undertaken free of any Spanish duties or taxes. Spain’s seven free zone ports are located in Vigo, Cadiz, Barcelona, Santander, Seville, Tenerife, and Las Palmas de Gran Canaria – all of which fall under the EU Customs Union, permitting the free circulation of goods within the EU. The entire province of the Canary Islands is a Special Economic Zone (SEZ), offering fiscal benefits that include a reduced corporate tax rate, a reduced Value-Added Tax (VAT) rate, and exemptions for transfer taxes and stamp duties. The Spanish enclaves of Ceuta and Melilla also offer unique tax incentives; they do not impose a VAT but instead tax imports, production, and services at a reduced rate. Spanish customs legislation also 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 must abide by Spanish labor laws.

Performance and Data Localization Requirements

Spain does not have performance and localization requirements for investors. The Spanish Data Protection Agency and the Spanish Police request data from companies, although the companies may refuse unless required by court order.

Real Property

There are generally no restrictions on foreign ownership of real estate. The buyer must fill out a Declaration to the Foreign Investment Register form before buying the property if the funds for the purchase come from a country or territory considered to be a tax haven. The declaration lasts six months. Foreign individuals require an identification card for foreigners (NIE). Other foreign legal persons require an identification number known as a NIF. Apart from money laundering regulations, no special restrictions or limitations apply to foreign mortgage guarantees and loans.

The Land Register provides evidence of title and legal certainty to all parties involved in a transaction. Public or private acts that affect the property are included in the land register. The Property Registry is responsible for managing the Land Register. A right or title recorded in the registry prevails over any other right or title. Certain administrative concessions (licenses for individuals to use or develop publicly owned property for a particular purpose) may also be registered. Anyone who can prove a legitimate interest in the information contained in the register may access the register. It is not possible to make changes to the ownership of real estate by electronic means. The transfer of real estate or the grant of rights over property should be executed by public deed in front of a notary before being registered with the Land Registry. A registered title includes the plot of land and the buildings attached to the land. Each plot constitutes a registered property. Each registered property is a legal object and has its own separate entry in the registry in which all related data is registered. There are rules that determine whether a parcel of land, a building, farm, spring, or other type of property has a separate entry in the registry system.

Lenders generally use mortgages as security. Mortgages are made by public deed and registered at the land registry. Once registered, the mortgage takes priority over the interest of any third party. Anyone with a legitimate interest in a property can find out whether it is mortgaged by consulting the register. Sale and leaseback is another form of real estate financing that has been used by some Spanish financial institutions. These institutions raised financing through the sale of their offices to their clients and subsequently leased them back. The institution raised funds and their clients received a stream of rental income.

Intellectual Property Rights

Spanish law protects intellectual property rights (IPR), and enforcement is carried out at the administrative and judicial levels. In Spain, IPR is separated into industrial property, which refers to industry and innovative activity (patents and trademarks), and intellectual property, which focuses on the rights of creators. Spanish patent, copyright, and trademark laws all approximate or exceed EU standards for IPR protection. Spain is a member of the World Intellectual Property Organization (WIPO) and party to many of its treaties, including the Berne Convention, the Paris Convention, the Madrid Accord on Trademarks, the WIPO Copyright Treaty, and the WIPO Phonograms and Performances Treaty.

Since its removal from the U.S. Trade Representative’s (USTR’s) Special 301 Watch List in 2012, Spain has undertaken extensive, multi-year reform measures to strengthen its framework for IPR protections. The latest legislative changes to the 1996 Law on Intellectual Property, in force as of March 2019, streamline anti-piracy and anti-counterfeit measures. As a result, Spain now has a stronger legal framework and corresponding criminal procedures to address IPR violations.

USTR removed Spain from its Notorious Markets List in 2020. Although physical and online marketplaces for counterfeit goods persist in Spain, Spanish authorities continue to make significant regulatory, legal, and enforcement progress in protecting IPR, and Spain is now ranked 9th out of 55 countries in the U.S. Chamber of Commerce 2023 International IP Index.

Spanish authorities published a new Patents Law in 2015 (Law 24/2015), which entered into force in April 2017. A non-renewable 20-year period for working patents is available if the patent is used within the first three years. Spain permits both product and process (service patents?) patents. Patents can be awarded by the Spanish Office of Patents and Trademark (OEPM), a Spanish autonomous region via an Industrial Property Regional Information Center, or the European Patent Office.

Spanish law extends copyright protection to all literary, artistic, or scientific creations, including computer software.

Amendments to the 2001 Trademark Law (17/2001), which amend the regulations for the 2001 law, entered in force in April 2019. OEPM oversees protection for national trademarks. Trademarks registered in the Industrial Property Registry receive protection for 10 years from the date of application and may be renewed. Protection is not granted for generic names, names that violate Spanish customs, or other inappropriate trademarks. The Spanish parliament passed a reform of the penal code that entered into force in July 2015 (Ley Organica 1/2015). The revised penal code removed the condition that certain IPR crimes related to the sale of counterfeit items meet a threshold of EUR 400 to merit prosecution, and it changed the procedure for destruction of counterfeit items seized by law enforcement. Counterfeit items may now be destroyed once an official report is filed unless a judge formally requests the items be retained.

Businesses may seek a trademark valid throughout the EU via the Office for Harmonization in the Internal Market (OHIM), which is located in Alicante:

Office for Harmonization in the Internal Market (Trademarks and Designs)Avenida de Europa, 4E-03008 AlicanteTel: (34) 96-513-9100https://euipo.europa.eu/ohimportal/en/home

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

The Spanish government welcomes all forms of investment, including portfolio investment, and actively courts foreign investment as part of its digital and green transformation. Foreign investors do not face discrimination when seeking local financing for projects. Credit is allocated on market terms, and foreign investors are eligible to receive credit in Spain. A large range of credit instruments are available through Spanish and international financial institutions. Many large Spanish companies rely on cross-holding arrangements and ownership stakes by banks rather than pure loans. However, these arrangements do not restrict foreign ownership. Several of the largest Spanish companies that engage in this practice are also publicly traded in the United States. There is a significant amount of portfolio investment in Spain, including by U.S. entities. Spain has an actively traded and liquid stock market, the IBEX 35.

In 2019, the United States and Spain amended their bilateral tax agreement to prevent double taxation of each other’s nationals and firms and to improve information sharing between tax authorities.

Spain has accepted the obligations of Article VIII, Sections 2, 3, and 4, and maintains an exchange rate system free of restrictions on payments and transfers for current international transactions, other than restrictions notified to the Fund under Decision No. 144 (52/51).
In January 2021, Spain’s new Financial Transactions Tax (FTT) or “Tobin tax,” entered into force. The FTT is an indirect tax of 0.2 percent on the acquisition of Spanish companies with a market capitalization of at least EUR 1 million. The financial intermediary executing the transaction – not the seller or acquirer of the shares – pays the tax.

Money and Banking System

There were about 37.4 commercial bank branches per 100,000 adults in Spain in 2021, down from 104 in 2007 but still higher than the eurozone average, according to the IMF. There are 17,945 financial institution branches as of December 2022, after having closed 2,476 offices in 2022, according to the Bank of Spain. Spain’s domestic housing crisis, which began in 2007, was linked to poor lending practices by Spanish savings banks. The government subsequently created a Fund for Orderly Bank Restructuring (FROB) through Royal Decree-law 9/2009, which restructured credit institutions to bolster capital and provisioning levels. The number of Spanish financial entities dropped significantly since 2009 through consolidation as banks have faced increased capital requirements and shrinking profit margins.

The COVID-19 pandemic adversely affected the outlook for Spanish banks, though the government’s income support measures, fiscal support for ailing firms, and loan guarantees helped reduce the pressure on the sector. Given the Spanish banking system’s retail orientation, the Bank of Spain expects improving profitability in the context of rising interest rates and a favorable liquidity position, despite global instability in the banking system. In December 2022, the parliament approved a temporary 4.8 percent windfall tax on banks with revenues exceeding EUR 800 million, which will apply in 2023 and 2024. The nonperforming loan ratio in Spain improved to 3.5 percent in December 2022. The sector has capital buffers to absorb the unexpected losses associated with this crisis, though there is significant disparity among institutions. Spanish financial institutions have significantly higher capital levels than the minimum regulatory requirements, which can be used to absorb unexpected losses from the economic fallout of pandemic. Total profit for the Spanish banking system was about EUR 20.5 billion euros in 2022, compared to the losses of 5.5 billion registered in 2020.

The Bank of Spain, Spain’s central bank, is a member of the euro system and the European System of Central Banks. Within the framework of the Single Supervisory Mechanism (SSM), the Bank of Spain and European Central Bank (ECB) jointly supervise the Spanish banking system.

Foreign banks can establish themselves in Spain and are subject to the same conditions as Spanish banks to access the Spanish financial system. Foreign banks with authorization in another EU member state do not need to get authorization from the Bank of Spain to establish a branch or representative office in Spain.

The National Securities Market Commission (CNMV) is responsible for the supervision and inspection of Spanish securities markets. Since its creation, the CNMV’s regime has been updated to adapt to the evolution of financial markets and to introduce new measures to protect investors.

Total assets for the five biggest banks in Spain at the end of 2021 were EUR 3.4 trillion:

1. Banco Santander: EUR 1.7 trillion
2. Banco Bilbao Vizcaya Argentaria (BBVA): EUR 713.1 billion
3. CaixaBank: EUR 609.1 billion
4. Banco Sabadell: EUR 251.4 billion
5. Bankinter: EUR 107.5 billion

To open a bank account as a non-resident, a foreigner needs a proof of identity, proof of address in Spain, and proof of employment status or where the funds originated. All documents that are not in Spanish or issued by Spanish authorities must be translated into Spanish.

Foreign Exchange and Remittances

Foreign Exchange

There are no controls on capital flows. In February 1992, Royal Decree 1816/1991 provided complete freedom of action in financial transactions between residents and non-residents of Spain. Previous requirements for prior clearance of technology transfer and technical assistance agreements were eliminated. The liberal provisions of this law apply to payments, receipts, and transfers generated by foreign investments in Spain.

Remittance Policies

Capital controls on the transfer of funds outside the country were abolished in 1991. Remittances of profits, debt service, capital gains, and royalties from intellectual property can all be affected at market rates using commercial banks.

Sovereign Wealth Funds

Spain does not have a sovereign wealth fund or similar entity. Spain was among the top ten receiving countries for sovereign wealth investments, attracting EUR 2.8 billion between October 2020 and December 2021 (latest available data).

Privatization Program

Spain does not have a formal privatization program.

Climate Issues

Spain’s climate goals are outlined in its National Energy and Climate Plan for 2021-2030 and include:

• Reduce national total greenhouse gas emissions by 23 percent compared to 1990 levels.
• Increase the share of renewables in energy end-use to 42 percent.
• Increase the share of renewables in electricity generation to 74 percent.
• Increase the share of renewables powering public buildings to 100 percent by 2025.
• Encourage at least 35 percent of current car owners to switch to non-emitting vehicles.

Spain’s long-term goal is to decarbonize its economy by 2050 with a 100 percent renewable electricity system. This implies reducing CO2 emissions from 334 million metric ton equivalent (MT) emitted in 2018 to a maximum of 29 MT emitted in 2050. Its long-term climate strategy is backed by a 2021 Climate Change and Energy Transition law, which prohibits new hydrocarbon exploration and extraction projects, and a Just Transition Strategy, Spain’s roadmap to shut down thermal power while protecting coal miners and power plant workers.

Spain has identified various strategic projects for its post-pandemic economic recovery and transformation (PERTEs), including one focused on renewable energy, green hydrogen, and storage. The renewable energy PERTE was approved in December 2021 and plans to mobilize 16.37 billion euros to promote its energy transition. The Spanish government is actively looking for private sector investment to transform its energy sector, offering strategic opportunities for U.S. businesses and technologies. To further advance its medium and long-term climate and energy transition goals, Spain approved several roadmaps in key sectors, including green hydrogen (October 2020) aimed at mobilizing 8.9 billion euros to install four gigawatts (GW) of electrolyzers by 2030, biogas (March 2022) aimed at boosting biogas production to more than 10.4 terawatt-hour by 2030, and offshore wind and sea energy (December 2021) to produce three GW of offshore wind by 2030.

To increase stability and flexibility in its network as it decarbonizes its energy sector, Spain announced an Energy Storage Strategy (March 2022) aimed at developing 20 GW of storage capacity by 2030 and 30 GW by 2050. In July 2021, Spain announced plans to invest a total of 4.3 billion euros by 2023 to accelerate the production of electric vehicles and expects to attract an additional 19.7 billion euros from the private sector.

Resources to Report Corruption

Ministry of FinanceCalle Alcala, 928071 Madrid, SpainTelephone: +34 91 595 8000Email: informacion.administrativa@minhap.es Website: https://ssweb.seap.minhap.es/ayuda/consulta/PTransparencia  

Transparency InternationalNational Chapter – SpainFundacion Ortega y Gasset-MarañónCalle Fortuny, 5328010 Madrid, SpainTelephone: +34 91 700 4105Email: info @ transparencia.org.es
Website: http://www.transparencia.org.es/