Guide to business in Spain
Spain profile
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Spain is in an outstanding position worldwide in terms ofthe importance of its economy: the 9th largest economyin the world by GDP, the 6th largest receiver of foreigndirect investment (FDI), the 8th largest issuer of FDI andthe 7th largest exporter of commercial services. What’smore, two of the three most prestigious rating agencies inthe world (Fitch and Moody´s) have given Spain their topscore in 2010.
Spain has a modern economy based on knowledge, inwhich services represent 71.09% of business activity. It isan international center for innovation that benefits from ayoung and highly qualified population of a proactivenature, and competitive costs, especially as regardsgraduate and post-graduate employees.
The country has worked hard to equip itself with state-ofthe-art infrastructures capable of fostering the futuregrowth of the economy. And this has been done alongsidea major commitment to R&D. Public spending in this fieldhas increased by a factor of 2.2 since 2004.
There are interesting business opportunities for foreigninvestors in Spain in high value-added and strategic fieldswith a huge potential for future growth such as the ICT,renewable energy, biotechnology, environment,aerospace and automotive sectors, because of theattractive competitive environment.
And in addition to gaining access to the Spanish nationalmarket, an attractively large market of nearly 47 millionconsumers with a high purchasing power, companies canalso gain access to the markets of the EMEA region(Europe, Middle East and North Africa), and especially tothose of Latin America, as a consequence of the prestigeand strong presence of Spanish companies in theseregions.
The main characteristics of our country are described inthis chapter: demographics, political and territorialstructure, economy and the foreign trade sector.
Guide to business in SpainSpain profile2
1. Introduction
2. The country, its people and quality of life
3. Spain and the European Union
4. Infrastructure
5. Economic overview
6. Domestic market
7. Foreign trade and investment
8. Legislation on foreign investment and
exchange control regulations
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4
9
11
15
17
18
21
Guide to business in Spain
Spain profile
Ñ1
Guide to business in SpainSpain profile3
1. Introduction
1. INTRODUCTION
Spain is one of the most significant economies in the world: 9th in terms of size and an attractive
destination for foreign investment, making Spain the 6th largest recipient of FDI worldwide1. Spain’s
appeal for foreign investment lies not only in its domestic market, with its high purchasing power, but
also in the possibility of operating with third markets from Spain. This is so because Spain offers a
privileged geo-strategic position within the European Union giving access to over 1,700 million
potential clients in the EMEA Region (Europe, Middle East and Africa). Its strong economic, historic
and cultural ties also make Spain the perfect gateway to Latin America.
Furthermore, Spain is a modern knowledge-based economy with services accounting for 71.09
percent of economic activity. The country has become a center of innovation supported by a young,
highly-qualified work force and competitive costs in the context of Western Europe.
This chapter gives a brief description of Spain’s vital statistics - the latest facts and figures which
explain the demographics, the political framework and the economic structure of the country.
1 “World Investment Report 2009” (2008 figures)
Guide to business in SpainSpain profile4
2. THE COUNTRY, ITS PEOPLE AND QUALITY OF LIFE
2.1 Geography, climate and living conditions
The Kingdom of Spain occupies an area of 504,782 square kilometers in the southwest of Europe,
and is the second largest country in the EU. The territory of Spain covers most of the Iberian
Peninsula, which it shares with Portugal, and also includes the Balearic Islands in the Mediterranean
Sea, the Canary Islands in the Atlantic Ocean, the North African cities of Ceuta and Melilla and some
surrounding rocky islands.
Despite the differences among the various regions of Spain, the country can be said to have a typical
Mediterranean climate. The weather in the northern coastal region (looking onto the Atlantic and
the Bay of Biscay) is mild and generally rainy throughout the year, with temperatures neither very low
in the winter nor very high in the summer. The climate on the Mediterranean coastline, including the
Balearic Islands, Ceuta and Melilla, is mild in the winter and hot and dry in the summer. The most
extreme differences occur in the interior of the Peninsula, where the climate is rather dry, with cold
winters and hot summers. The Canary Islands have a climate of their own, with temperatures
constantly around 20 Celsius degrees and only minor variations in temperature between seasons or
between day and night.
Spain has an excellent quality of life and is very open to foreigners. More than 10,000 kilometers of
coastline, abundant sporting facilities and events and social opportunities are crowned by the
diversity of the country’s cultural heritage as a crossroads of civilizations (Celts, Romans, Visigoths,
Arabs, Jews, etc.).
Galicia
Asturias Cantabria PaísVasco
La Rioja
Navarra
Castilla y León
Extremadura
Andalucía
Castilla - La Mancha
Comunidad de Madrid
Aragón
Cataluña
Murcia
ComunidadValenciana
Canarias
Baleares
FRANCE
PORTUGAL
MORROCO
La Coruña
Santiago de Compostela Lugo
Orense
OviedoSantander
León
Palencia
Valladolid
Segovia
Ávila
Soria
Logroño
Vitoria
Pamplona
Huesca
Zaragoza
Lérida
Tarragona
Castellón de la Plana
Valencia
Alicante
Murcia
Albacete
Cuenca
Madrid
Toledo
Cáceres
Mérida
Córdoba
Sevilla
Huelva
Cádiz
Ceuta
Málaga
Granada
Jaén
Almería
Melilla
BadajozCiudad Real
Guadalajara
Palma De Mallorca
Barcelona
Gerona
Teruel
BilbaoSan Sebastián
Salamanca
Burgos
Zamora
Pontevedra
Las Palmas de Gran Canaria
Santa Cruz de Tenerife
2. The country, its people and quality of life
Guide to business in SpainSpain profile5
Spanish is the official language of the country. There are other Spanish languages that are also
official in the corresponding Autonomous Communities (regions), according to their “Statutes of
Autonomy”. Education is compulsory until the age of 16 and English is the main foreign language
studied at school.
Spain has a labor force of 22.9 million people, representing 59.76% of the country’s population over
16 years old according to the Labor Force Survey (released in the fourth quarter 2009). Compared
with other OECD countries, Spain’s population is relatively young: 15.5% is under 16 years old, 67.8%
is between 16 and 64 years old, and only 16.7% is 65 and over, according to year 2009 figures.
Additionally, as seen in Table 2 below, Spain has been receiving a significant inflow of immigrants in
recent years that has offset the consequences of an aging population.
2.2 Population and human resources
The population of Spain in 2009 was 46.7 million people, with a population density of more than
92.60 inhabitants per square kilometer.
Spain is a markedly urban society (see Table 1), as evidenced by the fact that more than 32% of the
population lives in the capitals of the provinces.
Table 1
THE BIGGEST CITIES IN SPAIN*
POPULATION
Madrid 3,255,944Barcelona 1,621,537Valencia 814,208Sevilla 703,206Zaragoza 674,317Málaga 568,305Murcia 436,870
Palma de Mallorca 401,270Las Palmas de Gran Canaria 381,847Bilbao 354,860
* Figures refer only to the municipal district of each city.
Source: Report about population in Spanish cities at January 1, 2009. Official State Gazette.
Guide to business in SpainSpain profile6
2007 2008 2009
Europe 1,661,636 1,917,069 2,007,633America 1,234,688 1,354,158 1,479,014Asia 238,740 270,210 299,743Africa 841,561 922,635 944,696Oceania 1,989 1,839 1,903Unknown 1,130 7,588 8,243TOTAL 3,979,744 4,473,499 4,791,232
Source: Ministerio de Trabajo y Asuntos Sociales (Ministry of Labour and Social Affairs)2.
Data at December 31, 2009.
2 www.mtas.es
Table 2
FOREIGNERS RESIDENT IN SPAIN BY CONTINENT OF ORIGIN
Spain’s labor force structure by economic sector underwent significant changes sometime ago, with a
noteworthy increase in the working population employed in the services industry and a drop in the
number of people working in agriculture and industry (Chart 1 and Table 3).
The labor force is highly qualified, productive and capable of adapting to technological changes.
Lastly, in keeping with the commitment entered into with the European Union to promote job
creation, the Spanish government has implemented significant changes to the job market since the
mid-nineties, introducing a greater degree of flexibility in employment. Nevertheless, as a result of
the current global economic crisis, the significant migratory flow received by our country over the last
decade, and the change in the Spanish economy, which has moved away from labor-intensive sectors
towards sectors involving new technologies, the unemployment rate in Spain has increased
significantly.
As a result, the government prepared an ambitious Economic and Employment Stimulus Plan, called
Plan E. This Plan combines short-term fiscal stimulus measures with measures aimed at supporting
demand and making structural reforms, which will serve to enhance the competitiveness of the
Spanish productive system.
The economic effort linked to this Plan is very significant, accounting for approximately 2% of GDP in
2009 and are focused on supporting employment, mainly through the Local Investment Fund, on
reducing taxes for businesses and families and on increasing access to financing through the Official
Credit Institute (ICO). Also, in coordination with other Member States, measures have been
implemented to provide support to hard-hit industries, such as the automotive, and more recently
tourism, sectors.
In addition, the Spanish Government has approved the Preliminary Sustainable Economy Bill as part
of its strategy to change Spain’s economic model with a view to boosting competitiveness,
Guide to business in SpainSpain profile7
Chart 1
LABOR FORCE STRUCTURE BYECONOMIC SECTOR IN 2009
Source: Instituto Nacional de Estadística
(National Statistics Institute)
Services
Construction
Industry
Agriculture
4%
14%
10% 72%
2007 2008 2009
Agriculture 4.4 4.0 4.2Industry 16.0 15.3 14.4Construction 13.1 11.0 9.7Services 66.4 69.7 71.7
Source: Instituto Nacional de Estadística (National Statistic Institute). Labor Force Survey, 4Q of 2009.
Table 3
EVOLUTION OF LABOR FORCE STRUCTURE BY ECONOMIC SECTOR (Percentage)
strengthening financial oversight, combating payment delinquency, increasing transparency in
relation to compensation at listed companies and facilitating public-private procurement. This Bill
forms part of a strategy the main objective of which is to lay the foundations for a more sustainable
development and growth model for the Spanish economy. This strategy also includes a capital fund
of €20 billion, managed by the Official Credit Institute, as well as a program of structural reforms
with a 10-year horizon.
At the local level, the Government has approved a new State Fund for Employment and Local
Sustainability, which gives continuity to the State Fund of Local Investment that began to operate in
2009. The new investment program, funded with a budget of €95.3 million, places the emphasis
this time on promoting initiatives aimed at environmental conservation, savings, energy efficiency,
new technologies and local services.
Guide to business in SpainSpain profile8
3 www.casareal.es4 www.poderjudicial.es5 www.congreso.es6 www.la-moncloa.es
2.3 Political institutions
Spain is a parliamentary monarchy. The King is the Head of State3 and his primary mission is to
arbitrate and moderate the regular functioning of the country’s institutions in accordance with the
Constitution. He also formally ratifies the appointment or designation of the highest holders of public
office in the legislative, executive and judicial branches4.
The Constitution of 1978 enshrined the fundamental civil rights and public freedoms as well as
assigning legislative power to the Cortes Generales (Parliament)5, executive power to the
Government of the nation, and judicial powers to independent judges and magistrates.
The responsibility for enacting laws is entrusted to the Cortes Generales, comprising the Congreso de
los Diputados (Lower House of Parliament) and the Senado (Senate), the members of which are
elected by universal suffrage every four years.
The Cortes Generales exercise the legislative power of the nation, approve the annual State budgets,
control the actions of the Government and ratify international treaties.
The Government6 is headed by the Presidente del Gobierno (President of the Government) who is
elected by the Cortes Generales and is, in turn, in charge of electing the members of the Consejo de
Ministros (Council of Ministers).
The members of the Council of Ministers are appointed and removed by the President of the
Government at his or her discretion. For administrative purposes, Spain is organized into 17
Autonomous Communities (Regions) each of which generally comprises one or more provinces, plus
the Autonomous Cities of Ceuta and Melilla in Northern Africa; the total number of provinces is 50.
Each Autonomous Community (Region) exercises the powers assigned to it by the Constitution as
specified in its “Statute of Autonomy”. These Statutes also stipulate the institutional organization of
the Community concerned, consisting generally of: a legislative assembly elected by universal
suffrage, which enacts legislation applicable in the Community; a Government with executive and
administrative functions, headed by a President elected by the Assembly, who is the Community’s
highest representative; and a Superior Court of Justice, in which judicial power in the Community’s
territory is vested. A Delegate appointed by the Central Government directs the Administration of the
State in the Autonomous Community (Region), and co-ordinates it with the Community’s
administration.
The Autonomous Communities (Regions) are financially autonomous and also receive allocations
from the general State budgets.
As a result of the structure described above Spain has become one of the most decentralized
countries in Europe.
Guide to business in SpainSpain profile9
3. SPAIN AND THE EUROPEAN UNION
Spain became a full member of the European Economic Community in 1986. Therefore, EU
legislation is fully applicable in Spain. In this connection and according to figures published by the
European Commission, Spain fully complies with the objectives established by the European Council
and has implemented 3,000 Directives into national law.
A major impact of European Union membership for Spain, and for the other Member States, came in
the mid-nineties with the advent of the European Single Market and the European Economic Area,
which created a genuine barrier-free trading space.
Since then, the EU has advanced significantly in the process of unification by strengthening the
political and social ties among its citizens. Spain, throughout all this process, has always stood out as
one of the leaders in the implementation of liberalization measures.
Since January 1, 2007, with the addition of Rumania and Bulgaria, the European Union membership
now stands at 277.
With the aim of strengthening democracy, efficiency and transparency within the EU and, in turn, its
ability to meet global challenges such as climate change, security, and sustainable development, the
27 EU Member States gathered together on December 13, 2007, to sign the Treaty of Lisbon, which
entered into force – subject to prior ratification by each of the 27 member states – on December 1,
2009. Previously, between June 4 and 7 the European Parliament elections took place8.
Spain holds significant responsibilities within the EU, evidenced by the fact that it is, along with
Poland, the fifth country in terms of voting power in the Council of Ministers. Currently of note is the
fact that Spain has assumed the Council Presidency of the European Union for the fourth time and
for the period running from January to June 2010.
The introduction of the Euro (on January 1, 2002) heralded the start of the third Spanish presidency
of the European Council and represented the culmination of a long process and the opening-up of a
veritable array of opportunities for growth for Spanish and European markets. Since January 1, 2009,
with the addition of Slovakia, Euro Zone membership now stands at sixteen.
The euro has led to the creation of a single currency area within the EU that makes up the world’s
largest business area, bringing about the integration of the financial markets and economic policies
of the area’s member states, strengthening ties between the member states’ tax systems and
bolstering the stability of the European Union.
Furthermore, the adoption of a single European currency has had a clear impact at an international
level, raising the profile of the Euro-Zone at both international and financial gatherings (G-7
meetings) and within multilateral organizations. The economic and business stability offered by the
3. Spain and the European Union
7 www.mae.es8 http://europa.eu
Guide to business in SpainSpain profile10
9 Annual Report of Progress 2009-PEIT
euro have been contributing to the growth of the Spanish economy, as well as its international
political standing.
Spain is the EU member state that has received the most structural and cohesion funds, which have
been put to use to finance infrastructure and development projects. Indeed, it is estimated that
between 2007 and 2013, Spain is set to receive upwards of €31.5 billion in the guise of various
structural and cohesion funds, making it the EU’s second largest recipient of such funds, second only
to Poland.
Under the decisions adopted by the Council of Europe in London in 2005, Spain was also awarded a
special €2-billion allowance set aside for R&D activities, with which the government, in partnership
with the private sector, has set in motion initiatives in this area to co-finance. Noteworthy among
such initiatives was the launch of Programa Ingenio 2010 in a bid, essentially, to reach a situation in
which public and private investment in R&D&I accounts for 2% of GNP by 2010. In this connection,
the initial results of Programa Ingenio 2010, released in 2008, reveal that R&D investment
accounted for 1.2% of GNP in 2006 (representing the largest increase since 1991), while business
investment in this area reached 0.67% of GNP.
The Government’s determination to boost investment in R&D&I is evidenced by the fact that in the
2004-2009 period, the Central Government’s budget for civil R&D&I nearly tripled, surpassing €8.2
billion in 2009, a particularly significant increase within the context of the budgetary constraints
brought about by the current economic situation. If the extraordinary items from Plan E are also
taken into account, the total funds devoted in 2009 to civil R&D&I amount to €8.69 billion, 12%
more than in 2008.
In addition, to improve business competitiveness, in 2009 the Interempresas program was created
with both domestic (€36.5 million) and international (€10 million) components aimed at co-
financing R&D&I projects undertaken by companies, mainly small and medium-sized, in the Health
and Energy industries9.
Guide to business in SpainSpain profile11
4. Infrastructure
4. INFRASTRUCTURE
The Government intends to continue with its program of heavy investment in this area in the future, as is
borne out by the Strategic Infrastructure and Transport Plan, which plans to make a total investment of over
€248 billion in the period 2005-202010. In this regard, with accumulated investment of over €62 billion,
more than 25% of the Plan has been executed in the 4 years that it has existed, thereby exceeding its
objectives both in terms of the total executed and the percentage of GDP of such execution. Railway
transportation takes center stage in the Plan, accounting for almost 50% of the total investment.
The motorway and dual carriageway network, of nearly 14,000 kilometers, has undergone constant
renovation with a view to enhancing its efficiency. The Government’s investment package means that
Spain will be able to call on a wide-reaching motorway and dual carriageway network, granting
direct access to all Spaniards and meaning that 94% of the population is never more than 30
kilometers from a high capacity road. With this in mind, 1,500 kilometers of motorway are expected
to enter into service during the period 2008-2012, with work underway on a further 1,600
kilometers. According to data as of March 31, 2009, 1,564 kilometers of motorways and dual
carriageways are under construction or under tender.
As far as railway transport is concerned (where Spain has a network of over 15,000 kilometers), high-
speed networks have become one of the top priorities in the Government’s infrastructure plans, with
plans for a 10,000 kilometer network by 2020. Consequently, all Spanish cities will have direct access
to the network, and 90% of the country’s citizens will be less than 50 kilometers away from a station
on the network. In this regard, at the outset of 2008, the number of provinces already benefiting
from the existing high-speed infrastructure was 33, covering 63.8% of the total surface area of Spain
and some 73% of the country’s total population.
Moreover, Madrid will be connected by high-speed train to the French border, via Zaragoza (Aragón),
Barcelona (Cataluña) and via Vitoria and Irún (the Basque Country). As things stand, Madrid already
has high-speed train connections to numerous Spanish cities via the following lines: 1) Madrid-
Seville; 2) Madrid-Zaragoza-Huesca; 3) Madrid-Zaragoza-Camp de Tarragona-Barcelona; 4) Madrid-
Malaga; and 5) Madrid-Segovia-Valladolid. In addition, as of March 31, 2009, 2,199 kilometers are
under construction or under tender, thus enabling 1,300 kilometers of high-speed lines to be put into
service during the 2008-2012 period, including the high speed Barcelona-Gerona, Madrid-Valencia
and La Coruña-Pontevedra-Vigo connections, to name but a few.
Finally, it is worth noting the freight sector liberalization since January 2005, which has led to the creation
of private enterprises that transport goods by railway. The ultimate aim is to encourage the
transportation of goods by railway in general, with a view to reducing the costs of the Spanish industrial
sector, increasing the energy efficiency of transportation and reducing greenhouse gas emissions.
Air transport links up the main Spanish cities and, with approximately 250 airlines operating out of
the country’s 49 airports, Spain is connected to the world’s leading cities. Spain is a major hub for
10 www.mfom.es
Guide to business in SpainSpain profile12
lines linking the Americas and Africa to Europe. Thus, the most significant investments in the pipeline
are aimed at the two principal international airports in Madrid and Barcelona. With the inauguration
of Terminal 4 in February 2006, Madrid’s airport saw its capacity increase to 70 million passengers
per year, having been recognized in 2008 as the world’s eleventh largest airport (by passenger
footfall) by the Airport Council International. Elsewhere, investment in the Barcelona airport will
enable capacity to be increased up to 70 million passengers per year. In line with the 2005-2020
Strategic Infrastructure and Transport Plan, the “Plan Canarias” has been launched, paving the way
for an investment of almost €3 billion in Canary Islands airports11.
Furthermore, with over 53 international ports on the Atlantic and Mediterranean coasts, Spain can
boast excellent maritime transport links. The Strategic Infrastructure and Transport Plan forecasts an
increase of up to 75% in the capacity of Spanish ports, cementing their position as intermodal hubs by
2020. Specifically, during the period 2008-2012 it will increase in the capacity of sheltered water,
docking space and land surface area by 7, 26 and 30%, respectively. In addition, 2009 will see the start-
up of the first two Seaside Motorways between the ports of Algeciras, Vigo and Gijón, and those of
Nantes-Saint Nazaire and Le Havre in France. Negotiations have begun with the Italian Government for
a similar process. This will permit a more sustainable alternative in some of the main flows with the EU.
In addition, with a view to improving the competitiveness of ports, the Spanish Parliament is working on
a new Ports Law that will reduce restrictions on inter- and intra-port competition.
Spain is well equipped in terms of technological and industrial infrastructure, having seen a boom in
recent years in technological parks in the leading industrial areas, as well as around universities and
R&D centers. There are currently 79 technological parks12 (32 of which are now fully operational)
housing over 4,500 companies, mainly engaged in the telecommunications and IT industries, in
which a large number of workers are employed in R&D activities.
€9,271 million has been budgeted for R&D&I for 2010.
As mentioned before, with a view to achieving new goals, the government has created the new
INGENIO 2010 Program.
Spain can also boast a solid telecommunications network, with an extensive conventional fiber optic
cable network (64,000 km) covering the country almost in its entirety, on top of one of the world’s
largest undersea cable networks and satellite link-ups spanning the five continents. Particularly
noteworthy is the significant deregulation set in place some years ago in the majority of industries,
the telecommunications industry included, meeting the deadlines set for such purpose by the EU
with ease. Among other advantages, this deregulation has meant a more competitive range of
products on offer as borne out by costs, essential for economic development.
Last, it is worth noting the significant investments made in hydraulic infrastructures, which have
improved the possibility of guaranteed water availability.
11 www.aena.es (press release)12 www.apte.org
Guide to business in SpainSpain profile13
ROAD NETWORK
RAILWAYS
Galicia
AsturiasCantabria País
Vasco
La Rioja
Navarra
Castilla y León
Extremadura
Andalucía
Castilla - La Mancha
Comunidad de Madrid
Aragón
Cataluña
Murcia
ComunidadValenciana
Canarias
Baleares
FRANCE
PORTUGAL
MORROCO
Freeways
Freeways in construction
Freeways of toll
Other main highways
La Coruña
Santiago de Compostela
Lugo
Orense
Oviedo
Santander
LeónPalencia
Valladolid
Segovia
Ávila
Soria
Logroño
Vitoria
Pamplona
Huesca
ZaragozaLérida
Tarragona
Castellón de la Plana
Valencia
Alicante
Murcia
Albacete
Cuenca
Madrid
ToledoCáceres
Mérida
Córdoba
Sevilla
Huelva
Cádiz
Ceuta
Málaga
Granada
Jaén
Almería
Melilla
BadajozCiudad Real
Guadalajara
Palma de Mallorca
Barcelona
Gerona
Teruel
BilbaoSan Sebastián
Salamanca
Burgos
Zamora
Pontevedra
Las Palmas de Gran Canaria
Santa Cruz de Tenerife
Galicia
AsturiasCantabria País
Vasco
La Rioja
Navarra
Castilla y León
Extremadura
Andalucía
Castilla - La Mancha
Comunidad de Madrid
Aragón
Cataluña
Murcia
ComunidadValenciana
Canarias
Baleares
FRANCE
PORTUGAL
MORROCO
High speed (more than 250 km/hour)
High planned speed
High speed in construction
Fast line (more than 200 km/hour)
Long distance rail routes
La Coruña
Santiago de Compostela
Lugo
Orense
Oviedo
Santander
LeónPalencia
Valladolid
Segovia
Ávila
Soria
Logroño
Vitoria
Pamplona
Huesca
ZaragozaLérida
Tarragona
Castellón de la Plana
Valencia
Alicante
Murcia
Albacete
Cuenca
Madrid
ToledoCáceres
Mérida
Córdoba
Sevilla
Huelva
Cádiz
Ceuta
Málaga
Granada
Jaén
Almería
Melilla
BadajozCiudad Real
Guadalajara
Palma de Mallorca
Barcelona
Gerona
Teruel
BilbaoSan Sebastián
Salamanca
Burgos
Zamora
Pontevedra
Las Palmas de Gran Canaria
Santa Cruz de Tenerife
Guide to business in SpainSpain profile14
PORTS
AIRPORTS
Galicia
AsturiasCantabria País
Vasco
La Rioja
Navarra
Castilla y León
Extremadura
Andalucía
Castilla - La Mancha
Comunidad de Madrid
Aragón
Cataluña
Murcia
ComunidadValenciana
Canarias
Baleares
FRANCE
PORTUGAL
MORROCO
Main ports
Bahía de Cádiz
Bahía de Algeciras
Málaga Motril Almería
Cartagena
Alicante
Valencia
Castellón
TarragonaBarcelona
Pasajes
BilbaoSantanderGijónAvilésFerrol-San Cimbrao
La Coruña
Vilagarcía
Marín- Pontevedra
Vigo
Baleares
Ceuta
Santa Cruz de Tenerife
Las Palmas
Melilla
Huelva
La Coruña
Santiago de Compostela
Lugo
Orense
Oviedo Santander
LeónPalencia
Valladolid
Segovia
Ávila
Soria
Logroño
Vitoria
Pamplona
Huesca
ZaragozaLérida
Tarragona
Castellón de la Plana
Valencia
Alicante
Murcia
Albacete
Cuenca
Madrid
ToledoCáceres
Mérida
Córdoba
SevillaHuelva
Cádiz
Ceuta
Málaga Granada
Jaén
Almería
Melilla
BadajozCiudad Real
Guadalajara
Palma de Mallorca
Barcelona
Gerona
Teruel
BilbaoSan Sebastián
Salamanca
Burgos
Zamora
Pontevedra
Las Palmas de Gran Canaria
Santa Cruz de Tenerife
Galicia
AsturiasCantabria País
Vasco
La Rioja
Navarra
Castilla y León
Extremadura
Andalucía
Castilla - La Mancha
Comunidad de Madrid
Aragón
Cataluña
Murcia
ComunidadValenciana
Canarias
Baleares
FRANCE
PORTUGAL
MORROCO
Madrid/Barajas
Salamanca
León Burgos
Valladolid
LogroñoPamplona
Zaragoza
Valencia
Alicante
Murcia/San Javier
Almería
Granada
CórdobaSevilla
Badajoz
JerezMálaga
Melilla
Huesca
Reus Barcelona
Sabadell
Gerona
San SebastiánBilbao
Vitoria
SantanderAvilés
La Coruña
Santiago
Vigo
Madrid/Torrejón
Madrid/Cuatro Vientos
AlbaceteIbiza
Menorca
Palma de Mallorca
International Airports
Control centers of Navigation
National Airports
Tenerife Sur
Tenerife Norte
Gran Canaria
Fuerteventura
El Hierro
La Gomera
La Coruña
Santiago de Compostela
Lugo
Orense
Oviedo
Santander
León
Palencia
Valladolid
Segovia
Ávila
Soria
Logroño
Vitoria
Pamplona
Huesca
ZaragozaLérida
Tarragona
Castellón de la Plana
Valencia
Alicante
Murcia
Albacete
Cuenca
Madrid
ToledoCáceres
Mérida
Córdoba
SevillaHuelva
Cádiz
Ceuta
Málaga
Granada
Jaén
Almería
Melilla
BadajozCiudad Real
Guadalajara
Palma de Mallorca
Barcelona
Gerona
Teruel
BilbaoSan Sebastián
Salamanca
Burgos
Zamora
Pontevedra
Las Palmas de Gran Canaria
Santa Cruz de Tenerife
Guide to business in SpainSpain profile15
5. Economic overview
2007 2008 2009
Agriculture and fishery 2.94 2.86 2.62Industry 17.87 17.39 15.32Construction 12.19 11.55 10.97Services 67.00 68.20 71.09
Source: Eurostat, 2009. 3Q 2009
5. ECONOMIC OVERVIEW
The structure of the Spanish economy is that of a developed country, with the services sector being
the main contributor to GDP, followed by industry. These two sectors represent approximately 87% of
Spain’s GDP with agriculture’s share today representing a 2.6% of GDP, and declining sharply as a
result of the country’s economic growth (see Table 4).
Table 4
STRUCTURE OF GDP (% of total, current prices)
Spain is a dynamic country which in the past decade has achieved sustained growth (3.4%) that is
higher than the EU average (2%) (Chart 2).
Chart 2
GDP GROWTH(% growth rate, 1995 constantprices)
Source: Bank of Spain
Data 2009 Spain Euro Zone
4,2
2,7 2,73 3,1
3,63,4
1,51
0,7
1,8
11,522,533,544,5
2000 2001 2002 2003 2004 2005 2006
3,1
4
2007
2,7
3,6
2008
0,5
0,9
1,8
0,50-0,5-1-1,5-2-2,5-3-3,5-4-4,5-5
2009
-3,6
-4,0
Guide to business in SpainSpain profile16
However, since August 2007 we have been immerse in an international crisis which has grown
gradually worse and has spread around the world until becoming a global crisis. In this respect, the
prudent budgetary policy followed in Spain in recent years (with a ratio of government debt to GDP
that is 20 points below the European average) permits the pursuit of counter-cyclical and structural
policies aimed at favoring an economic model based on growth offered by new sectors located
higher up in the value chain, such as renewable energy, biotechnology or information technologies
and telecommunications.
Moreover, inflation in Spain has slowly fallen since the end of the 1980s. Average inflation between
1987 and 1992 was 5.8%; it dropped below 5% for the first time in 1993, and it has been shrinking
progressively since then. The year-on-year inflation rate for 2009 was 0.8%.
Table 5
GROWTH FOR OECD COUNTRIES (Percentages)
Real GDP Growth
2007 2008 2009
EU countriesGermany 2.6 1 -4.9France 2.3 0.3 -2.2Italy 1.5 -1 -4.9United Kingdom 2.6 0.5 -4.8Spain 3.6 0.9 -3.6Other countriesUnited States 2.1 0.4 -2.4Japan 2.3 -1.2 …Total Euro Zone 2.7 0.5 -4.0Total OCDE 2.7 0.5 …
Source: Banco de España (Bank of Spain). Data 2009
Guide to business in SpainSpain profile17
6. DOMESTIC MARKET
The growth of the Spanish economy in recent years has been driven by strong demand and a
substantial expansion of production in the context of an increasingly open economy.
Today Spain has a domestic market of 46.7 million people with a per capita income (ppp) of 23,874
by INE for the year 2008, and an additional injection of demand coming from the 52.2 million
tourists13 who visit the country every year. The close links with Latin America and North Africa and the
obvious advantages of using Spain as a gateway to those countries are worthy of mention.
Table 6 reflects the evolution of production and demand components. The slowdown in the Spanish
economy’s growth has been due to a drop-off in domestic demand and private consumption,
alongside a sharp reduction in external demand. Moreover, the only element of domestic demand
that showed a slight decline was final consumption.
6. Domestic market
Table 6
GROWTH OF PRODUCTION AND DEMANDCOMPONENTS (Percentages)
2008 2009
Production componentsAgriculture and fishery -0.8 -2.4Industry -2.1 -14.7Energy 1.9 -8.2Construction -1.3 -6.3Services 2.2 -1Demand componentsPrivate consumption -0.6 -4.8Public consumption 5.4 3.8Gross fixed capital formation -4.4 -15.3Domestic demand -0.5 -6Exports of goods and services -1.0 -11.5Imports of goods and services -4.9 -17.9
Source: Banco de España (Bank of Spain). (Data 2009)
13 www.iet.tourspain.es. (Data January-December 2009)
Guide to business in SpainSpain profile18
7. Foreign trade and investment
Table 7
DISTRIBUTION OF EXPORTS AND IMPORTS 2009*(as a % of total)
Exports Imports
Capital goods 20.4% Capital goods 20.6%Automobile industry 17.6% Energy products 16.2%Food 15.6% Chemical products 15.6%Chemical products 14.6% Automobile industry 12.5%Semi-manufactured non-chemical products 11.3% Food 11.1%Consumer goods 9.3% Consumer goods 10.9%Energy products 4.5% Semi-manufactured non-chemical products 6.9%Other goods 2.7% Durable consumer goods 3.1%Durable consumer goods 2.1% Raw materials 2.7%Raw materials 1.9% Other goods 0.4%
Source: Ministerio de Industria, Turismo y Comercio (Ministry of Industry, Tourism and Trade).
* Data available for the period January-November 2009
14 WTO “International Trade Statistics 2009” report.15 Annual data published by the Spanish Ministry of Industry, Tourism andTrade.
7. FOREIGN TRADE AND INVESTMENT
In recent years, rapid growth in international trade and foreign investments has made Spain one of
the most internationally-oriented countries in the world.
With regard to the trading of goods, Spain is ranked 17th in the world as an exporter and 12th as an
importer; while in the trading of services it occupies 7th place as an exporter and 9th place as an
importer14.
The share of Spanish exports and imports of goods with respect to global figures amount to 1.7% and
2.4%, respectively. The share of exports and imports of services with respect to global figures stand at
3.8% and 3.0%.
The breakdown by industry of foreign trade is relatively diversified, as can be seen in the following
table:
As would be expected, the countries of the EU are Spain´s main trading partners. Accordingly, during
200915, Spanish exports to the European Union accounted for 69.3% of total exports and sales to the
Euro Zone 57.1% of the total. As for imports, those originating from the European Union accounted
for 58.3% of the total and those from the Euro Zone 48.1%.
Guide to business in SpainSpain profile19
Graph 3
FOREIGN INVESTMENT INSPAIN (1994-2009*)(Million euros)
*Data available for the period January-
September 2009.
Source: Registro de Inversiones
Exteriores Ministerio de Industria,
Turismo y Comercio. (Registry of Foreign
Investments. Ministry of Industry,
Tourism and Trade).
Specifically, Spain’s leading trade partners are France and Germany. Beyond the EU, of note are Asia
and Africa, which have displaced Latin and North America from their traditional role as Spain’s main
trade partners outside the EU.
As regards investment, Spain is positioned as one of the main recipients of investment worldwide.
Specifically, according to the UNCTAD, in 2008 Spain was the 6th largest recipient of foreign direct
investment in the world, 4th in the EU. Moreover, Spain is also one of the main foreign direct
investors in the world: $77 billion in 2008 for a rank of 8th largest investor worldwide16.
16 UNCTAD ”World Investment Report 2009” Report.
Gross investment Net investment
0
5.000
10.000
15.000
20.000
25.000
30.000
–5.000
2009
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Guide to business in SpainSpain profile20
2008 2009
I. Current account -97,786 -50,593Trade Balance -81,077 -41,733Services Balance 25,422 24,166Income -31,414 -24,652Net Current Transfers -10,717 -8,374II. Capital Account 5,297 3,159III. Financial Account 92,557 48,374Total (excluding Bank of Spain) 70,786 49,071Direct investment -4,597 -4,833Portfolio investment 6,064 47,031Other investment 76,953 11,929Financial derivatives -7,635 -5,056Bank of Spain 21,771 -697Reserves -473 -1,120Claims with the Eurosystem 23,185 -5,435Other net assets -942 5,858IV. Net errors & omissions -68 -940
(*) Data available for the period January-November 2008 and 2009.
N.B.: A positive sign in the current and capital accounts means a surplus (receipts greater than payments) and represents a net loan from Spain to
the rest of the world (increase in assets or decrease in liabilities), whereas in the financial account a positive sign means a net inflow of capital and
represents a net loan from the rest of the world to Spain. A negative sign in reserves means an increase.
Source: Banco de España (Bank of Spain)
Table 8
SPAIN’S BALANCE OF PAYMENTS* (Millions of euros)
As a summary of Spanish foreign trade, the balance of payments is attached.
Guide to business in SpainSpain profile21
8. LEGISLATION ON FOREIGN INVESTMENT AND EXCHANGE CONTROL REGULATIONS
This section covers the main aspects of the Spanish legislation on exchange control and foreign
investments. Although these areas are fully liberalized, there are specific reporting obligations to be
accomplished.
As a general rule, foreign investments are subject only to notification after the investment has been
made. Exchange controls and capital movements are fully liberalized and in all areas there is
complete freedom of action.
8.1 Legislation on foreign investment
Royal Decree 664/1999 deregulated practically all transactions of this kind (with the provisions and
exceptions set forth below), eliminating the requirement for “prior verification” and adapting
Spanish domestic law to the rules on the freedom of movement of capital contained in Articles 56 et
seq. of the Treaty of the European Union.
The most noteworthy aspects of the applicable rules are as follows:
• Foreign investments are, as a general rule, subject only to notification after the investment has
been made. The only exceptions are: (i) Investments from tax havens, which in general must be
notified beforehand, and (ii) foreign investments in activities directly related to national security,
and real estate investments for diplomatic missions by States that are not members of the
European Union and require “prior verification” from the Spanish Council of Ministers.
• There is no obligation for foreign investments to be formalized in the presence of a Spanish notary
public (unless specific legislation provides otherwise).
• Solely investments in the air transportation and radio industries, in industries relating to minerals
and raw mineral materials of strategic interest and mining rights, in the television, gaming,
telecommunications and private security industries, in industries concerned with the
manufacturing, marketing or distributing of arms and explosives for civilian use, and in national
security-related activities (these latter activities are subject to the clearance rules contained in the
Royal Decree), will be subject to the requirements imposed by the relevant body established by
industry-specific legislation.
8.1.1. Investors
Investors can be:
• Non-resident individuals (that is, Spanish nationals or foreigners domiciled abroad, or who have
their principal place of residence there).
• Legal entities whose registered offices are located abroad.
• Public agencies of foreign States.
8. Legislation on foreign Investment and exchange control regulations
Guide to business in SpainSpain profile22
A Spanish company in which foreign shareholders have a majority holding is not deemed to be an
investor. A change of registered office of legal entities or a change of residence of individuals is
enough to change the classification of an investment as a Spanish investment abroad or a foreign
investment in Spain.
8.1.2 Regulated Investments
Foreign investments in Spain, for the purpose of the obligation to report which is analyzed later,
could be carried out through any of the next operations:
• Participation in Spanish companies, including their incorporation and subscription and acquisition
of shares in corporations or the subscription of shares in limited liability companies, and any legal
transaction under which voting and other non financial rights are acquired.
• Establishment of and increase of capital allocated to branches.
• The subscription and acquisition of marketable debt securities issued by residents (debentures,
bonds, promissory notes).
• Participation in mutual funds recorded in the Registers of the Spanish National Securities Market
Commission17.
• The acquisition by non-residents of real estate located in Spain valued at more than €3,005,060,
or where the investment originates from a tax haven, whatever its amount.
• The formation, formalization or participation in joint ventures, foundations, economic interest
groupings, cooperatives and joint-property entities, with the same characteristics as in the
previous paragraph regarding the value of the investment.
Foreign investments not included in the above list (such as participating loans), are totally
deregulated, and no notice is required. Notwithstanding the foregoing, said investments may be
subject to industry-specific regulations and the rules on exchange control and notification of
monetary flows to or from other countries remain in force.
8.1.3 The party required to report foreign investments
As a general rule, the owner of the investment and, in addition, any Spanish notary public acting in
the transaction, is obliged to report the investment to the authorities. However, investments in
certain assets (mutual funds, securities, registered shares) may require other individuals to report the
investment (credit, financial, deposit-taking or management entities, the Spanish company receiving
the investment).
17 http://www.cnmv.es/index.htm
Guide to business in SpainSpain profile23
8.1.4 Reporting rules
(i) General rule
As a general rule, foreign investments indicated in section 8.1.2 above and the liquidation thereof
must be reported after the event to the Investments Register at the Ministry of Industry, Tourism and
Trade18.
(ii) Exceptions
Investments from tax havens must be reported before and after the event, except in the following
cases:
• Investments in marketable debt securities issued or offered publicly, whether or not they are
traded on an official secondary market, and units in mutual funds recorded in the Registers of the
Spanish National Securities Market Commission.
• Where the foreign interest does not exceed 50% of the capital stock of the Spanish company in
which the investment is made.
It is important to stress that this prior reporting obligation is not equivalent to a verification or
authorization requirement and once the investment has been reported, the investor may make his
investment without having to wait for any reply from the authorities.
8.1.5 Monitoring of foreign investments
The General Directorate for Trade and Investments19 (“DGCI”) of the Ministry of Industry, Tourism and
Trade can require Spanish companies which have foreign shareholders and Spanish branches of non-
resident persons specifically or generally to file an annual report on the status of their foreign
investments. The General Directorate may also require the parties required to report foreign
investments to provide the information necessary in each particular case.
8.1.6 Suspension of the deregulation rules
The Spanish Council of Ministers can suspend the application of the deregulation rules in certain
cases, which will require investments concerned to undergo a prior procedure to obtain
administrative clearance from the Council of Ministers.
Up to date, the Council of Ministers has exercised the powers of suspension described above only in
respect of foreign investments in Spain in activities directly related to national security, such as the
production or marketing of arms, munitions, explosives and other armaments (except in the case of
listed companies, in which case only acquisitions by non-residents of more than 5% of their capital
stock, or acquisitions of less than 5% that enable such investors to form, directly or indirectly, part of
their managing bodies, will require clearance).
18 www.mityc.es19 www.mcx.es
Guide to business in SpainSpain profile24
8.2 Exchange control regulations
Exchange control and capital movements are fully liberalized and in all areas there is complete
freedom of action.
In this sense, Law 19/2003, on Movement of Capital and Foreign Transactions and for the Prevention
of Money Laundering, repealed Law 40/1979, on Exchange Control Legal System (with the exception
of chapter II), and modified Law 19/1993, on Certain Measures for the Prevention of Money
Laundering, but maintained the principle of liberalization of movements of capital.
Law 19/2003 should have been implemented by regulations before January 8, 2004, but this has
been done only partially. In this regard, Royal Decree 54/2005 has modified the regulations of Law
19/1993, approved by Royal Decree 925/1995. However, no other regulations have been
implemented and, until they are, according to the First Temporary Provision of Law 19/2003, all
regulations approved implementing Law 40/1979 will remain in force in everything not opposed to
Law 19/2003.
Additionally, Law 36/2006, on measures for the prevention of tax fraud, has modified Law 19/1993
in connection with certain aspects of the prevention of money laundering.
The main features of the Spanish exchange control scenario currently in force can be summarized as
follows:
8.2.1 Freedom of action
As a general rule, all acts, businesses, transactions and operations between residents and non-
residents which involve or may involve payments abroad or receipts from abroad are completely
deregulated. This deregulation includes payments or receipts made either directly or by offset of the
underlying transactions, as well as transfers to or from abroad and variations in accounts or financial
debtor or creditor positions abroad. It also covers the import or export of means of payment.
8.2.2 Safeguard clauses and exceptional measures
The EU provisions will be able to prohibit or restrict the performance of certain transactions and the
respective collections, payments, bank transfers or variations in accounts or financial positions in
respect of third countries.
The Spanish Government may also impose prohibitions or restrictions in respect of one or a group of
States, a certain territory or an extra-territorial centre, or suspend the system of liberalization for
certain acts, businesses, transactions or operations.
8.2.3 Statistical information
In order to calculate the Spanish balance of payments and to maintain statistical control of monetary
flows there are certain mechanisms for payments to and receipts from abroad.
Guide to business in SpainSpain profile25
Currently, these mechanisms are as follows:
• As a general rule, payments, receipts and transfers between residents and non-residents,
denominated either in euros or in foreign currency, should be made through deposit-taking
entities (normally banks) registered in the Bank of Spain’s Official Register20 to whom the resident
party must provide with certain data (e.g. names and addresses of both parties) and specifically
with a description of the transaction giving rise to the payment, receipt or transfer.
The debits and credits posted to bank accounts held in Spain by non-residents are also subject to
this regime.
• The debits and credits posted to bank accounts held abroad by residents must be notified to the
Bank of Spain using specific forms if they exceed a specified threshold or if expressly requested by
the Bank of Spain.
• Payments and receipts between residents and non-residents can be made, in Spain or abroad, in
coins, bank notes and bearer checks, denominated either in euros or in foreign currency, and must
be declared by the resident party within 30 days if they, in general terms, exceed €6,000
(although the limit depends on the form of payment).
• Non-residents intending to credit bank accounts held in Spain by non-residents by means of bank
notes or bearer checks, in euros or foreign currency, or to transfer abroad such means of payment,
are obliged to evidence the origin of such funds. Otherwise, the registered entities will not be able
to proceed with these transactions.
Additionally, non-residents are required to justify the origin of the funds they use to acquire bank
checks, payment orders or other instruments, both in euros and in foreign currency, at a registered
entity, or to carry out sales and purchases of bills against other bills in authorized currency
exchange establishments.
Exceptionally, the Spanish Ministry of Industry, Tourism and Trade may, by making the relevant
regulations, require prior clearance or declaration for payments, receipts or transfers to or from
abroad arising from certain transactions yet to be specifically defined.
8.2.4 Specific transactions to be reported to the Bank of Spain
For purely statistical and informative reasons, residents involved in businesses or transactions abroad
should declare them in the following cases:
• Financing and deferrals of payments and receipts for more than one year between residents and
non-residents deriving from commercial transactions or the provision of services.
• Offsets of credits and debits between residents and non-residents deriving from commercial
transactions or the provision of services.
20 http://www.bde.es/
Guide to business in SpainSpain profile26
• Offsets of credits and debits deriving from intermediation in financial markets by intermediary
entities.
• Financial loans received by residents from non-residents or granted by residents to non-residents.
Securities such as bonds, promissory notes, etc. not traded on Spanish stock exchanges issued by
Spanish residents and acquired by non-residents are considered as financial loans from non-
residents.
The notification of foreign loans and credits provided by non-residents to residents requires (prior
to the first draw-down of funds of the loan or credit provided) the resident borrower concerned to
obtain a financial transaction number (“NOF”) when the amount thereof is equal to or higher
than €3,000,000, and it is not necessary to file any returns for lower amounts. This NOF must be
indicated in all the collection and payment notices relating to the transaction.
Specifically, the procedure for the assignment of a NOF is as follows:
— If the amount of the financing is less than €3,000,000, the transaction is excluded from the
reporting obligation unless the Bank of Spain requires it because the aggregate amount of
various transactions exceeds the limit established.
— If the amount is between €3,000,000 and €6,000,000, unless the financing is provided by a
non-resident that is resident in a tax haven in accordance with RD 1080/1991, the NOF may be
assigned not only by the Bank of Spain but also directly by any registered entity acting on
behalf of the Bank of Spain, for which the resident borrower concerned must fill out a Form PE-
2 containing a preprinted number which is the NOF.
— In any other cases, the NOF must be assigned by the Bank of Spain, for which a Form PE-1 must
be filled out.
— With regard to loans and credits exceeding €3,000,000 deriving from tax havens, the Bank of
Spain may request from the resident borrowers all the information it may deem relevant or
make as many verifications needed in order to identify the conditions of the transaction before
proceeding to register the transaction and assign the NOF.
Additionally, the Spanish authorities and the Bank of Spain may request any data in order to monitor
such transactions for statistical and tax purposes.
8.2.5 Import and export of certain means of payment and movement in national territory
Order EHA/1439/2006, on the declaration of movements of means of payment for the purposes of
the prevention of money laundering, in force from February 13, 2007, establishes that the export of
coins, bank notes and bearer checks, denominated either in euros or in foreign currency, although
deregulated, is subject to prior declaration for purely informative purposes if the amount involved
exceeds €10,000 per individual per trip. If the declaration is not made, the Spanish customs officials
will retain these means of payment.
Guide to business in SpainSpain profile27
The import of the above-mentioned means of payment by non-residents is subject in certain cases to
prior declaration to the Spanish customs authorities if higher than €10,000 (per individual per trip).
The movement in national territory of forms of payment consisting of cash, bank bills and bank
checks made out to bearer and denominated in national or any other currency, or any physical
means, including electronic, that are designed for use as a form of payment, for amounts equal to or
higher than €100,000, must also be reported previously. For purposes of this Order, “movement”
shall be deemed to mean any change of place or position verified outside the domicile of the holder
of the means of payment.
8.2.6 Types of bank accounts
Non-resident individuals and legal entities can hold bank accounts on the same conditions as
resident individuals and legal entities. The only requirement is to provide documentary evidence, on
opening the bank account, of the non-resident status of the holder of the account. Additionally, such
status must be confirmed to the authorized bank every two years. Other minor formalities are
stipulated.
Moreover, residents may, subject to certain declaration requirements, freely open and hold bank
accounts abroad either in euros or in foreign currency (the opening of such bank accounts by resident
parties must be declared to the Bank of Spain)and bank accounts in Spain denominated in foreign
currencies at registered entities (without being subject to any information requirement).
8.2.7 Residence for exchange control purposes
For exchange control purposes, individuals are deemed to be resident in Spain if they have their
customary place of residence in Spain. Legal entities with registered offices in Spain, and the
permanent establishments and branches in Spain of legal entities or of individuals who are resident
abroad, are likewise resident in Spain for exchange control purposes.
Non-residents for exchange control purposes are individuals with their customary place of residence
abroad, legal entities with registered offices abroad, and the permanent establishments and
branches abroad of Spanish resident individuals or entities.
Individuals or entities are deemed to have their customary residence in Spain if they comply with the
requirements set forth in the tax legislation to be considered as residents in Spain for tax purposes
but with the specifications established by regulations (currently there are no regulations on this
matter).
8.2.8 Notaries’ anti-money laundering obligations
The recently approved Royal Decree 1804/2008, of November 3, 2008, and Order EHA/114/2008, of
January 29, 2008, have detailed and implemented the manner in which notaries have to meet
certain anti-money laundering-related obligations to which they are subject under the provisions of
Law 19/1993 and its implementing regulations approved by Royal Decree 925/1995, as well as the
Notarial Organization and Regime Regulations.
Guide to business in SpainSpain profile28
Indeed, notaries’ status as public attesting officials, deriving from their continuous involvement in
economic and financial transactions, as well as their capacity as public officials with an obligation to
collaborate with the central government authorities, constitutes the ultimate basis of the duty
incumbent on them to supply and require information regarding such transactions.
Sociedad Estatal para la Promoción y Atracción de las
Inversiones Exteriores, S.A.U. RM: Tomo 21818, libro 0, folio
15, sección 8, hoja M-388683,
Inscripción 1. NIF: A-84479013. Depósito legal: M-3674-2007.
Published 2010
This guide was researched and written by Garrigues on behalf
of INVEST IN SPAIN.
This guide is correct to the best of our knowledge and belief at
the date indicated below. It is, however, written as a general
guide so it is necesary that specific professional advice be
sought before any action is taken.
Madrid, January 2010
Prepared by:
Guide to business in Spain
Establishing abusiness in Spain
!2
Setting up a business in Spain is simple. Thetype of business entities available are in keepingwith those existing in other OECD countries andthere is also a wide range of possibilitiescapable of meeting the needs of the differenttypes of investor who wish to invest in or fromSpain.
It is also worth noting that foreign investmentrestrictions and exchange controls have beenvirtually eliminated in line with the EUlegislation on deregulation in this area.
This chapter describes the basic requirements ofthe different business structures for investing inSpain, as well as the key formalities that aforeign investor must fulfill in order to set up orstart up each of therm.
Currently being updated owing
to a change in legislation
Guide to business in SpainEstablishing a business in Spain2
Guide to business in Spain
Establishing abusiness in Spain
!2
1. Introduction
2. Different ways of doing business in spain
3. Tax identification number (N.I.F.) and
foreigner identity number (N.I.E.)
4. Incorporation of a corporation
5. Formation of a branch
6. Other alternatives for operating in spain
7. Other alternatives to INVEST IN SPAIN
8. Dispute resolution
3
4
5
6
11
14
21
24
Galicia
Asturias Cantabria PaísVasco
La Rioja
Navarra
Castilla y León
Extremadura
Andalucía
Castilla - La Mancha
Comunidad de Madrid
Aragón
Cataluña
Murcia
ComunidadValenciana
Canarias
Baleares
FRANCE
PORTUGAL
MORROCO
La Coruña
Santiago de Compostela Lugo
Orense
OviedoSantander
León
Palencia
Valladolid
Segovia
Ávila
Soria
Logroño
Vitoria
Pamplona
Huesca
Zaragoza
Lérida
Tarragona
Castellón de la Plana
Valencia
Alicante
Murcia
Albacete
Cuenca
Madrid
Toledo
Cáceres
Mérida
Córdoba
Sevilla
Huelva
Cádiz
Ceuta
Málaga
Granada
Jaén
Almería
Melilla
BadajozCiudad Real
Guadalajara
Palma De Mallorca
Barcelona
Gerona
Teruel
BilbaoSan Sebastián
Salamanca
Burgos
Zamora
Pontevedra
Las Palmas de Gran Canaria
Santa Cruz de Tenerife
Guide to business in SpainEstablishing a business in Spain3
1. Introduction
1. INTRODUCTION
This chapter takes a practical look at the main alternatives open to a foreign investor interested in
establishing a business in Spain, as well as the main steps, costs and legal requirements involved.
Several alternatives are analyzed in this chapter, including both the establishment of business by the
investor itself, either through the incorporation of a company or a branch, or through a joint venture
with other enterprises already established in Spain. Other channels for conducting business without a
physical presence, such as distribution, agency, commission and franchising agreements are also
considered.
The following steps are explained throughout this chapter:
• Setting-up of a Spanish corporation and formation of a Spanish branch (sections 3 and 4).
• Acquisition of shares in an existing Spanish corporation (section 6.1).
• Acquisition of real estate located in Spain (section 6.2).
Finally, this Chapter contains a section on disputes resolution in Spain, to be carried out through the
national courts or arbitration, this last having proven well-suited to the settlement of such disputes.
Guide to business in SpainEstablishing a business in Spain4
2. DIFFERENT WAYS OF DOING BUSINESS IN SPAIN
Various alternatives are open to the foreign investor once the decision to invest in Spain has been
taken:
• The incorporation of a Spanish company (an S.A. or any other of the forms of undertakings
described in Appendix I, section 2 of this Guide), or the formation of a branch or permanent
establishment. Spanish law provides for a variety of vehicles that can be used by foreign
companies or individuals for investing in Spain.
Traditionally, the corporation (S.A.) has been the form most commonly used, although the limited
liability company (S.L.) has gained popularity in recent years.
• Association with other businesses already established in Spain. Foreign investors may find a joint
venture with a Spanish company to be the most appropriate form of presence in Spain, since it
allows the parties to share risks and combine resources and expertise.
A joint venture can be set up under Spanish law in a number of ways:
— An Economic Interest Grouping (“Agrupación de Interés Económico”, E.I.G.) or a European
E.I.G. (E.E.I.G.).
— A Temporary Business Association (“Unión Temporal de Empresas” or U.T.E.).
— A silent partnership (contrato de cuenta en participación) with a Spanish company.
— Joint ventures through Spanish corporations or limited liability companies.
• However, it is not necessary for every investor willing to operate and/or distribute his goods or
services in Spain to set up a new business or enter into an association with an existing one.
Penetration of the Spanish market and a satisfactory response to existing demand may be
achieved using the various forms of distribution agreements available in Spain, without
establishing a centre of operations. The alternatives include:
— Signing a distribution agreement.
— Operating through an agent.
— Operating through commission agents.
— Franchising.
Each of these forms of doing business in Spain offers different advantages that should be balanced
against the potential problems that each may pose and that need to be considered from the tax and
legal points of view.
2. Different ways of doing business in Spain
Guide to business in SpainEstablishing a business in Spain5
3. TAX IDENTIFICATION NUMBER (N.I.F.) AND FOREIGNER IDENTITY NUMBER (N.I.E.)
The applicable Spanish legislation currently requires that any individual or legal entity with economic
or professional interests in Spain, or involved in a relevant way for tax purposes, must hold a tax
identification number (in the case of legal entities) or a foreigner identity number (for individuals).
These documents, the first of which is issued free of charge and the second at a small cost, must be
obtained in order to set up a company, but also to file and process certain documentation with the
Spanish authorities. The steps to be taken are as follows:
(a) Assignment of a tax identification/foreigner identity number to non-resident directors of the
company to be set up: (a) if the director is a legal entity, a specific form must be filed with the
competent authorities, along with certain documentation, and a number is automatically
assigned; (b) if the director is an individual, a Foreigner Identity Number (N.I.E.)1, which will
also serve as a N.I.F., must be applied for by either one of the following methods:
• In Spain: at the General Directorate of Police2. If directors do not appear in person, a duly
notarized and apostilled or legalized general or special power of attorney is needed for each of
the directors, as well as a certified true copy of their passport.
• Abroad: at Spanish diplomatic missions or consular offices.
(b) Assignment of a tax identification/foreigner identity number to any shareholders of the
company: A specific form must be submitted to the competent authorities (in the case of legal
entities) or a N.I.E. must be applied for (for individuals) following the procedures described
above.
Throughout the above process, the shareholders and/or director(s) acting through a representative
must grant sufficient powers of attorney to fulfil these formalities.
3. Tax identification number (N.I.F.) and foreigner identity number (N.I.E.)
1 http://www.mir.es/2 http://www.policia.es/
Guide to business in SpainEstablishing a business in Spain6
4. Incorporation of a corporation
4. INCORPORATION OF A CORPORATION
The most common form of legal entity under Spanish corporate law is the corporation (“Sociedad
Anónima” - S.A.), and the second most common is the limited liability company (“S.L.”). (Other
corporate forms are described in Appendix I, section 2 of this Guide).
However, it should be noted that similar steps and expenses are involved for both legal forms, so this
chapter describes only those necessary for establishing a corporation.
4.1. Legal steps
Example: incorporation of an S.A. through cash contributions. The formal act of incorporation takes
place in the presence of a notary public, who executes the related public deed of incorporation
(including the articles of incorporation). The share capital must be fully subscribed and at least 25%
paid in at the time of incorporation; the remaining 75% must be paid in within the period stipulated
in the by-laws. The minimum share capital required is €60,102 (compared with the much lower
figure of €3,005 for an S.L., which must be paid in full at incorporation).
The basic requirements for establishing a corporation are as follows:
• Issue by the Spanish Central Mercantile Register3 of a certificate of clearance for use of the name
of the new company. This step should precede all others, to ensure that the proposed name can in
fact be used. The certificate of clearance is valid for six months from the date of issue.
• Execution by the future shareholders of an agreement of intent to set up the new company. The
minimum terms of such an agreement are as follows: (a) the type of company to be set up; (b)
the corporate purpose of the company; (c) the initial share capital; and (d) the registered office.
However, this document is executed for the mere purpose of the assignment of a provisional N.I.F.
to the new company, which is why the terms of the agreement can later be amended in the deed
of incorporation.
• Assignment of a provisional N.I.F. to the new company. This is a necessary formality for the
payment of transfer tax (see below) and the registration of the company in the Mercantile
Register. Fulfilment of this formality, which is free of charge, requires a specific form and certain
other documents (including the future shareholders’ agreement of intent to set up a company) to
submitted to the competent authorities, with a provisional number being assigned automatically
to the company. Once the company has been registered in the Mercantile Register, it must obtain
a definitive N.I.F. within a maximum of six months from assignment of the provisional N.I.F.
However, in order for the Spanish authorities to issue a definitive N.I.F., the formalities relating to
assignment of a N.I.F. and N.I.E. to the foreign shareholders and directors of the company must be
completed, as detailed in Chapter 2, section 3.
3 http://www.rmc.es/
Guide to business in SpainEstablishing a business in Spain7
• Execution of the public deed of incorporation of the company before a Spanish notary public.
• Evidence of the identity of the founder shareholders.
The notary public will require the persons who appear before him for this purpose to exhibit: (i)
evidence of their identity; (ii) the powers of attorney (if applicable) to represent a third party on
whose behalf any of them appears; (iii) evidence of payment and whether it is to be made in cash
or in kind (if applicable); (iv) the name clearance certificate from the Mercantile Register (see
above); and (v) the form (to be signed by the notary, if applicable) for subsequent declaration of
the foreign investment to the General Directorate for Trade and Investment of the Ministry of
Economy and Finance (“D.G.C.I.”)4 (See Chapter 1, section 8 for further information). It is also
necessary to provide the notary with the by-laws of the company.
If a shareholder is represented at the act of incorporation, the powers of attorney used must
satisfy certain requirements and, if issued abroad, must be duly legalized. There are two main
procedures for such legalization:
— Execution of the powers of attorney in the presence of the Spanish Consul in the foreign
investor’s home country. The foreign investor appears before the Spanish Consul, provides
evidence of his identity and grants the related powers of attorney. If a company, rather than
an individual, is the foreign shareholder, apart from his identity, the person appearing before
the Spanish Consul must provide evidence of his authorization to act in the name and on
behalf of the shareholder and to grant the powers of attorney to the designated person.
The Spanish Consul may demand any documentation he considers necessary, and will
proceed to execute a public deed of powers of attorney, in Spanish, to the person
designated. These powers of attorney can be used directly in Spain.
— Execution of the powers of attorney in the presence of a foreign public authenticating officer.
The foreign investor appears before the authenticating officer, gives evidence of his identity
and grants the related powers of attorney. If the foreign investor is a company, its
representative shall execute the powers of attorney in the presence of the public
authenticating officer, who certifies the document as well as the identity and authorization
of the representative of the foreign investor to grant the powers of attorney. The signature
of the foreign authenticating officer would also require subsequent legalization (either by the
“apostille” procedure approved by The Hague Convention of October 5, 1961, when
applicable, or by a Spanish Consul abroad). Under this second procedure, the powers would
normally be issued in the language of the authenticating officer who attests to the act so an
sworn translation into Spanish would also have to be prepared.
• Bank documents must be delivered to the acting notary public as evidence of payment.
4 General Directorate for Trade and Investment
Guide to business in SpainEstablishing a business in Spain8
• It is worthwhile noting in this section that under Spanish labor legislation, non-EU nationals
intending to work in Spain must obtain a special work visa and a work and residence permit. The
Spanish labor authorities grant different work permits depending on the type of work and its
duration. (For more information regarding visas and work and residence permits please see
Chapter 5).
Workers who have resided legally and continuously in Spain for five years and have renewed their
work and residence permits (both for self-employed and for employed work), may obtain a long-
term residence permit. After obtaining such a permit, the worker must apply for a resident alien
identity card, which will be renewed every five years.
Nationals from other Member States of the European Union, the European Economic Area and
Switzerland do not need work permits either as employees or as self-employed workers, since
Spain fully applies EU legislation on the free movement of workers. Citizens of the above are
therefore entitled to be employees or self-employed workers, on the same terms as Spanish
citizens.
Self-employed workers or employees, students and other beneficiaries of the right to permanent
residence, provided that they are citizens of the European Union Member States or of other States
included in the European Economic Area may live in Spain without a residence card. It will be
sufficient for them to hold a valid national identity card or passport and to register themselves on
the appropriate Register of Foreigners (for stays exceeding three months). Family members of EU
citizens may reside in Spain without having to obtain a work or residence permit, although they
will have to apply for a card for family members of EU citizens. Other foreign citizens included in
the European Union system must obtain a residence card.
• Payment of transfer tax. (See Chapter 3, section 2.7 for further information). A special form must
be filed within a maximum period of 30 days from the act of incorporation. Again, this is a
necessary requirement for registration of the company in the Mercantile Register.
• Registration in the Mercantile Register.
Once the above steps have been completed, the company’s public deed of incorporation is filed at
the Mercantile Register for its formal registration.
• Subsequent declaration of the investment to the D.G.C.I. Prior declaration is in certain cases
required, especially for foreign investments originating in territories or countries deemed to be tax
havens. (See section 8 of Chapter 1 for more detailed information).
• Registration of the company for I.A.E. (Business activity tax). Newly incorporated companies must
use the same special form used to request a tax identification number, to describe their business
activity, and specify the article of the Law by virtue of which they are exempt from this tax (newly
incorporated companies or companies starting a new business are exempt from this tax for the
first two tax periods). This step must be completed before the company starts operation.
Guide to business in SpainEstablishing a business in Spain9
• Registration of the company for V.A.T. purposes. (See Chapter 3, section 2.6 for further information).
• Obtainment of an opening license from the relevant municipal council.
• Registration of the company for Spanish social security and occupational accident insurance
purposes, and registration of the employees for social security purposes5. (See Chapter 5 section
11, for further information).
• Compliance with certain procedural formalities at the local office of the Ministry of Labour and
Social Affairs6.
The following chart shows the main steps for incorporation of a company through cash contributions:
5 http://www.seg-social.es/6 http://www.mtas.es/
Table 1
PRELIMINARY STEPS TO INCORPORATE A COMPANY
Execution of thepublic deed ofincorporationbefore spanishnotary public
PRELIMINARYSTEPS
Certificate of clearance ofthe corporate name
Granting of powers ofattorney for the incorporation
Opening of bank account
Determination and depositof the capital stock
Determination of the bodyof administration
Declaration ofthe investment
before theMinistry of
Industry, Tourismand Trade
Assigment of thedefinitive taxidentification
number
Registrationwith the
MercantileRegister
Payment oftransfer tax
Declaration of intentionsof the shareholders
regarding the incorporationof a company
Assingment of a provisionaltax identification number
Reparation of thecorporate by-laws
As a general rule, incorporation takes between six and eight weeks although this period may be
considerably longer if a N.I.E. must be obtained for any of the foreign director.
For additional information please visit www.investinspain.org and the web page www.ipyme.org.
Additionally, companies may wish to consult the one-stop business office (www.vue.es), which
provides integrated advisory and processing services to entrepreneurs.
Guide to business in SpainEstablishing a business in Spain10
4.2. Costs
• Transfer tax at 1% on the share capital (See section 2.7 of Chapter 3).
• Fees of the notary public handling the incorporation, which are charged on a sliding scale based
on the share capital. For guidance purposes, the official rates amount to €90 for the first €6,010,
after which the following range is applied: 0.45% down to 0.03% for share capital in excess of
€6,010 and below €6,010,121. For any amount in excess of €6,010,121, the Notary will receive the
amount that is agreed upon by the founder shareholders.
• Fees for registering the company in the local Mercantile Register, following its incorporation in the
presence of the notary. There are official rates that amount to €6.01 for the first €3,005, after
which a sliding scale of officially approved charges is applied. These range from 0.1% down to
0.005% for capital in excess of €6,010,121. The total fee is capped at €2,181 and may not exceed
this amount.
• Opening license tax. A one-off municipal levy, ordinarily a relatively small amount.
• Other expenses (e.g. professional fees), which are not readily quantifiable.
Guide to business in SpainEstablishing a business in Spain11
5. Formation of a branch
5. FORMATION OF A BRANCH
In general terms, the requirements, procedural formalities and costs of forming a branch in Spain of
a foreign company are very similar to those for the incorporation of a subsidiary as a company. The
main legal steps and costs are summarized below, highlighting the main differences with respect to
the incorporation of a subsidiary.
5.1. Legal steps and costs
• Execution of the public deed recording the opening of a branch in the presence of a Spanish
notary public. This step consists of the public formalization before a notary public of the resolution
to open a branch previously adopted by the competent body of the foreign parent company.
In addition to the documentation required in the case of a subsidiary (evidence of the identity of
the person who appears before him, his powers of attorney to represent the parent company,
evidence of payment and whether it is to be made in cash or in kind (if applicable), and the form,
where applicable, for declaring the foreign investment to the D.G.C.I.’s Foreign Investment Register)
(See section 8 of Chapter 1 for more detailed information), the Notary Public will also require
evidence of the existence of the parent company, its by-laws, the names and personal details of its
directors and the resolution to form the branch previously adopted by the appropriate
representatives or committees within the parent company.
• Assignment of a Tax Identification Number (N.I.F.)(*).
• Appointment of an individual or legal entity residing in Spain to represent the parent company in
dealings with the Spanish tax authorities regarding its tax obligations.
• Payment of transfer tax on the contributions made if the entity operating through a branch has its
registered office and effective place of management in a non-EU country. (See section 2.7 of
Chapter 3 for further information).
• Registration in the Mercantile Register(*)7.
• Subsequent declaration to the D.G.C.I. In some cases, prior declaration is required. (See section 8
of Chapter 1 for more detailed information).
• Registration of the branch for I.A.E. (Business Activity Tax) purposes(*).
• Registration of the branch for V.A.T. purposes(*).
• Payment of opening license tax(*).
• Registration for social security purposes(*)8. (See section 11 of Chapter 5 for further information).
• Compliance with the labour formalities(*).
(*) The procedures are as in the case of a company.7 http://www.rmc.es/8 www.seg-social.es/
Guide to business in SpainEstablishing a business in Spain12
5.2. Branch versus subsidiary
The main differences that should be taken into consideration are summarized below.
From a Spanish legal standpoint, the main differences between a branch and a subsidiary are as
follows:
• Minimum share capital:
Subsidiary incorporated as an S.A.: €60,102
Subsidiary incorporated as an S.L.: €3,006
Partnership limited by shares: €60,102
General partnership or branch: no legal minimum
• A subsidiary is a separate legal entity, whereas a branch has the same legal identity as its parent
company.
• The liability of the shareholders of a subsidiary incorporated as an S.A. (or S.L.) for the debts of the
subsidiary is limited to the amount of the capital contributions they make or undertake to make,
(with certain exceptions Appendix I, section 3).
In the case of a branch, there is no limit to the parent company’s liability.
From a tax standpoint (for further tax information, see section 2 of Chapter 3), both the branch and
the subsidiary are, in general terms, liable for Spanish corporate income tax at 30% on their net
income, although the following considerations should be taken into account:
• The remittance of branch profits and the payment of a subsidiary’s dividend to a non-EU parent
company resident in a non-treaty country are taxable in Spain at the rate of 19%; if the parent
company is EU-resident, the remittance or dividend is usually tax-exempt. If the parent company is
resident in a non-EU country with which Spain does have a tax treaty, the dividends would be
taxable at the reduced treaty rate and the remittance of branch profits would, under most of the
treaties, be exempt from tax in Spain.
• Share of parent company overheads: In practice, it is usually easier for these expenses (if any are
imputed) to qualify as deductible in the case of a branch than in the case of a subsidiary.
• Interest on loans from a foreign parent company to its Spanish branch is not tax-deductible for the
branch. By contrast, the interest on loans from the shareholders of a subsidiary is normally tax-
deductible for the subsidiary, provided that the transaction is valued on an arm’s-length basis and
subject to certain requirements.
Guide to business in SpainEstablishing a business in Spain13
Table 2
PARENT COMPANY IN
EU country (1) Treaty country Non Treaty country
Subsidiary:
Profit of Spanish subsidiary 100 100 100
Spanish income tax (30%) (2) 30 30 30
Dividends 70 70 70
Withholding tax on dividends — (4) 7 (5) 13.3 (3)
Total tax in Spain 30 37 43.3
Branch:
Profit of Spanish branch 100 100 100
Spanish income tax (30%) (2) 30 30 30
Profit remitted to the parent company 70 70 70
Withholding tax — (4) — (6) 13.3 (3)
Total tax in Spain 30 30 43.3
(1) Spain has tax treaties in force with all EU countries except Cyprus.
(2) (See special tax rate for small and medium-sized companies in Chapter 3).
(3) Withholding tax rate = 19%.
(4) Exempt, provided certain conditions are met.
(5) The withholding tax rate on dividends used in this example is 10% (the most common rate in the tax treaties entered into by Spain).
(6) The branch profit tax will apply if provided for in the corresponding tax treaty (e.g. the U.S., Canada and Brazil).
5.3. Calculation of Spanish corporate income tax
Below is a very simple example of the calculation of Spanish corporate income tax on the profit
obtained by a Spanish subsidiary or by the branch in Spain of a foreign company. (For further
information, see section 2.1. of Chapter 3).
Guide to business in SpainEstablishing a business in Spain14
6. Other alternatives for operating in Spain
6. OTHER ALTERNATIVES FOR OPERATING IN SPAIN
6.1. Forms of business co-operation
One of the most common forms of business co-operation between companies is the joint venture
(J.V.). Spanish law provides for different forms of joint venture:
6.1.1. Temporary Business Alliances (U.T.E.s)
Under Spanish law, U.T.E.s are temporary business alliances set up for a specified or unspecified
period of time, for the purpose of carrying out a specific project or service. U.T.E.s allow several
companies to operate together in one common project. This form of association is very common for
engineering and construction projects but can be used in other sectors as well.
U.T.E.s are not corporations and have no legal personality. In order to qualify for the special regime of
flow-through taxation, they must be formed by notarial deed and registered with the Finance’s
Special Register of U.T.E.s at the Spanish Ministry of Economy and Finance9. Furthermore, they may
be also registered at the Commercial Register. However, U.T.E.s must comply with bookkeeping and
accounting requirements similar to those of corporations.
U.T.E.s are governed by Act 18/1982, concerning the Tax Regime of Temporary Business Groupings
and Associations and Regional Industrial Development Companies, amended, inter alia, by Act
12/1991, Act 43/1995 and Act 62/2003.
6.1.2. Economic Interest Groupings (E.I.G.s)
E.I.G.s are created with a view to help members achieving their objectives. The E.I.G.s may not act on
behalf of their members nor may they substitute them in their operations. Consequently, the E.I.G. is
most commonly used to provide centralized services within the context of a broader association or
group of companies, such as centralized purchasing, sales, information management or
administrative services.
One of the key differences between U.T.E.s and E.I.G.s is that E.I.G.s are entities of a mercantile nature
with a separate legal personality.
Spanish law lays down certain requirements for E.I.G.s:
• They may not interfere with their partners’ decisions on personnel, finance or investment matters,
nor are they allowed to manage or control their activities.
• They may not hold, directly or indirectly, a portfolio of investments in other companies, unless it is
necessary to acquire shares or holdings in order to fulfil the E.I.G.s purpose, in which case the
shares or holdings must be transferred immediately to its partners.
• They must be formed by notarial deed and registered in the competent Mercantile Register.
9 http://www.meh.es
Guide to business in SpainEstablishing a business in Spain15
E.I.G. members are considered personally and severally liable for the entity’s debts, albeit secondarily
to the E.I.G. Their main obligation is to contribute to the E.I.G.s capital on the agreed terms and to
share in its expenses.
There are two main governing bodies in an E.I.G.: the members’ meetings and the managers. The
managers are jointly liable with the E.I.G. for all tax obligations accrued and for any damage caused,
unless they are able to prove that they acted with due diligence.
E.I.G.s are mainly governed by Act 12/1991, of April 29, on Economic Interest Groupings.
The European E.I.G. (E.E.I.G.) also has a separate legal identity and E.E.I.G.s incorporated in Spain
share the main features contemplated in EU Regulation 2137/85, which establishes the basic rules
governing E.E.I.G.s.
6.1.3. Participation Account Agreement (silent partnership)
This form of business partnership, similar in nature to an unincorporated partnership agreement,
consists of a financial collaboration whereby one or more entrepreneurs (nonmanaging investor-
participants) provide cash contributions or contributions in kind to another entrepreneur (the
managing participant) in order to take up an interest in the results of the activities of the managing
participant. This interest refers to both the positive and negative results (i.e. income or losses) of the
business in question.
The contributions, whether cash or in kind, do not qualify as capital contributions as such, but rather
as an agreement which simply confers a right on the nonmanaging investors to share in the results
of the business concerned. Nonmanaging investors do not therefore have shareholder status at the
managing company.
As indicated in the Commercial Code, this type of agreement does not require any legal formality
(public deed or filing with the Mercantile Register). However, in practice, the contracting parties tend
to record the agreement in a public deed that can serve, if necessary, as proof before third parties.
Under current legislation, remuneration obtained by nonmanaging investors must be recorded as an
expense in the accounts of the managing participant. This expense qualifies as a tax-deductible item
for corporate income tax purposes.
Lastly, the execution of this agreement in a public instrument is regarded as a taxable event under
the “corporate transactions” heading of the Transfer Tax Law.
6.1.4. Joint ventures through Spanish corporations or limited liability companies.
A significant number of joint ventures use corporations and limited liability companies as vehicles.
Consequently, reference should be made to comments made in other sections of this Guide on the
formation, basic characteristics and features of the governing bodies of corporations and limited
liability companies. (See this Chapter and Annex I).
Guide to business in SpainEstablishing a business in Spain16
6.2. Distribution, agency, commission agency and franchising agreements
6.2.1. Distribution agreements
In practice, distribution agreements are often confused with agency agreements.
Nevertheless, they are different and have distinct regulations and characteristics.
Distribution agreements offer a highly interesting alternative means of organizing a company or
branch or entering into commercial cooperation agreements with previously existing entrepreneurs
in order to carry out their operations in Spain, since a considerably lower initial investment is
required.
There are several types of distribution agreement. It is worth noting that such agreements are not
regulated, allowing the parties broad discretion to decide on the contents of the contract, given the
current lack of specific legislation on this area.
Under a distribution agreement, one of the parties undertakes to purchase and resell goods
belonging to the other party.
Distributors are legal entities that form an intrinsic, albeit not truly integrated, part of the
commercial network of the venture, united by a business relationship and a desire to increase sales.
Agreements in the Spanish distribution networks or system can be divided into the following broad
categories:
• Commercial concession or exclusive distribution agreements:
The supplier not only undertakes not to provide his products to more than one distributor within a
specified territory, but also not to sell those products himself within the territory of the exclusive
distributor.
• Sole distribution agreements:
The only difference with the above agreement is that, in this case, the supplier reserves the right
to supply the agreed products to users in the territory of the concession.
• Authorized distribution agreements under the selective distribution system:
Owing to their nature, certain products require special treatment by distributors and sellers. The
form of distribution used in both cases is called “selective distribution”, as distributors are carefully
selected on the basis of their capacity to handle technically complex products and to maintain a
particular image or brand name.
As regards the taxation of distribution agreements, non-resident manufacturers not established in
Spain will record business income in Spain on the sale of their goods to distributors, which is
generally not taxable in Spain (for further information, see Chapter 3). For information on the
taxation of individual or corporate distributors resident in Spain, see Chapter 3.
Guide to business in SpainEstablishing a business in Spain17
6.2.2. Agency agreements
Article 1 of Spanish Act 12/1992, on Agency Agreements, which implemented Directive 86/653/EEC,
provides the following definition of agency agreements:
"Under an agency agreement, an individual or legal entity, known as an agent, agrees with
another on a continuous or regular basis, for remuneration, to promote commercial acts or
transactions for the account of another or to promote or conclude them for the account and in the
name of others, as an independent intermediary and without assuming the risk and hazard of
such transactions, unless otherwise agreed."
The agent is an independent intermediary who does not act independently, but rather for and on
behalf of one or more principals.
The agent must, of his own accord or through his employees, negotiate and, if required by contract,
conclude on behalf of the principal, the commercial acts or operations he is instructed to handle.
Other specific regulations provide that:
• An agent cannot subcontract his activities unless expressly authorized to do so.
• An agent is authorized to negotiate the acts or operations detailed in the agency agreement, but
can only conclude them on behalf of the principal when expressly authorized to do so.
• The agent may act on behalf of different principals, unless the related goods or services are
identical or similar, in which case the consent of the existing principals is required.
There are three types of remuneration for an agent: A fixed sum, a commission, or any combination
of the two.
As a general rule, the restraint of trade clause –restricting or limiting the activities that can be carried
out by the agent once the agency agreement has been terminated– can never be valid for more than
two years after the termination of the agency agreement.
The following constitute the obligations of the principal:
• To act loyally and in good faith in its relations with the agent.
• To provide the agent with all the documentation he needs to engage in his activity.
• To provide the agent with all the information required to perform the agreement.
• To pay the agreed compensation.
• To accept or reject transactions proposed by the agent.
One of the essential elements of the agency agreement is that the agent’s work must always be
compensated with a fixed amount, a commission or a combination of both.
Guide to business in SpainEstablishing a business in Spain18
With respect to the tax treatment of agency agreements, the key issue is to determine whether a
commercial agent can be considered as a permanent establishment in Spain of the principal, which
will in turn depend on whether or not there is a relationship of dependence between them. As
regards the taxation of residents and non-residents in Spain, see Chapter 3, section 2.3.
6.2.3. Commission agency agreements
This is the mandate under which the authorized agent (commission agent) undertakes to perform or to
participate in a commercial act or agreement on behalf of another (the principal). Commission agents
may act:
• In their own name, acquiring rights against the contracting third parties and vice versa.
• On behalf of their principal, who acquires rights against third parties and vice versa.
The main obligations of commission agents are as follows:
• To represent their principals as if their interests were their own and to perform their engagement
personally. Commission agents may delegate their duties if authorized to do so and may use
employees under their responsibility.
• To account for amounts that they have received as commission, to reimburse any excess amount
and to return any unsold merchandise.
• In general, commission agents are not liable to their principal for the performance of the related
agreements by third parties, although this risk can be secured by a commission del credere.
• Commission agents are barred from buying for their own account or for the account of others,
without the consent of their principal, the goods that they have been instructed to sell, and from
selling the goods that they have been instructed to buy.
The principal undertakes to pay a commission. The payment of this commission is protected by
means of lien and preference rights on the commission agent as security for his claims against his
principal.
As regards the tax treatment of transactions under this type of agreement, non-resident principals
not established in Spain record business income in Spain on the sale of their goods, which is
generally not subject to taxation in Spain (for further information, see Chapter 3, section 2.3).
For information on the taxation of individual or corporate commission agents residing in Spain, see
Chapter 3, section 2.3.
6.2.4. Differences and similarities between agency agreements and commission agencyagreements
The main similarity between the two types of agreement is that, in both cases, an individual or legal
entity undertakes to pay another compensation for arranging a business opportunity for the former
Guide to business in SpainEstablishing a business in Spain19
to conclude a legal transaction with a third party, or for acting as the former‘s intermediary in
concluding the transaction.
The main difference between them is that agency agreements involve an engagement on a
continuous or regular basis, whereas commission agency agreements involve occasional
engagements.
6.2.5. Franchising
Franchising is a system for marketing goods, services and/or technology. It is based on close, ongoing
cooperation between undertakings that are legally and financially distinct and independent (the
franchisor and its individual franchisees). Under this system, the franchisor grants a right to, and
imposes an obligation on, its individual franchisees, for a specific market, to pursue the business or
commercial activity previously carried out by the former with sufficient experience and success, using
the concept and system defined by the franchisor.
In return for a direct and/or indirect consideration, this right entitles, and obliges, individual
franchisees to use the brand name and/or trade or service mark for the goods or services, the know-
how and the technical and business methods, which must be specific to the business, material and
unique, the procedures and other intellectual property rights of the franchisor, backed by the
ongoing provision of commercial and technical assistance under, and during the term of, the relevant
written franchising agreement between the parties, all of the above regardless of any supervisory
powers conferred on the franchisor by contract.
Commercial concession or distribution agreements will not necessarily be considered franchises
where an entrepreneur undertakes to acquire, under certain conditions, products (usually brand
products) from another entrepreneur who grants him a certain exclusive rights in an area, to resell
them, again under certain conditions, as well as to offer purchasers of the products after-sale
services.
In addition, the following are not considered to be franchises: (i) the grant of a manufacturing
license, (ii) the licensing of a registered trademark to be used in a particular area, (iii) transfers of
technology or (iv) a license to use a commercial emblem or logo.
The applicable Spanish legislation is (i) Royal Decree 378/2003, which refers to Regulation (EC) No.
2790/1999, of December 22, 1999, relating to the application of Article 81.2 of the Treaty to certain
categories of vertical agreements and concerted practices and Regulation (EC) no. 1400/2002, of
July 31, 2002, for the motor vehicles sector; and (ii) Royal Decree 2485/1998, of April 13,
implementing Article 62 of Act 7/1996, of January 15, 1996, regulating retail trade, which was
designed to establish the basic conditions for carrying on franchise activity and to create the Register
of Franchisors, in accordance with the amendments introduced by Royal Decree 419/2006, of April 7,
2006.
In Spain, prior to the start of their franchising activity in the territory of more than one Autonomous
Region, the franchisor shall register with a public administrative Register of Franchisors, which is
Guide to business in SpainEstablishing a business in Spain20
hierarchically subordinate to the General Directorate for Internal Trade of the Ministry of Industry,
Tourism and Trade. Consequently, in accordance with the amendments introduced by Royal Decree
419/2006, the Register will take charge of registering franchisors at the instance of the Autonomous
Region in which they are domiciled, or directly at the request of the party concerned, whether or not
it is domiciled in Spain. They must also regularly update the list of franchisors, provide information
and issue franchisors with the relevant supporting certificates.
With regard to the various types of agreement, the following are worth mentioning: Industrial
franchising agreements (for the manufacture of goods), distribution franchising agreements (for the
sale of goods) and service franchising agreements (relating to the provision of services).
The advantages offered by a franchising agreement include the fact that a franchising agreement is a
form of product and/or service distribution that enables a uniform distribution network to be swiftly
created with limited investment. Franchising also enables independent traders to set up installations
more rapidly and with greater chances of success than if they did so themselves without the know-
how and assistance of the franchisor.
Antitrust law requirements must be thoroughly considered when defining the content of franchising
agreements.
Last, as regards the tax treatment of franchising agreements, the nature of the consideration paid by
the franchisee to the franchisor should be analyzed, since it could be considered a royalty and
business income, or only a royalty, depending on the different services rendered and the rights
granted. For information on the tax treatment of the franchisee, see section 2 of the Chapter 3.
According to the experts, franchising has seen a spectacular growth in Spain in recent years, giving
rise to what is now a well-established franchising system. Within the EU, Spain is almost on a par
with France and the UK, which have the most franchise establishments.
10 Provided that: (i) the control of the entity is acquired or, if it is alreadyheld, increased; or (ii) the transferred holding has been obtained as aconsequence of a contribution of immovable properties carried out in thethree preceding years.
Guide to business in SpainEstablishing a business in Spain21
7. Other alternatives to invest in Spain
7. OTHER ALTERNATIVES TO INVEST IN SPAIN
7.1. Acquisition of shares of an existing corporation
7.1.1. Legal steps
• Transfers of shares in a limited liability company must, in all cases, be attested to by an
authenticating officer. Transfers of shares in Spanish corporations must be attested to by an
authenticating officer where so required by Spanish legislation or if so agreed on by the parties. The
authenticating officer will require evidence of the following: the identity of the parties involved and, if
applicable, the related powers of attorney (if one or both of them act on behalf of another individual
or entity); the seller’s title to the shares and any forms required to declare the foreign investment to
the D.G.C.I.’s Foreign Investment Register. (See section 8 of Chapter 1 for more detailed information).
• Payment of transfer tax, if applicable: As described in the transfer tax section (see section 2.7 of
Chapter 3), transfers of shares of companies whose assets consist mainly of Spanish real estate10
are, in certain cases, subject to a transfer tax of 7% (certain Autonomous Communities and Cities
have not enforced their own legislation and are still applying a 6% rate, while the applicable rate
in the Canary Islands is 6.5%).
• Subsequent declaration of the acquisition to the D.G.C.I. is required (in some cases prior reporting
might be necessary), (see section 8 of Chapter 1 for further information).
7.1.2. Costs
• Fees of the authenticating officer attesting to the transaction: In the case of a notary public, the
scale applicable for the incorporation of a subsidiary or the formation of a branch is also
applicable here.
• In the case of a Spanish Consul abroad, a similar sliding scale tied to the price fixed is applicable.
By way of example, there is a minimum fee for amounts below €1,202, while rates range from 1%
down to 0.05% for amounts in excess of €300,506.
No transfer tax is levied on this transaction, except in the cases mentioned above.
7.1.3. Special considerations for the acquisition of shares of companies between non-residents
Acquisitions of shares of Spanish companies between non-residents that have already taken place
abroad may be formalized before a Spanish authenticating officer.
The documents to be delivered to the Spanish authenticating officer formalizing the transaction for
Spanish purposes may include the special forms on which the investments and corresponding
divestment are declared to the D.G.C.I.’s Foreign Investment Register.
Guide to business in SpainEstablishing a business in Spain22
7.2. Acquisition of real Estate located in Spain
7.2.1. Legal steps
• General:
— Execution of the notarized public deed of purchase. The acquisition must be attested to by a
Spanish notary public or by a Spanish Consul abroad, to whom it is necessary to show evidence
of: The identity of the parties and, if applicable, the related powers of attorney, as well as their
respective tax identification numbers; the seller’s title to the property; the special form (to be
signed) to declare the investment to the D.G.C.I.’s Foreign Investment Register (See section 8 of
Chapter 1 for more detailed information); and the effective payment and means by which the
purchase was carried out (specifically, whether the payment was received prior to the
formalization, the amount, and whether payment was made in cash, by check or any other
money transfer instrument or by bank transfer).
— Payment of transfer tax or V.A.T. and stamp tax:
If the vendor is a private individual who is not an entrepreneur developing an economic
activity, transfer tax would be generally applicable, at the rate of 7% as a general rule (certain
Autonomous Communities and Cities have not enforced their own legislation and are still
applying a 6% rate. In the Canary Islands, the applicable rate is 6.5%). (See section 2 of
Chapter 3 for more detailed information).
If the vendor is an individual entrepreneur or a company, developing an economic activity, the
following cases may arise:
– Transfers of buildable land (or land in the process of being developed) and first delivery of
buildings: V.A.T. at 16%11 (7% if the building is for housing) plus stamp tax, in general, at 1%.
The stamp tax rate may be modified by the Autonomous Communities. This regime also
applies to “refurbished” buildings in accordance with VAT legislation – or buildings that are
supplied for “refurbishment” or subsequent demolition – with the aim of developing them in
the future-.
– Transfers of rural land (unbuildable or non in the process of being developed) and second or
subsequent delivery of buildings: Transfer tax or V.A.T. can be applied if the acquirer is an
entrepreneur or professional who is entitled to deduct 100% of the input V.A.T. and the
vendor chooses to pay V.A.T. rather than transfer tax, while meeting certain requirements12.
11 As of July 1, 2010, and on an indefinite basis, the standard VAT rate isincreased from 16% to 18%, and the reduced rate from 7% to 8%.12 The stamp tax rate applicable to public deeds documenting transfers ofreal estate where the vendor waives the V.A.T. exemption, can be higherthan the general rate of the stamp tax, in certain AutonomousCommunities (1.5% or 2%).
Guide to business in SpainEstablishing a business in Spain23
• If the real estate is located in the Canary Islands (where V.A.T. is not applicable (See section 3.1. of
Chapter 3)), the following would be applicable:
— If the vendor is a developer (individual or company) the following cases can arise:
– Transfer of buildable land and first delivery of buildings: Canary Islands Indirect General Tax
(C.I.I.G.T.) at 5% plus stamp tax at 0.75% (0.4% if it involves real estate that will constitute
the principal residence and other requirements are met, such as the acquisition is made by
large-size families, disabled persons or people below the age of 35).
– Transfer of rural (unbuildable) land and second or subsequent delivery of buildings: Transfer
tax at 6.5% (4% if it involves real estate that will constitute the principal residence and other
requirements are met, such as the acquisition is made by large-size families, disabled
persons or people below the age of 35) or C.I.I.G.T. The second one is applicable if the
acquirer is an entrepreneur or professional, and if the vendor chooses to pay C.I.I.G.T. rather
than transfer tax, while meeting certain requirements.
— If the vendor (individual) is not a developer: Transfer tax (regardless of the nature of the real
estate).
• Registration of the property at the Official Property Register. This step should be completed as
soon as the public deed of purchase is notarized and the taxes referred to above have been paid,
in order to ensure that the acquirer’s property rights are duly protected.
• Subsequent declaration is required when the amount exceeds €3,005,060.52 (see Section 8 of
Chapter 1).
7.2.2. Costs
• Notary public fees (as in previous sections).
• Transfer tax or V.A.T. and stamp tax (see above).
• Property Register fees. Here, a sliding scale is again applicable, ranging from 0.4% (for the first
€6,010) down to 0.02% (for amounts exceeding €601,012).
• Municipal tax on the increase in urban land value (See section 4 of Chapter 3). This tax is levied by
municipalities and is based on the deemed increase in the value of urban land from the date of
the last sale to the date of the current sale (with a minimum of 1 year and a maximum of 20). This
tax is payable by the seller. The amount of this tax depends (among other circumstances) on
where the land is located (and, accordingly, on its cadastral value) and on the holding period of
the immovable property at hand.
• Property tax. This tax (“Impuesto sobre Bienes Inmuebles”) is levied annually, every January 1, on
the cadastral value of the real estate owned. (See section 4 of Chapter 3).
Guide to business in SpainEstablishing a business in Spain24
8. DISPUTE RESOLUTION
8.1. State court proceedings
Organic Act 6/1985 regulates the constitution, operation and governance of Courts and Tribunals in
Spain. For judicial purposes, the State is organized on a territorial basis into municipalities, judicial
districts, provinces and Autonomous Communities, in which the Justices of the Peace, the Courts of
First Instance, the Administrative Courts, the Labor Courts, the Criminal Courts, the Appellate Courts
and the Higher Courts of Justice have jurisdiction. The Supreme Court and the Audiencia Nacional
(the latter only for certain specific matters) have jurisdiction over the entire national territory. The
former is the highest court instance with the exception of the guarantee of constitutional rights,
which are safeguarded by the Constitutional Court.
Act 1/2000 is the Spanish Civil Procedure Act and came into force on January 8, 2001. Criminal, labor
and administrative proceedings are governed, respectively, by the Criminal Procedure Act passed by
the Royal Decree dated September 14, 1882, the Consolidated Text of the Labor Procedure Act,
passed by Royal Legislative Decree 2/1995 and Act 29/1998 on the Administrative Jurisdiction.
Although the Spanish civil procedural system should be considered as a civil law system, certain
features of the Civil Procedure Act have their roots in the common law system. An example of this is
the predominance of the oral proceeding. The Civil Procedure Act reduces formalities and promotes
more expeditious proceedings and a quicker and more efficient response from the courts.
Spain has signed numerous bilateral and multilateral treaties on the recognition and enforcement of
foreign judicial decisions.
8.2. Arbitration
Arbitration is increasingly seen as a genuinely alternative system for the settlement of commercial
disputes. Companies, aware of the greater speed, efficiency and flexibility of arbitration in
comparison with action before the courts, are seen to be increasingly keen to turn to arbitration.
Furthermore, Spanish Courts support arbitration and normally uphold and enforce arbitration
clauses and awards without hesitation.
Act 60 of December 23, 2003 on Arbitration (the “Arbitration Act”) permits individuals or
corporations to make agreements to submit to one or more arbitrators the disputes that have arisen
or may arise on matters which they are free to dispose of by law. The Arbitration Act is mostly inspired
by the UNCITRAL13 Model Law on International Commercial Arbitration. In the same way, Royal
Decree 231/2008, of February 15, regulates the Consumers Arbitration System, in particular,
regarding those issues aroused between the consumers or users and the companies in relation to the
legal rights granted to consumers.
8. Dispute resolution
13 United Nations Commission on International Trade Law
Guide to business in SpainEstablishing a business in Spain25
The Arbitration Act reinforces anti-formalist criteria in several ways. It allows for the arbitration
agreement to be recorded in any kind of information technology format, provided it can be retrieved
for future consultation.
The Arbitration Act allows for the granting of interim measures by the arbitrators. This faculty is in
line with the Civil Procedure Act, which allows judges to grant interim measures although an
arbitration proceeding is still pending to be ruled. In this sense, the jurisdiction of arbitrators and
judges to grant interim measures is concurrent, this means that parties are allowed to request
interim measures either to arbitrators either to Spanish Courts.
Under the Arbitration Act it is possible to enforce an arbitral award, ruled in Spain, even if
proceedings to set aside the award are still pending. In that case, a State Court may only suspend the
enforcement proceedings if the party against whom the award is being enforced posts security for an
amount equal to the amount set out in the award, plus the potential damages arising out of the
delay in enforcement of the award.
The grounds for refusal to recognise or enforce arbitral awards appearing in the Arbitration Act are
based on the contents of the UNCITRAL Model Law grounds nearly verbatim, which in turn are based
almost in their entirety on the New York Convention of 1958.
Spain has adhered to the New York Convention of 1958 and to the European Convention on
International Commercial Arbitration signed in Geneva on April 21, 1961.
Spain’s adherence to a Model Law arbitration regime makes international arbitration in Spain more
accessible for cross-border practitioners and their clients. The Arbitration Act brings Spain ever
closer to becoming an ideal seat for international arbitration, particularly where Latin American
interests are involved, given Spain's convenient geographical location in southern Europe, its
competitive cost-structure in comparison with other European forums and its linguistic and cultural
ties to Latin America.
Sociedad Estatal para la Promoción y Atracción de las
Inversiones Exteriores, S.A.U. RM: Tomo 21818, libro 0, folio
15, sección 8, hoja M-388683,
Inscripción 1. NIF: A-84479013. Depósito legal: M-3674-2007.
Published 2010
This guide was researched and written by Garrigues on behalf
of INVEST IN SPAIN.
This guide is correct to the best of our knowledge and belief at
the date indicated below. It is, however, written as a general
guide so it is necesary that specific professional advice be
sought before any action is taken.
Madrid, January 2010
Prepared by:
Guide to business in Spain
Tax system
%3
The Spanish tax system is modern andcompetitive. The tax burden in Spain, (i.e. taxand social security contributions as apercentage of GDP), is three points lower thanin neighboring countries.
The Spanish Tax Agency (AEAT) offers thetaxpayers a wide range of services in order tofacilitate the fulfillment of their tax obligations.For this purpose, among others measures, itprovides the taxpayers with computer programsthat facilitate the preparation of their tax formsand promotes its electronic submission andpayment by using an electronic officialcertificate, being one of the most innovative taxagencies in the world.
Guide to business in SpainTax system2
Guide to business in Spain
Tax system
%3
1. Introduction to the Spanish tax system
2. Central Government taxes
3. Special regimes of certain Autonomous
Communities
4. Local taxes
3
4
85
96
Galicia
Asturias Cantabria PaísVasco
La Rioja
Navarra
Castilla y León
Extremadura
Andalucía
Castilla - La Mancha
Comunidad de Madrid
Aragón
Cataluña
Murcia
ComunidadValenciana
Canarias
Baleares
FRANCE
PORTUGAL
MORROCO
La Coruña
Santiago de Compostela Lugo
Orense
OviedoSantander
León
Palencia
Valladolid
Segovia
Ávila
Soria
Logroño
Vitoria
Pamplona
Huesca
Zaragoza
Lérida
Tarragona
Castellón de la Plana
Valencia
Alicante
Murcia
Albacete
Cuenca
Madrid
Toledo
Cáceres
Mérida
Córdoba
Sevilla
Huelva
Cádiz
Ceuta
Málaga
Granada
Jaén
Almería
Melilla
BadajozCiudad Real
Guadalajara
Palma De Mallorca
Barcelona
Gerona
Teruel
BilbaoSan Sebastián
Salamanca
Burgos
Zamora
Pontevedra
Las Palmas de Gran Canaria
Santa Cruz de Tenerife
Guide to business in SpainTax system3
1. Introduction
1. INTRODUCTION TO THE SPANISH TAX SYSTEM
The Spanish tax system is modern and competitive, as is evidenced by a tax burden three points
below that of its neighboring countries and by the limited number of applicable taxes.
The Spanish State Tax Agency has distinguished itself through its technological leadership within the
Government. It is one of the most modernized European tax agencies, in the vanguard of offering
electronic public services, such as online services to tax certificates and the option of filing tax returns
online.
The Spanish tax system comprises three kinds of taxes: “impuestos” (true taxes), “tasas” (dues and
fees) and “contribuciones especiales” (special levies). The “tasas” and “contribuciones especiales”
are collected in return for a public service provided by the authorities or for any type of benefit as a
result of public works or services.
In Spain taxes are levied by the Central Government, by the Autonomous Communities (regional)
and by local authorities. This chapter concentrates on the taxes levied by the Central Government,
including those administered and collected by regional and local authorities. However, given their
importance, a reference is made to the special regimes applicable in the Canary Islands, the Basque
Country and Navarra.
In Spain taxes are levied by the Central Government, by the Autonomous Communities (regional) and by
local authorities. This chapter concentrates on the taxes levied by the Central Government, including those
administered and collected by regional and local authorities. However, given their importance, a reference
is made to the special regimes applicable in the Canary Islands, the Basque Country and Navarra.
2. CENTRAL GOVERNMENT TAXES
National taxes in Spain can be classified as follows:
�• Direct taxes:
— On income:
� – Corporate income tax.
� – Personal income tax.
� – Non-resident income tax.
� — On assets (affecting only individuals):
� – Inheritance and gift tax.
� – Wealth tax.
�• Indirect taxes:
� — Value added tax (VAT).
� — Transfer tax and stamp tax.
� — Excise taxes.
� — Customs duties on imports.
� — Tax on insurance premiums.
2.1 Corporate income tax
The regulation of Corporate Income Tax is contained in the Revised Corporate Income Tax Law,
approved by Legislative Royal Decree 4/2004, of March 5, and in the Regulation approved by Royal
Decree 1777/2004, of July 301.
The key factor in determining the application of corporate income tax is “residence”. A company is
deemed to be resident in Spain for tax purposes if it meets any of the following conditions:
�• That it was incorporated under Spanish law.
�• That its registered office is located in Spain.
�• That its effective management headquarters are in Spain.
2. Central Government taxes
1 November 18, 2008 marked the publishing of Royal Decree 1793/2008,of November 3, amending the Corporate Income Tax Regulations and, inparticular, on the documentation obligations with respect to transactionsperformed with related parties.
Guide to business in SpainTax system4
The Tax Administration can presume that entities, theoretically resident in tax havens or territories
with zero taxation, have their tax residence in Spanish territory when their principal assets directly or
indirectly consist of property situated in Spain or rights that are exercised there, or when their
principal activity is carried out therein, unless it is proven that their administration and effective
management takes place in the other country or territory and that their establishment and operation
in Spain was for valid and compelling commercial and business reasons and not just as a means of
managing securities or assets.
For the purposes of determining which entities reside in tax havens, the provisions of Article 1 of
Royal Decree 1080/1991, of July 5, (which contains 48 territories which have been classified as such)
will apply. However, “tax haven” status will not apply to countries or territories on the list which have
signed with Spain a tax treaty with an exchange-of-information provision (or exchange-of-
information agreement) expressly indicating that the country or territory will no longer be considered
a tax haven once the treaty applies and for its duration.
In turn, the status of “zero-taxation country or territory” will be given to countries or territories which
do not apply a tax identical or analogous to personal income tax, corporate income tax or
nonresident income tax. For a tax to be considered identical or analogous to the above taxes, its
purpose must be to tax income and/or gains, regardless of whether the subject-matter of the tax
consists of the income and/or gains, the revenues or their indicative elements2.
In addition, where Spain has signed a tax treaty, a tax of an identical or analogous nature which
applies for the above-mentioned purposes will be deemed to exist.
Lastly, it is considered that effective exchange of information exists with a country or territory if the
following applies to such country or territory:
�• A tax treaty which includes an exchange-of-information provision (provided that there are no
express limitations on its scope); or
�• A tax information exchange agreement (provided that its fitness for the above purposes has been
expressly established).
In the event of a conflict of residence, the provisions of Spain’s tax treaties with other countries will,
where applicable, prevail.
Resident companies are taxed on their worldwide income. Taxable income includes all the profits
from business activities, income from investments not relating to the regular business purpose, and
income derived from asset transfers.
2 It is also established that the obligatory contributions effectively madeby an individual to a public welfare system to cover contingencies similarto those covered by the Social Security shall be classified as an identical orsubstantially similar tax for personal income tax purposes, as long as thecountry or territory concerned does not levy a tax that is identical orsubstantially similar to personal income tax.
Guide to business in SpainTax system5
In this connection, regard should also be had to the provisions of Spain’s tax treaties with other
countries which, where applicable, may influence the determination of the taxation in Spain.
Taxation of nonresident entities is regulated separately under the Revised Non-Resident Income Tax
Law approved by Legislative Royal Decree 5/2004, of March 5, was also amended by the
aforementioned Law 35/2006.
2.1.1 Taxable income
The Corporate Income Tax Law establishes three methods for determining taxable income: the direct
assessment method, the indirect assessment method and the objective assessment method.
Under the direct assessment method (which is generally applicable), taxable income is defined as the
difference between period revenues and period expenses. Taxable income is based on the income
disclosed in the financial statements adjusted in accordance with tax principles. Business expenses
are deductible if they are properly recorded and supported.
2.1.1.1 Revenue and expense allocation criteria
The tax principles for allocating revenues and expenses to determine taxable income generally
coincide with accounting principles. Tax law identifies the accrual method as generally applicable for
revenue and expense recognition purposes. Additionally, all expenses must be recorded in order to
be deductible (except in certain cases, such as unrestricted depreciation). For tax purposes, in the
event of conflict between an accounting standard and a tax principle, the latter will prevail. However,
expenses recorded in a fiscal year subsequent to their accrual, or revenues recorded in a fiscal year
prior to their accrual, are allocated for tax purposes in the year in which they are recorded, provided
that such practice does not give rise to lower taxation than that which would apply in the event of
the proper recognition of the expenses and revenues in the taxpayer’s books.
For certain transactions, companies are permitted to use special allocation methods other than the
accrual method (e.g. deferred price transactions).
If allocation criteria other than those expressly envisaged in the tax regulations are applied, the
rationale for their use must be duly supported and they must be approved by the Government.
2.1.1.2 International “fiscal transparency” regime (“Controlled Foreign Corporations” provisions)
This regime, according to which resident corporate income taxpayers shall include in their tax base
income obtained by its nonresident subsidiaries although such income has not been actually
distributed, becomes applicable when:
�• The taxpayer (Spanish company) holds 50% or more of the capital stock, equity, voting rights or
results of the non-resident company. Notwithstanding the above, this regime will not be
applicable when the non-resident entity is tax resident of another EU Member State provided that
the taxpayer evidences that (i) the formation and operations of the nonresident entity are based
Guide to business in SpainTax system6
on valid economic reasons and (ii) it performs business activities. Ownership interests held by
related entities or individuals (resident or non-resident) are included in determining such holding.
�• The tax (corporate income tax or similar) paid by the non-resident on the attributable net income
must be less than 75% of that which would have been payable under Spanish regulations.
�• The net income derives from:
a) Ownership of real estate or rights in rem, unless such real estate is used for an entrepreneurial
activity or licensed to another non-resident group company (as defined in Article 42 of the
Commercial Code).
b) Share in equity and transfer to third parties of capital (with certain exceptions, such as
financial assets held in order to meet statutory requirements, etc.).
c) Lending, financing, insurance and service activities (except services directly related to export
activities) with related resident companies which incur deductible expenses. The attribution
does not take place if more than 50% of this type of income derives from transactions carried
out with unrelated entities.
d) Income from transfers of assets or rights included in a) or b) above.
The attribution of net income does not take place (except for the case c) above) when the non-
resident company obtains such income from an entity in which its direct or indirect holding amounts
to at least 5% of its capital stock if:
�• The former engages in directing and managing its investment.
�• At least 85% of the revenues of the latter entity derive from entrepreneurial activities.
Additionally, a general exception to the applicability of the regime for the income addressed in letters
a), b) and d) above is established when the attributable income is below:
�• 15% of the total net income obtained by the non-resident entity or,
�• 4% of the total revenues of the non-resident entity.
The above limits may also be computed on a foreign group basis, as legally defined.
In any case, the attributed net income cannot be higher than the total net income of the non-
resident entity.
The attribution will take place in proportion to the direct or indirect holding in the non-resident entity
and the amount of net income to be attributed will be determined in accordance with the principles
and criteria established in the corporate income tax legislation.
The Spanish entity will not include in its tax base the portion of distributed dividends received which
derives from income previously attributed.
Guide to business in SpainTax system7
Specific income can only be included in the tax base once, regardless of the manner or the entity at
which it is disclosed.
This legislation entitles the Spanish company to a tax credit on the amount of corporate income tax
(or similar) actually paid by the non-resident entity and its subsidiaries as defined by law (in
proportion to the net income attributed) and the tax actually paid as a result of the distribution of
dividends. The limit for this tax credit is the Spanish tax.
No tax credit is permitted for taxes paid in tax havens.
Where the investee is resident in a country or territory classed as a tax haven it will be presumed
that:
a) The amount paid by the entity not resident in Spain attributable to any of the classes of income
previously referred to in letters a) to d), in relation to a tax identical or similar to corporate income
tax, is lower than the 75% that would have been applicable in accordance with the corporate
income tax rules.
b) The income obtained by the investee arises from the mentioned classes of income.
c) The income obtained by the investee is 15% of the acquisition cost of the holding.
These assumptions are refutable and do not apply if the investee consolidates its financial
statements, pursuant to Article 42 of the Commercial Code, with one or more of the entities which
are obliged to include in their taxable income the income obtained from non-resident entities.
2.1.1.3 Market price valuation
As a general rule, assets must be valued under the methods provided in the Commercial Code.
Despite this fact, any variations in their value caused by applying the fair value method will have no
effect for tax purposes if they do not have to be taken to income.
Notwithstanding the above, in certain cases, market valuation (i.e. valuation on an arm’s-length
basis) must be applied for tax purposes. This method is applicable to:
�• Donated assets.
�• Assets contributed to entities and the securities received in exchange.
�• Assets transferred to shareholders in the event of dissolution, the withdrawal of shareholders.
capital reductions with refund of contributions, paid-in surplus and the distribution of income.
�• Assets transferred as a result of mergers, absorptions and full or partial spin-offs.
�• Assets acquired through swap transactions.
�• Assets acquired as a result of exchanges or conversions.
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It should be noted that current legislation provides for a special tax neutrality regime when certain of
the transactions described above are carried out as part of a corporate reorganization (i.e. mergers,
spin-offs, non-monetary contributions of lines of business and share exchanges as well as non-
monetary contributions of assets if certain requirements are met)3.
Under this regime, provided that certain requirements are met, the gains disclosed on the valuation
at market prices of the assets and rights transferred may be excluded from the transferor’s tax base,
thereby not entailing an acquisition cost for tax purposes for the acquirer.
Transactions between related entities may be valued at arm’s-length value, being understood as such
the one which would have been agreed between independent persons or entities under normal
market conditions.
The Tax Administration may verify that the valuation given to transactions performed between
related entities is in accordance with arm’s-length value and make the adjustments which it considers
appropriate in relation to valuations which are not in accordance with the above-mentioned arm’s-
length value in relation to Corporate Income Tax, Personal Income Tax and Nonresident Income Tax.
For the purposes of carrying out such verification the Tax Administration may use the documentation
furnished by the taxable person and the data and information which it has in its possession.
However, the Tax Administration’s valuation of a certain transaction will also be applicable to the rest
of the related persons or entities that are involved in such transaction.
In this respect, the Administration’s valuation will not give rise to taxation of higher income for
corporate income tax, personal income tax or non-resident income tax, than that actually derived
from the transaction for the persons or entities as a whole that performed it.
Related entities must justify such valuation by means of the appropriate documentation, which must
be kept available for inspection by the Tax Administration. In this connection, Royal Decree
1793/2008, implements the obligations on documentation, being consistent with the guidelines set
by the work carried out within the European Union in this area.
The current Spanish rules on transactions between related parties (i.e., controlled transactions) were
introduced by Law 36/2006, as an integral part of the Corporate Income Tax Law. Law 36/2006,
which introduced the obligation on taxpayers to value their transactions with related entities at
arm’s-length prices, entered into force on December 1, 2006.
In this regard, the Royal Decree 1793/2008, November 3, introduces various provisions
implementing the Revised Corporate Income Tax Law, as we will briefly describe below.
First of all, the Royal Decree lays down guidelines for performing the comparability analysis for the
purpose of establishing “normal market value,” and they reflect the guidelines set by the OECD.
Guide to business in SpainTax system9
3 The regime also applies to transfers of registered office of a Europeancompany or a European cooperative society from one EU Member Stateto another.
Guide to business in SpainTax system10
Second, the new legislation regulates the deductibility requirements for related-party cost
contribution arrangements.
A third section is devoted to the documentation which the tax payer must furnish at the request of
the tax authorities to support the arm’s-length nature of the prices used in its related-party
transactions4. ln this regard the Royal Decree requires taxpayers to provide two sets of
data/documentation:
• On the one hand, data on the group to which the taxpayer belongs, describing its structure; the
various entities making it up; the nature, amounts and flows of related-party transactions; and, in
general, the group’s transfer pricing policy.
• On the other hand, the appropriate supporting documentation of the same entity, identifying the
entities related to it, including a comparability analysis, as well as justification for the valuation
method chosen, and any documentation supporting the valuation of its transactions.
A further section seeks to regulate secondary adjustments, in line with the definition given to them in
the Corporate Income Tax Law, by indicating that secondary adjustments will relate to the difference
between the agreed price and the arm’s-length value and that such difference will be recharacterized
according to the appropriate type of income (for instance, in the case of a shareholder receiving
services from its subsidiary at a price below their arm’s-length value, it could be construed that there
had been a distribution of dividends)5.
Lastly, the Royal Decree establishes the documentation obligations for taxpayers that perform
transactions with entities or persons resident in tax havens, and regulates the procedure for advance
pricing arrangements6.
Besides the above, the failure to provide, or the provision of incomplete, inaccurate or false data in
the documentation which, in accordance with the applicable legislation, must be kept avoidable for
inspection by the Tax Administration, will be considered a serious infringement.
It will also constitute a serious tax infringement the fact that the arm’s-length value shown in the
documentation provided by the taxpayer (it is presumed that the arm’s-length value must be shown
by such documentation) differs from that declared in corporate income tax, personal income tax and
non-resident income tax returns.
4 The documentation obligations apply to transactions carried out on orafter February 19, 2009.5 The secondary adjustments could mean that other taxes becamechargeable (for instance if an item of income were recalculated as adividend, it could trigger the obligation to withhold tax from the payee).6 There are limitations on the documentation obligation in the case oftransactions by individuals or by enterprises of a reduced size, amongothers.
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As regards the punitive procedure applicable to such tax infringement the following must be
considered:
• When the performance of a valuation correction by the tax Administration is not appropriate, the
penalty will consist of a fine of 1,500 euros per item of information and 15,000 euros "per
collection of information which is omitted, inaccurate or false", referred to each documentation
obligation established in the applicable legislation for the group or for each entity as taxpayer.
• When the performance of a valuation correction by the tax Administration is appropriate, the
penalty will consist of a proportional fine of 15% over the amount resulting from the valuation
corrections of each transaction, being the minimum amount of such penalty the double of the
penalty that would have corresponded by applying the rule described in 1) above.
The amount of these penalties can be reduced in the terms envisaged in the General Taxation Law
(Law 58/2003, of December 17).
The following are deemed to be related persons or entities:
a) An entity and it shareholders.
b) Entities and their directors.
c) An entity and the spouses of, or persons related by direct or collateral consanguinity or affinity up
to the third degree of kinship to, its members or participants, board members or directors.
d) Two entities belonging to a group.
e) An entity and the members or participants of another entity, where the two entities belong to a
group.
f) An entity and the board members or directors of another entity, where the two entities belong to
a group.
g) An entity and the spouses of, or persons related by direct or collateral consanguinity or affinity up
to the third degree of kinship to, the members or participants of another entity, where the two
entities belong to a group.
h) An entity and another entity in which the first-mentioned entity has an indirect holding of at least
25 percent of the capital stock or equity.
i) Two entities in which the same members, participants or their spouses, or persons related by
direct or collateral consanguinity or affinity up to the third degree of kinship, have a direct or
indirect holding of at least 25 percent in the capital stock or equity.
j) An entity resident in Spain and its permanent establishments abroad.
k) An entity not resident in Spain and its permanent establishments in Spain.
l) Two entities that form part of a group taxed under the regime for groups of cooperative entities.
In cases where relatedness is defined on the basis of the relationship between the members or
investors and an entity, the holding must be at least 5 percent, or 1 percent in the case of securities
admitted to listing on a regulated market. The reference to “director” shall include de iure and de
facto directors. A group exists where an entity exerts or can exert control over another entity or other
entities pursuant to Article 42 of the Commercial Code, regardless of where they have their residence
or of the obligation to prepare consolidated financial statements.
OECD methods are applicable for determining market prices between related parties as follows:
Firstly, three different methods can be used:
�• Comparable uncontrolled price method (market price of the goods or of comparable items).
�• Cost plus method.
�• Resale price method.
Secondarily, two subsidiary methods are established (based on the profit which must be obtained by
the entities involved in relation to a collection of transactions–aggregation) for cases in which, due to
the complexity or the information relating to the transactions, the above-mentioned methods cannot
be adequately applied (based on the price of the transaction): (i) the profit split method and (ii) the
transactional net margin method.
Additionally, the corporate income tax legislation envisages the possibility of reaching “advance
pricing agreements” with the tax authorities. Thus, a taxpayer may submit to the tax authorities a
proposal for valuing its transactions with related entities based on market conditions. If the proposal
is approved by the tax authorities, such valuation is valid for tax purposes for a maximum period of
four tax years7.
2.1.1.4 Thin capitalization rule
Where the direct or indirect net remunerated indebtedness of an entity tax resident in Spain (other
than a financial institution) to one or more related persons or entities not residents in Spain exceeds
the result of applying a coefficient of 3 to capital for tax purposes (equity of the entity excluding
income or loss for the year), the interest accrued on the excess will be treated as a dividend and thus
will be nondeductible for the Spanish company.
The rule commented in the preceding paragraph will not be applicable when the non-Spanish-
resident related entity is tax resident in another EU Member State, unless it is resident of a territory
classified as tax haven.
Guide to business in SpainTax system12
7 Advance pricing arrangements may also be reached in connection withcontributions for research, development and technological innovation ormanagement expenses and in connection with the part of managementexpenses that may be allocated to a permanent establishment in Spain ofa non-resident entity.
The taxpayer may submit a (duly supported) proposal for applying a higher ratio. If the proposal is
approved, a different ratio may be applied. This possibility is not applicable to transactions made
with or by persons or entities resident in countries or territories legally defined as tax havens.
2.1.1.5 Changes in residence, cessation of business by permanent establishments, transactions performed with persons or entities resident in tax havens
Lastly, the tax base must in general include the difference between the value per books and the
normal market value of the assets which:
�• Are owned by a resident entity that transfers its place of residence abroad;
�• Are allocated to a permanent establishment located in Spanish tax territory that ceases
operations; or
�• Having been previously allocated to a permanent establishment located in Spain, are transferred
abroad.
It should be noted that income deriving from the transfer of assets that were formerly attached to
the business activity of a permanent establishment, will be also imputed to such permanent
establishment provided that the transfer would have taken place within the three tax periods
following the one on which the referred asset left being attached to the business activity.
Also, the tax authorities can value at market price any transactions with persons or entities resident
in territories defined in the relevant regulations as tax havens if the valuation agreed upon has led to
lower or deferred taxation in Spain.
2.1.1.6 Inventory valuation
There are no special tax rules in this connection. Accordingly, all inventory valuation methods (FIFO,
acquisition cost or weighted average cost) applicable for accounting purposes are also acceptable for
tax purposes. The same rules apply to inventory depreciation.
2.1.1.7 Value adjustments
�• Depreciation
Depreciation qualifies as a deductible expense only if it is effective and is recorded in the accounts
(with certain exceptions such as goodwill (See page 20 in this Chapter) or the accelerated
depreciation applicable to certain activities, such as research and development).
� — Official depreciation rates.
There are official rate tables (updated by Royal Decree 1777/2004) which, if complied with,
relieve the company of the need to prove effectiveness. Examples of the current official rates
are:
Guide to business in SpainTax system13
There are special rules for assets used on a daily basis in more than one ordinary shift of work
and for assets acquired second hand.
� — Declining-balance depreciation
Under this method, which is permitted for all assets except buildings, furniture and household
goods, depreciation can be shifted to the early years of the asset’s useful life, when the
effective depreciation may be greater by applying a coefficient to the declining balance of the
asset’s book value.
— Sum-of-the-years’-digits method
This system is also permitted for all assets except buildings, furniture and household goods,
and the sum of the digits is determined on the basis of the depreciation period established in
the official tables.
� — Other depreciation methods
Companies which, for technical reasons, wish to depreciate their assets at different rates than
those fixed by the official tables and also wish to obviate the uncertainties involved in proving
the “effective” depreciation, can seek prior approval from the tax authorities for special
depreciation plans with such annual rates of depreciation.
Finally, companies of certain kinds and in certain industries (e.g. mining companies, industries
in the process of reorganization, etc.) may be authorized to depreciate their assets at their
discretion in accordance with the special laws regulating each industry.
� — Amortization of intangible assets
Intangible assets are amortized by the same methods as those applicable to tangible fixed
assets throughout their economic life.
Maximum Minimum
Industrial buildings 3 1.47Commercial buildings 2 1Office furniture 10 5Computers 25 12.5Software 33 16.7Vehicles 16 7.14Machinery 12 5.55
Table 1
ANNUAL DEPRECIATION RATE (%)
Guide to business in SpainTax system14
Intangible assets with a definite useful life may be amortized over ten years provided that: (i)
they were acquired for valuable consideration; (ii) the transferee and transferor are not part of
the same group of companies within the meaning defined in Article 42 of the Commercial
Code, irrespective of residence and the obligation to prepare consolidated financial
statements. If both companies are part of the same group, the deduction will be made with
respect to the acquisition price of the assets paid by the transferor where they were acquired by
unrelated individuals or entities.
Where the useful life is less than ten years, the maximum annual limit will be calculated based
on such duration.
Otherwise, the amortization expense will only be tax deductible if the taxpayer proves that it
relates to an irreversible decline in value of the assets.
An intangible asset recorded in respect of goodwill can be amortized over twenty years provided
that, in addition to the two requirements mentioned above for intangible assets with a definite
useful life, a restricted reserve has been recorded, at least for the tax-deductible amount, on
the terms provided in corporate legislation. If this reserve cannot be recorded, the deduction is
conditional upon the reserve being recorded against the first income figure in the following
years. This deduction is not conditional upon it being recorded in the statement of income. The
deducted amounts will reduce the value of goodwill for tax purposes.
Lastly, the amortization of intangible assets with an indefinite useful life will be deductible over
ten years if they were acquired for valuable consideration and the transferee and transferor are
not part of the same group of companies within the meaning defined in Article 42 of the
Commercial Code, irrespective of residence and the obligation to prepare consolidated
financial statements (if both companies form part of the same group, the deduction will be
applied to the acquisition price of the assets paid by the transferor where they were acquired
by unrelated individuals or entities). This deduction is not conditional upon it being recorded in
the statement of income. The deducted amounts will reduce the value of the assets for tax
purposes.
In any other case, the depreciation will only be tax deductible if the taxpayer proves that it is
due to the irreversible loss in value of the assets.
� — Financial lease contracts
Under Spanish law, financial lease contracts (provided by finance entities, as legally defined)
for movable assets must have a minimum term of two years, and those for real estate must
have a minimum term of ten years, and the annual charge corresponding to the depreciation
of the cost of the asset must remain the same or increase over the term of the lease. Lease
payments (interest plus the portion of principal relating to the cost of the asset) are deductible,
except those for land (although in this case the interest portion will be deductible) and for
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Guide to business in SpainTax system16
other non-depreciable assets. However, the ceiling on the deductibility of the depreciation cost
of the asset is twice the maximum depreciation rate per the official tables.
— Assets leased with purchase option
When the amount payable for exercising the purchase option is less than the amount resulting
from subtracting from the assets’ value the total maximum depreciation corresponding to
those assets throughout the duration of the assignment, the transaction will be considered a
financial lease and be treated as explained in relation to this type of lease.
Where the asset has been transferred previously by the transferee to the transferor, the
transaction will be deemed a form of financing and, therefore, the transferee will continue to
depreciate the asset under the same conditions and for the same value as prior to the transfer.
— Accelerated depreciation with maintenance of employment
Accelerated depreciation will be allowed for investments in new property, plant and equipment
and investment properties used for economic activities, received by the taxpayer in the tax
periods commenced in 2009 and 2010 where in the twenty-four months following the start
date of the tax period in which the acquired assets come into operation, the total average
headcount is maintained at the entity with regard to the previous twelve months. The
deduction will not be conditional upon whether it has been recognized in income.
This rule will also apply to those types of investments made under finance leases that meet the
abovementioned requirements by taxpayers who determine their tax bases under the direct-
estimate rules, on condition that the purchase option is exercised.
This rule will apply to investments received within the tax periods mentioned in that point,
which relate to new assets ordered under works agreements or investment projects which, in
both cases, require a performance period of more than two years between the order date or
start date for the investment and the date on which it is received or brought into operation.
In the case of investments in progress made within tax periods commencing in 2009 and 2010.
In the cases of investments relating to assets obtained under works agreements or investment
projects which, in both cases, require a performance period of more than two years between
the order date or start date for the investment and the date on which it is received or brought
into operation, even if these dates occur after the end of the tax periods commenced in 2009
and 2010, accelerated depreciation shall be allowed only for the investment in progress made
within the tax periods commenced in 2009 and 2010.
�• Diminution in value of assets
�� — Impairment losses on receivables for foreseeable bad debts
Guide to business in SpainTax system17
This provision covers the foreseeable losses in the realizable value of accounts receivable. The
deductibility of this provision is subject to certain requirements. Under these requirements, the
only method applicable is the individual balance method, whereby the status of each
receivable is individually analyzed. The deduction of this provision is subject to satisfaction of
any of the following tests:
a) The balance must be more than six months past due.
b) The debtor must have been held to be in insolvency.
c) The debtor must have been taken to court for the criminal act of dealing in assets to defraud
creditors.
d) The obligations must have been claimed in court or the subject of a lawsuit or arbitration
proceeding.
Losses to cover the risk of bad debts of related entities cannot be recorded for tax purposes for
receivables from related parties unless the related parties concerned are insolvent. Similarly,
losses to cover the risk of foreseeable bad debts from public entities or receivables for which
sufficient guarantees have been provided cannot be recorded for tax purposes.
Losses to cover the risk of foreseeable bad debts by financial Institutions, as defined by law, are
subject to specific rules.
• Impairment losses related to equity securities
A deduction in respect of impairment losses relating to equity securities not listed on a regulated
market cannot be higher than the difference arising in the reporting year between the opening
and closing balance of shareholders’ equity (equity method) on the basis of either the accounts
prepared by the directors or the accounts approved by the shareholders. For listed securities,
impairment losses are tax deductible to the extent of the difference between the year-end stock
market price and the price at the beginning of the tax year.
Impairment losses relating to investments in entities resident in countries or territories deemed to
be tax havens are not deductible unless those entities file consolidated financial statements with
those of the entity that incurred the impairment loss as defined in Article 42 of the Commercial
Code, or unless those entities are resident in an EU Member State and the taxpayer evidences that
the formation and operations of the nonresident entity are based on valid economic reasons and
it performs business activities.
In the aforementioned conditions, the difference (between equity values at the beginning or end
of the fiscal year) will be tax deductible in proportion to the ownership interest held, without its
needing to be recognized in the income statement, where the securities represent an interest in
the capital of group, jointly controlled and associated entities as established in corporate law,
provided that the value of the ownership interest, reduced by the amounts deducted in previous
tax periods, exceeds the value of the investee’s equity at fiscal year-end which corresponds to such
interest, adjusted in the amount of unrealized gains existing at acquisition date and which remain
at valuation date. The deductible difference may not exceed the amount of such excess.
In this regard, the equity shall be determined as established in the Commercial Code and other
accounting regulations, and the difference (between equity at the beginning and end of the year,
subject to the limit indicated in the preceding paragraph), if any, will be adjusted by the current
year’s expenses that are not tax deductible in accordance with the Corporate Income Tax Law.
The deducted amounts will reduce the value of the ownership interest, and will be considered
value adjustment, amortization or impairment of such interest for tax purposes. These amounts
will be included as a positive adjustment to the tax base of the tax period in which the equity
value at year-end exceeds the value at the start of the year, having regard to the contributions or
reimbursements thereof made during the year, with the limit of said excess.
The notes to the financial statements shall include information on the amounts deducted in each
tax period, the variation in the investee’s equity over the fiscal year, the amounts included in the
tax base of the period and those outstanding inclusion.
On the other hand, impairment losses on debt securities listed on regulated markets are
deductible, to the extent of the overall loss, including the positive and negative variations in value
experienced in the tax period by all of those listed securities held by the taxpayer.
Impairment losses which have a known repayment value and are not listed on regulated markets or
are listed on regulated markets in countries or territories deemed to be tax havens are not deductible.
��• Financial goodwill8
Where securities representing a holding in the equity of entities not resident in Spain are acquired
and the income or gains obtained by such entities qualify for exemption under Article 20.bis of the
Corporate Income Tax Law, the amount of the difference between the acquisition cost and underlying
book value of the holding on the acquisition date will be allocated to the assets and rights of the
entity not resident in Spain, and any portion of the difference that has not been allocated will be
deductible from taxable income, subject to an annual limit of one twentieth of its amount.
This deduction is not consistent with the tax credit for export activities, but is consistent with
impairment losses on the equity securities of companies not listed in a regulated market.
Guide to business in SpainTax system18
8 Following several complaints, the European Commission notified Spainon October 10, 2007 of the commencement of an investigationproceeding on the consistency of the tax amortization of financialgoodwill on the acquisition of nonresident entities with the legislation onState aid (Article 88(2) of the EC Treaty).The European Commission considers that the tax amortization offinancial goodwill constitutes State aid and is incompatible with EC Treatyprovisions insofar as it relates to acquisitions of EU enterprises. TheCommission has required Spain to eliminate Article 12.5 of the RevisedCorporate Income Tax Law in the case of intra-EU transactions There is atransitional regime for enterprises that acquired their investments beforepublication of the decision to initiate the formal investigation in theOfficial Journal of the European Union (December 21, 2007).
In the tax periods in which this deduction is to be made, the taxpayer must file with the tax
authorities the following information together with its corporate income tax return:
a) In relation to the direct investee:
1. Name and percentage holding.
�� 2. Description of its activities.
�� 3. Value and date of acquisition of the holdings, as well as their underlying book value,
determined on the basis of standardized financial statements.
4. Support for the rules on standardization of valuation and timing, as well as the attribution
to the assets and rights of the investee of the difference existing between the acquisition
cost and underlying book value of its holdings on the date of their acquisition.
b) Amount of investment made in the acquisition of holdings in entities not resident in Spain and
included in the tax credit base for export activities.
• Provisions
The following expenses are not deductible:
a) Those resulting from implied or tacit obligations.
b) Those relating to long-term compensation and other personnel benefits, except for the
contributions of the sponsors of pension plans subject to certain requirements.
c) Those concerning the costs of performing contracts which exceed the expected financial
returns from them.
d) Those resulting from restructurings, unless they refer to legal or contractual obligations, not
merely tacit obligations.
e) Those relating to the risk of sales returns.
f) Personnel expenses relating to payments based on equity instruments, used as a form of
employee compensation, either paid in cash or by awarding the instruments to employees.
Any expenses that are not deductible according to the foregoing list will be included in the tax
base for the tax period in which the provision is used for its intended purpose.
However, the following provisions, among others, are tax-deductible:
— Expenses relating to environmental actions under a plan prepared by the taxpayer and
accepted by the tax authorities.
— Expenses relating to insurance reserves made by insurance companies, to the extent of the
minimum amounts established in applicable legislation. With that same limit, the amount
Guide to business in SpainTax system19
recorded in the fiscal year for the equalization reserve will be deductible for purposes of
determining the tax base, even where it has not been included in the income statement
(provisions for outstanding premiums or fees will not be consistent, for the same balances,
with provisions to cover foreseeable bad debts).
— The expenses relating to risks resulting from repair and inspection warranties (and ancillary
expenses for sales returns), up to the limit resulting from applying to the sales with
outstanding warranties at the end of the tax period the average warranty expenses as a
percentage of total sales under warranty in the current and the two preceding tax periods.
2.1.1.8 Nondeductible expenses
�• Amounts directly or indirectly remunerating equity.
�• Corporate income tax.
�• Criminal and administrative fines and penalties, and surcharges for the late payment of taxes.
�• Gambling losses.
�• Free gifts. (i) Gifts to certain entities (foundations, etc.), (ii) of assets registered in the Register of
Assets of Cultural Interest, (iii) assets aimed at contributing to the conservation of assets of
cultural interest or (iv) to the performance of activities of general interest, which would give right
to deduct a 35% of the tax credit base determined in accordance with Law 49/2002, up to a limit
of 10% of the net taxable income of the year. The amounts exceeding said limit could be applied
in the tax periods ending in the 10 subsequent and immediate years).
• Expenses for services relating to transactions performed directly or indirectly with individuals or
entities resident in designated tax havens or paid through individuals or entities resident in tax
havens (unless the payer can prove that the expense arose from a transaction effectively
performed).
• Provisions to internal pension allowances.
Additionally, some expenses charged by related entities (such as management fees and R&D
contributions) must meet certain formal requirements in order to be tax deductible.
2.1.1.9 Capital gains and losses
By contrast with other countries, Spanish corporate income tax treats income resulting from the
transfer of assets in the same way as other income. Accordingly, such income is generally added to
(deducted from) regular business income to determine the taxable income and a tax credit for
reinvestment is applicable in some cases, as explained below (See heading 2.1.3.1 in this Chapter).
Special rules are envisaged for determining income resulting from real estate transfers to take into
account the declining value of money. Under these rules, the acquisition cost and the annual
depreciation are corrected by applying certain coefficients.
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2.1.1.10 Loss carryforwards
As a general rule, a resident entity can carry forward its tax losses for offset against the taxable
income of the following fifteen years. For newly-incorporated entities, this fifteen-year period
commences in the first fiscal year in which the entity reports taxable income.
The taxpayer must prove, by producing the related tax returns or self-assessments, accounting
records and the appropriate documentary support, the origin and amount of the tax losses to be
offset, whenever the tax losses were incurred.
Loss carrybacks are not permitted.
2.1.2 Tax rates
Spain’s current standard corporate income tax rate applicable in tax periods commencing in or after
January 2008 is 30.
Special rates are applicable to certain entities such as listed collective investment institutions
including real estate investment funds (1%), certain cooperatives (20%) or entities engaging in oil
and gas research and exploitation activities (35% in tax periods that commenced in or after January
1, 2008).
In the case of listed corporations for investment in the real estate market (known as SOCIMIs), the tax
rate is 19%, pursuant to 2010 General State Budget Law 26/2009, of December 23 (“the General
State Budget Law”) amending Law 11/2009, of October 26, regulating SOCIMIs.
For small and medium-sized companies, as mentioned below (See heading 2.1.9 in this Chapter) the
tax rate applicable to the first €120,202.41 of taxable income is 25%. Any taxable income above that
amount is taxed at a 30% rate9.
2.1.3 Tax credits, withholdings and prepayments
Under this heading we will describe the main tax credits applicable for 2010. In line with the process
started in 2007 some of them, such as the tax credit for export activities, will be progressively
reduced until they are completely removed in a few years.
2.1.3.1 Tax credit for reinvestment of extraordinary income
There is a general tax credit equal to 12% of the gains included in taxable income in tax periods that
commenced in or after January 2006 which were obtained from transfers of assets (the types of
asset are mentioned below), on condition that the transfer proceeds are reinvested.
A partial tax credit can be taken if the proceeds are partially reinvested, by applying the 12% tax
credit to the portion of the gain proportional to the amount reinvested.
Guide to business in SpainTax system21
9 The 2010 General State Budget Law establishes a reduced tax rate forenterprises of a reduced size that maintain employment.
The reinvestment must be made within a period commencing one year before and ending three
years after the date on which the asset transferred is made available. However, a special
reinvestment plan may be submitted where the reinvestment cannot be made in the above-
mentioned periods due to the technical characteristics of the reinvestment (If more than one transfer
of securities is made in the same period, time in the above-mentioned period will start running from
the end of the tax period).
The amount of the gain qualifying for the tax credit will not include impairment losses relating to any
transferred assets that were deductible, or amounts charged in respect of accelerated depreciation
and to be included in the tax base as a result of the transfer of the assets on which it was claimed.
The portion of the gain that has given the right to claim a double taxation tax credit will not be
included in the tax credit base either.
The tax credit will be taken in the period in which the reinvestment is made and will be taken without
any limit on the tax payable. However, where the reinvestment takes place before the transfer, the
tax credit must be taken in the period in which the transfer is made.
�• Types of asset transferred:
Gains on transfers of the following types of assets qualify for the above tax credit:
a) Tangible fixed assets or intangible assets or real estate investments that have been used for the
business activity and have been in operation for at least one year prior to the transfer.
b) Securities which represent at least 5% of the capital stock of any kind of entities (excluding
those which do not confer an interest in its capital stock or equity) and have been previously
held for at least one year. Such transfer may not be made in the framework of operations for
the dissolution or liquidation of these entities. The calculation of the stake transferred will refer
to the tax period.
For the purposes of calculating the length of ownership, the FIFO rule will be applied (those
acquired first will be deemed to have been transferred first). The calculation of the interest
transferred will refer to the tax period.
When the transferred securities relate to entities that have assets that were not used for
business activities, per the balance sheet for the last year-end, in a percentage of over 15% of
total assets, the credit will not be applied on the portion of the gain obtained on the transfer
relative to the percentage obtained. This percentage will be calculated by reference to the
consolidated balance sheet if the transferred securities relate to an investment in the equity of
a parent of a group, within the meaning defined in Article 42 of the Commercial Code,
irrespective of residence and of the obligation to prepare consolidated financial statements, in
which multigroup and associated entities will be included on the terms of corporate
legislation. The taxpayer can, however, determine that percentage by reference to the market
values of the assets on its balance sheet.
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�• Reinvestment requirements
The following are the assets in which the transfer proceeds must be reinvested:
a) Tangible fixed assets, intangible assets or real estate investments used for business activities
that must be put into operation within the reinvestment period.
b) Securities which represent at least 5% of the capital stock of any kind of entities, excluding
those which do not confer an interest in its capital stock or equity. The calculation of the stake
acquired will refer to the period established for making the reinvestment. These securities may
not give rise to any other tax incentive at the level of the tax base or tax payable, but value
corrections, exemptions envisaged in article 21 of the Corporate Income Tax Law and tax
credits for the avoidance of international double taxation are not considered as such. In
general, this tax credit is incompatible with tax deductibility of the amortization of the
financial goodwill arising in the acquisition of stakes in non-resident entities (established in
article 12.5 of the Corporate Income Tax Law), regardless the period in which the value
correction is made.
The Law provides for certain restrictions on the reinvestments that qualify for these purposes,
especially in relation to intragroup transfers.
The assets in which the reinvestment is made must continue to be held by the taxpayer in operation
for five years, except for justified loss, or for three years in the case of movable assets, unless their
useful life is shorter. If the assets are transferred before the end of that period, the tax credit will be
forfeited (unless the net book value or proceeds, if less, is reinvested as described above). If the tax
credit is forfeited in a year subsequent to that in which it is used, the relevant tax payable and late-
payment interest must be paid over to the tax authorities.
The reinvestment will be deemed to have been made when the assets in which it is made are made
available to the taxpayer. In the case of assets under financial lease agreements, the reinvestment
will also be deemed to have been made on the date on which the asset transferred is made available
(for the cash value of the asset). In the latter case, if the purchase option is not exercised, the
reinvestment will be deemed not to have been made (the reinvestment being a condition
subsequent).
2.1.3.2 Investment and professional training tax credits
�• A 2% tax credit for investments made in tangible fixed assets used for the following:
� — To protect the environment, consisting of installations to avoid air pollution from industrial
facilities.
� — To prevent the pollution of surface, underground and sea water by reducing, recovering or
treating industrial waste.
Guide to business in SpainTax system23
This tax credit will be 3% in the case of the acquisition of road transportation vehicles that
contribute to reducing air pollution.
In order for investments in these assets to qualify for this tax credit, they must be included in
programs, agreements or contracts with the relevant environmental authorities. In such cases, the
authorities will issue the related certificate accrediting the investment.
�• A 8% tax credit for investments made in certain assets of cultural interest, provided that they are
held for at least four years.
Capitalizable expenses incurred in the acquisition, maintenance, upkeep or repair of such assets
also qualify for this tax credit.
�• Investments in satellite vehicle navigation and location systems incorporated into industrial or
commercial road transportation vehicles will give the right to a tax credit of 2% of the amount of
such investments.
�• Investments in access platforms for people with disabilities and wheelchair securing facilities
incorporated into public passenger road transportation vehicles will give the right to a tax credit of
2% of the amount of such investments.
�• A 18% tax credit for investments made in Spanish motion picture or audiovisual productions. The
production cost is reduced, in order to apply the tax credit, by the portion financed by the financial
co-producer.
A 5% tax credit is envisaged for investment in a motion picture financed by the financial co-
producer (subject to a ceiling of 5% of the income for the year derived from such investment).
�• A 3% tax credit for investments made in the publication of books.
The portion of these investments (to protect the environment, made in certain assets of cultural
interest, in satellite vehicle navigation and location systems, in access platforms for people with
disabilities and wheelchair securing facilities incorporated into public passenger road
transportation vehicles, in Spanish motion picture or audiovisual productions, and in the
publication of books) financed with subsidies does not qualify for a tax credit.
�• A tax credit for 25% of the expenses incurred in the tax period on scientific R&D. If the investment
made exceeds average expenses incurred in the previous two years, 42% is applied to the excess.
In addition, a tax credit for 8%10 of the expenses incurred in the tax period on technological
innovation.
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10 The Sustainable Economic Bill envisages increasing the tax credit rate to12%.
Guide to business in SpainTax system25
Research and development (R&D) expenses included in the tax credit base must relate to activities
carried out in Spain or in any member state of the European Union or of the European Economic
Area.
R&D expenses shall include the amounts paid by the taxpayer individually or in collaboration with
other entities to fund the conduct of R&D activities in Spain or in any member state of the
European Union or of the European Economic Area.
The amount of the base for this tax credit is reduced by 65% of any subsidies received to
encourage such activities.
Apart from the tax credit for R&D expenses a tax credit is established for investments in tangible
fixed assets and intangible assets (excluding investment in buildings or land) to be used exclusively
for R&D activities, which will qualify for a tax credit for R&D activities (not technological
innovation) on the following conditions:
� — The base of the tax credit will be the amount of the investments in the above-mentioned
assets, net of 65% of the subsidies received.
� — The investments are deemed to be made when the assets are put into operation.
� — The tax credit rate in these cases will be 8%.
� — The assets acquired must remain at the company until their specific purpose in the research
and development activities is accomplished, unless their useful life is shorter.
� — This tax credit will be inconsistent with the other tax credits provided for the same investments
in the Chapter on Tax Credits to encourage the pursuit of certain activities, but will be
consistent with the tax credit for reinvestment of extraordinary income.
�• A tax credit may be taken for 3% of the investment in:
� — The formation of a branch or permanent establishment abroad, the acquisition of a holding in
a foreign company or the incorporation of a subsidiary directly connected with the export of
goods or services or the contracting of tourism services in Spain, provided that the holding is of
at least 25% of the capital stock of the subsidiary (except for investments in tax havens).
� — Advertising and publicity expenses covering more than one year for the launch of products, the
opening-up of markets, and attendance at trade fairs (including international trade fairs in
Spain) also qualify for this tax credit (except when carried out in tax havens).
The amount of the base for these tax credits is reduced by 65% of any subsidies received.
�• A tax credit can be taken for 1% of the amount of the employee training expenses.
If the expenses exceed the average amount spent in the two preceding years, this tax credit is
increased to 2% on the excess amount. The employee training expenses are reduced by 65% of
any subsidies received treated as period revenues.
The tax credit also applies to expenses incurred by the entity in training employees in the use of
new technologies. Such expenses include the cost of Internet access and the related hardware,
even if used by employees outside the workplace and outside normal working hours. The expenses
referred to in this section will be treated for tax purposes as training costs and will not give rise to
salary income for the employee.
2.1.3.3 Tax credit for employer contributions to employment pension plans
In general, this tax credit encourages contributions to employment pension plans or mutual entities
which operate as employee welfare vehicles sponsored by the taxpayer for the benefit of workers
whose annual gross compensation is less than €27,000 provided that such contributions are
imputed. If the compensation exceeds that amount, the tax credit will be taken on the proportion of
the contributions which relate to €27,000.
The tax credit is equal to 2% of the contributions made.
2.1.3.4 Tax credit for hiring workers with disabilities
The requirements for qualifying for this tax credit are as follows:
�• The contract must be an indefinite-term, full-time contract.
�• The amount of the tax credit will be €6,000 per disabled person/year by which the average labor
force increases, with respect to the immediately preceding year.
In general, the abovementioned tax credits (arising from the following investments or expenses: to
protect the environment, made in certain assets of cultural interest, in satellite vehicle navigation
and location systems, in access platforms for people with disabilities and wheelchair securing
facilities incorporated into public passenger road transportation vehicles, in Spanish motion picture
or audiovisual productions, in the publication of books, in R&D and technological innovation, in the
formation of a branch or permanent establishment abroad, in employee training expenses, for
employer contributions to employment pension plans, for hiring workers with disabilities, expenses
incurred by the entity in training employees in the use of new technologies and reinvestment of
extraordinary income) are limited to 35% of the gross tax payable, net of domestic and international
double taxation tax credits and of tax allowances (the limit will be raised to 50%11 where the R&D
and technological innovation tax credit and the tax credit for promotion of information and
communication technologies relating to expenditure and investment in the tax period exceed 10% of
the gross tax payable).
Guide to business in SpainTax system26
11 The Sustainable Economy Bill envisages raising this overall limit to 60%if the tax credits for R&D&I.
However, any excess can be carried forward for use in the following ten years (in the case of the tax
credit for scientific research and technological innovation activities, the period will be up to fifteen
years).
The period will be counted from the first subsequent year in which an entity reports taxable income
in the case of newly-incorporated entities or entities offsetting prior year’s losses by effective
contributions of new resources.
2.1.3.5 Tax credit for domestic double taxation of dividends and on transfers of shares
This credit completely eliminates double taxation when the resident company collecting the dividend
owns at least 5% of the resident company paying the dividend and had its holding during the 12-
month period prior to the date on which the distributed dividend becomes claimable or, failing that,
be maintained subsequently for the time required to complete that period. If these requirements are
not met, double taxation is not avoided altogether, since 50% of the dividend received is taxed (or
100% should certain anti-abuse provisions be applicable).
The credit can also be taken on transfers of shares in respect of the amount of undistributed earnings
generated in the period of ownership of the holding, provided that the requirements described above
are met.
Additionally, the credit applies (in respect of the amount of undistributed earnings) in the following
cases: liquidation of a company; acquisition by a company of its own shares for amortization
purposes; withdrawal of shareholders; dissolution of a company without liquidation (mergers, total
spin-offs or global transfers of assets and liabilities).
The above-mentioned tax credits are subject to certain limits (with some exceptions) including most
notably:
�• When the distribution of the dividend or of the share in profits does not result in the inclusion of
income in the tax base.
�• When the distribution of the dividend or of the share in profits causes an impairment loss in the
ownership interest for tax purposes.
�• When the undistributed income relates to income not included in the tax base of the investee
company because it was offset by tax losses.
Any excess tax credit can be carried forward for use in the following seven years.
2.1.3.6 Tax credit to avoid international double taxation
Traditionally, Spanish legislation has adopted the credit method and the underlying tax credit (for
dividends) to avoid international double taxation.
An amendment to the legislation dated June 2000, introduced a pure exemption system subject to
compliance with certain requirements.
Guide to business in SpainTax system27
Guide to business in SpainTax system28
The exemption co-exists with the tax credit system (the tax payer may opt for one or the other,
although the application of both is incompatible).
2.1.3.7 Tax credit system
Under this method, all the income or capital gains obtained abroad by companies resident in Spain
are included in the tax base in calculating the tax due. The amount of tax effectively paid abroad will
be deducted from the tax due, up to the limit of the tax that would have been payable on the
income had it been obtained in Spain. In making the calculation, all the income obtained in the
same country will be included, except in the case of permanent establishments, where the income
obtained by each of them will be grouped (“country per country mechanism”).
When the tax base includes dividends or shares in profits paid by an entity not resident in Spain, the
tax effectively paid by the non-resident entity in respect of the income from which the dividends or
shares in profits were paid will be deducted (underlying tax). This deduction, together with that
mentioned in the previous paragraph, may not exceed the gross tax that would have been payable in
Spain on such income.
The underlying tax is deductible without a level limit (i.e. the tax borne by the subsidiaries, by the
subsidiaries of such subsidiaries, etc.). To qualify for the tax credit, a direct or indirect holding of at
least 5% in the capital of the non-resident entity must be owned uninterruptedly for the one-year
period immediately prior to the distribution of the dividend (or the one-year period must be
completed after the distribution), and the resident entity must include in its tax base not only the
income distributed but also the taxes borne by said foreign entities.
Any amounts not deducted due to insufficiency of the gross tax payable may be carried forward for
use in the following ten years.
2.1.3.8 Exemption system applicable to income from business activities carried on abroad throughsubsidiaries or permanent establishments
Under the exemption system, dividends or profit participations derived from holding securities
representing the equity of entities which are not resident in Spanish territory and the income (gains)
obtained from the transfer of these securities are tax exempt in Spain provided the following
requirements are met:
a) The direct or indirect interest in the capital or equity of the non-resident entity must be at
least 5% and this interest must have been held by the Spanish entity uninterruptedly during
the year prior to the date on which the profit distributed becomes claimable (or will be
maintained for the time necessary to complete a year).
b) That the non-resident entity has been subject to a tax of an identical or analogous nature to
the Spanish corporate income tax in the tax year in which the profit which is distributed has
been obtained. It is considered that the non-resident entity is subject to a tax of identical or
analogous nature to the Spanish corporate income tax if the non-resident entity is resident in a
Guide to business in SpainTax system29
country with which Spain has a treaty to avoid international double taxation and such treaty
contains an exchange of information clause. The exemption does not apply when the non-
resident entity resides in a tax haven as legally defined unless it resides in a European Union
member State and the taxpayer evidences that its formation and operations are based on
valid economic reasons and that it performs business activities.
c) The income from which the dividends or profit participations arise must be derived from the
carrying on of business activities abroad as defined by the Law. This requirement will be
deemed to be met when at least 85% of the revenues for the year of the subsidiary relate to
operating (i.e. not subject to Spain’s controlled foreign corporations—CFC—rules) income
obtained abroad, as well as to dividends from sub holdings arising from qualifying operating
subsidiaries.
The exemption applies in the case of capital gains when the requirements provided for in b) and c)
above are met in every year of the holding, and the requirement set in a) on the date on which the
transfer takes place.
Regarding the computing of the one-year period, account may be taken of the period during which
the holding was owned by companies that meet the conditions to be considered as forming part of
the same group of companies according to Spanish mercantile legislation.
In any case, if the exemption has been applied to foreign-source dividends, the decline in the value of
the holding may not be included in the tax base, regardless of the manner or the tax period in which
it occurs, up to the amount of those dividends.
The Law also states that, if the non-resident entity whose holdings are being transferred has, in turn,
a direct or indirect holding in entities resident in Spain or possesses assets in Spanish territory (and
the market value of the holdings in the Spanish-resident entities or of the assets located in Spain
exceeds 15% of the market value of its total assets), the exemption would be limited to the part of
the income that relates to the net increase in undistributed profits generated by the investee entity
during the time the holding was owned. Furthermore, the law establishes provisions that limit the
application of the exemption, as in cases in which the entity transferring the holdings has made a
tax-deductible adjustment to the value of the holding transferred. In this case, the exemption is
limited to the excess of the income obtained on the transfer over the amount of the adjustment
deducted. Similarly, if the holding in the non-resident entity had been acquired from another entity
that meets the conditions referred to in Article 42 of the Commercial Code for forming part of a
group of companies, any loss disclosed on the transfer of the holding will be reduced (in order to
determine the amount of tax exempted) by the amount of the income obtained on the transfer of
the same holding to which the exemption had been applied. Furthermore, any income obtained on
the transfer will be taxed up to the amount of the loss on previous transfers included in the tax base
for corporate income tax purposes.
Apart from the above provisions, the Law also stipulates certain cases in which the exemption is not
applied, such as, for example, when the entity resident in Spain is a Spanish or European Interest
Guide to business in SpainTax system30
Grouping (EIG), or a Temporary Business Association (UTE) (see p. 39), the acquirer resides in a tax
haven, or the business activity abroad is carried on for the main purpose of qualifying for this tax
regime unless, in this latter case, evidence is provided of other valid economic grounds. It will be
assumed that the business activity abroad is carried on mainly to qualify for the tax regime if it is
simply relocated, i.e. when the same activity carried on by the subsidiary abroad had previously been
carried on in Spain by another entity, which has ceased to carry on business and has a relationship of
the type referred to in Article 42 of the Commercial Code.
Lastly, income obtained abroad through a permanent establishment will be also tax exempt provided
that the requirements previously referred are met (business activity, identical or analogous tax and
not located in a tax haven). It should be noted that the losses incurred by the establishment will be
deductible, although tax must be paid subsequently on future income up to an amount equivalent to
the losses previously deducted.
2.1.3.9 Withholdings and prepayments
Non-operating income, such as interest, rent and dividends, is subject to withholding tax at source,
as a prepayment against the final tax liability.
In addition, with certain exceptions, lessees of certain types of real estate must make withholdings of
19% of the rent paid to the related lessors.
Spanish companies are also required to make three tax prepayments (in April, October and
December of each year) based on the taxable income for the first three, nine or eleven months of the
calendar year, applying a rate equal to 5/7 of the applicable tax rate (for taxpayers taxable at the
standard rate, the prepayment would be 21%). Certain reductions, withholdings, prepayments on
account and installment payments made for the tax period shall be deducted from the resulting tax
payable.
This method is obligatory for taxpayers whose volume of business exceeds €6,010,121.04 in the 12
months prior to the date on which their tax period commences, and optional for any taxpayer that
expressly decides to follow the method.
Taxpayers whose volume of business does not exceed said amount, make the prepayments by
applying the rate of 18% to the gross tax payable (net of the related tax credits) of the last tax year
whose deadline for filing a return has elapsed.
The withholdings and prepayments can be taken as tax credits in the annual return for the
corresponding year. If the sum of such credits exceeds the final tax payable, the company is entitled
to a refund for the excess prepaid.
2.1.4 Consolidated taxation status
Spanish tax law envisages the possibility of certain corporate groups being taxed on a consolidated
basis.
Guide to business in SpainTax system31
The filing of a consolidated return has significant advantages, most notably the fact that the losses of
some group companies can be offset against the profits of others. Also, since inter-company profits
are eliminated in calculating consolidated income, the arm’s-length test being applied in the
valuation of inter-company transactions could be irrelevant12.
For tax purposes, a consolidated group consists of the resident controlling company, which must be
subject to (and not exempt from) corporate income tax, or by a permanent establishment of a non-
resident company, and those of its Spanish subsidiaries in which they have effective direct or indirect
ownership interests of at least 75%13. In order to request the application of the consolidated tax
regime, the controlling company or permanent establishment must have a direct or indirect holding
of at least 75% in the capital stock of another company on the first day of the tax period in which this
tax regime applies and said holding must be maintained throughout the tax period.
Resolutions for group companies to be taxed on a consolidated basis must be adopted by the
shareholders’ meeting (or equivalent body if they are not formed under the Commercial Code), and
the tax authorities must be notified at any time during the tax period immediately prior to that in
which the consolidated tax regime is applied. The regime will be applicable indefinitely so long as its
application is not waived.
2.1.5 Other special taxation regimes
Corporate income tax legislation contains provisions governing special taxation regimes, established
mainly as a result of the nature of the taxpayer or of the activities carried on by entities in a specific
economic sector:
2.1.5.1 Spanish and European Economic Interest Groupings (EIGs)
These entities and their shareholders are subject to the general corporate income tax rules, with
some exceptions, among others: they do not pay corporate income tax on the portion of their
taxable income attributable to shareholders resident in Spain.
The non-resident shareholders of a Spanish EIGs are taxable pursuant to the Non-Resident Income
Tax Law and pursuant to the rules contained in the tax treaties.
The non-resident shareholders of a Spanish EIGs are taxable pursuant to the Non-Resident Income
Tax Law and pursuant to the rules contained in the tax treaties.
12 In such cases, the Corporate Income Tax Regulations exempt thedocumentation obligation generally applicable to related-partytransactions, for transactions performed within the tax group.13 Law 11/2009, of October 26, regulating Listed Corporations forInvestment in the Real Estate Market, has introduced a reduction in theminimum holding of a parent company in its subsidiaries from 75% to70% for the purposes of the definition of ‘tax group’, so long as they aresubsidiaries whose shares are admitted to trading on a regulated market.The reduction will apply in tax periods beginning on or after January 1,2010.
Guide to business in SpainTax system32
2.1.5.2 Temporary Business Associations (“Uniones Temporales de Empresas” or UTEs).
These entities are taxed in the same way as EIGs. However, the foreign-source income (derived from
activities carried out abroad) of UTEs is tax-exempt (subject to application to the tax authorities).
The losses obtained by a UTE abroad are imputed to the tax bases of its members. If, in future years,
the UTE obtains income it must be included in the tax base of its members up to the limit of the
losses previously included.
2.1.5.3 Other special tax systems
Other special tax systems apply to venture capital companies and funds, industrial and regional
development companies and collective investment institutions.
Special regimes for economic sectors apply to both mining companies (with special provisions
relating mainly to accelerated depreciation of certain assets and reductions in the tax base due to
the applicability, subject to certain requirements, of the depletion factor), companies engaging in oil
and gas research and exploitation activities (which, although subject to tax at a higher rate—35%—
may reduce, with certain limitations, their tax base by applying the depletion factor and are subject
to special depreciation and loss carryforward provisions, etc.) and to shipping entities on the basis of
tonnage.
A special tax regime also applies to SOCIMIs. SOCIMIs are corporations whose main purpose is the
acquisition and development of urban real estate for leasing purposes, including building
refurbishment and holding shares in certain entities. As mentioned earlier the tax rate applicable to
entities of this type is 19%.
2.1.6 Foreign-securities holding entities
Current legislation of the regime governing foreign-securities holding entities (in Spanish, ETVE)
underlines the same as one of the most competitive in the European Union.
The main features of this special regime are summarized below:
2.1.6.1 Corporate purpose and application of the regime
It is sufficient to notify the decision to apply the regime to the Ministry of Economy and Finance (no
permission has to be granted by the authorities).
The securities or interests representing the holding in the capital of the foreign-securities holding
entities must be registered securities or interests. This special regime is not available for listed
companies.
Regarding the corporate purpose of the ETVE, it is sufficient for the corporate purpose to include the
management and administration of securities representing the equity of entities not resident in
Spanish territory, by means of the appropriate organization of material and personal resources.
Moreover, an ETVE may be a member of a consolidated tax group, if it meets the relevant
Guide to business in SpainTax system33
requirements, although this regime is not applicable to Spanish or European Interest Groupings and
Temporary Business Associations, and entities which have as their principal activity the management
of movable or immovable assets under certain conditions.
2.1.6.2 Treatment of the income obtained by the ETVE from holdings in non-resident entities
Firstly, the dividends or shares in the profits of entities not resident in Spain, and income deriving
from the transfer of the holding, are exempt subject to the requirements and conditions provided for
under the exemption method to avoid international double taxation.
Secondly, a minimum holding of at least 5% must be owned in the non-resident entity to apply the
aforementioned method. For the purpose of applying the exemption provided for in the ETVE regime,
the minimum holding requirement is deemed to be met if the acquisition value of the holding is over
€6 million. Holdings of less than 5% may be held in second and subsequent level subsidiaries (when
the €6 million requisite is maintained), if these subsidiaries meet the conditions referred to in Article
42 of the Commercial Code for forming part of the same group of companies as the first-level foreign
entity and file consolidated financial statements.
The above notwithstanding, when the holding in the non-resident entity had been valued in
accordance with the rules pertaining to the neutral tax regime, and the application of these rules,
even in a previous transfer, had resulted in the non-inclusion of income in the tax base for corporate
income tax, personal income tax or non-resident income tax, deriving from the transfer of the
holding in an entity resident in Spain, the exemption will apply only to the income relating to the
positive difference between the transfer value and the normal market value of the holding in the
non-resident entity at the time of acquisition by the transferring entity. The rest of the income
obtained on the transfer will be included in the tax base for the period.
2.1.6.3 Treatment of income distributed by the ETVE
If the recipient of the income is an entity subject to Spanish corporate income tax, the income
received will entitle the recipient to the tax credit for domestic double taxation.
In case the recipient is an individual subject to Spanish personal income tax, the income distributed
will be considered general income and he may apply the tax credit for taxes paid abroad on the
terms provided for in personal income tax legislation.
Finally, when the recipient is an individual or entity not resident in Spain, the profits distributed will
not be deemed to have been obtained in Spain and, in this respect, the first distribution of profits will
be deemed to derive from exempt income. In this sense, the distribution of additional paid-in capital
is to be treated in the same way as the distribution of income.
2.1.6.4 Treatment of the capital gains obtained on the transfer of the holdings in the ETVE
When the shareholder is an entity subject to Spanish corporate income tax, it may apply the
exemption to avoid double international taxation described above in respect of the part of the
income relating to holdings in non-resident entities that meet the relevant requirements, and the tax
Guide to business in SpainTax system34
credit for domestic double taxation of capital gains in respect of the corresponding portion of the
income obtained, on the terms provided for in the legislation governing the tax credit for domestic
double taxation.
When the shareholder is a person or entity not resident in Spain, the income relating to the reserves
allocated with a charge to the exempt income or to the value differences imputable to the holdings
in non-resident entities which fulfill the requirements to apply the exemption to foreign source
income, will not be deemed to have been obtained in Spain.
No special rules have been introduced for individual resident shareholders, who will be subject to
personal income tax legislation.
2.1.7 Neutral tax regime for restructuring operations
In order to facilitate corporate reorganizations (mergers, spin-offs, contributions of assets, and
exchanges of securities and transfers of registered office of a European company or a European
cooperative society from one EU Member State to another) , the Spanish tax system provides for a
well-established special regime based on the principles of non-intervention by the tax authorities and
tax neutrality, which guarantees the deferral of or exemption from taxation, as appropriate, in
respect of both direct and indirect taxation, for taxpayers carrying out such operations, along the
same lines as the rest of the EU Member States.
According to such regime, in the case of mergers, the absorbing company can deduct for tax
purposes up to a limit of a 5% annually, under certain circumstances14, the amount of the difference
between the acquisition cost of a holding above the 5% and its underlying book value that cannot be
allocated to the assets and rights acquired, in conformity with the rules for preparing consolidated
financial statements.
In this respect, the taxpayer, in the tax periods in which it is going to benefit from this tax measure,
should file to the tax authorities the following information jointly with its corporate income tax
return:
a) Identifying details of the transferor and of the percentage holding owned in it.
b) Value and date of acquisition of the holdings in the transferor, as well as their underlying book
value, determined on the basis of standardized financial statements.
c) Support for the following:
• Explanation of the rules on standardization of valuation and timing as well as for the
attribution to the assets and rights of the transferor of the difference existing between the
14 The difference allocated to assets and rights will be amortizable for taxpurposes if the same requirements are met.
Guide to business in SpainTax system35
acquisition cost and underlying book value of its holdings on the date of dissolution of that
entity;
• That the holding has not been acquired from persons or entities not resident in Spain or from
individuals resident in Spain, or from a related entity if the related entity, in turn, acquired the
holding from those persons or entities. It shall be deemed that this requirement has been
satisfied where the amount of the difference between the acquisition cost of a holding above
the 5% and its underlying book value that cannot be allocated to the assets and rights
acquired, has been taxed either in Spain or another EU Member State, under any transfer of
the holding;
• That the transferee is not, in relation to the transferor, in any of the situations provided for in
Article 42 of the Spanish Commercial Code.
2.1.8 Tax incentives for small and medium-sized enterprises
Enterprises whose net sales in the immediately preceding tax period (or in the current period in the
case of newly-incorporated enterprises) amount to less than €8 million qualify for certain tax
incentives. If the enterprise belongs to a group of companies within the meaning of Article 42 of the
Commercial Code, the net sales figure will be calculated for the group as a whole. The incentives can
summarized as follows:
• Accelerated depreciation of their tangible fixed assets up to certain limits, provided that certain
job creation requirements are met.
This possibility is inconsistent with the tax credit for reinvestment of extraordinary income.
• Accelerated depreciation of new fixed assets whose unit value does not exceed €601.01 (up to an
aggregate limit of €12,020.24), without having recorded it for accounting purposes.
• Entitlement to increase by 2 the maximum depreciation rates permitted per the official
depreciation tables (without having recorded it for accounting purposes) for new tangible fixed
assets and intangible assets (except, amongst others, goodwill and trademarks, which can be
depreciated by multiplying by 1.5 the maximum depreciation rates permitted per the official
depreciation tables).
• Ability to record provisions for bad debts based on 1% of the balance of their accounts receivable at
the end of the tax period.
• The tax rate for these enterprises is 25%, applicable to the first €120,202.41 of taxable income.
Any taxable income above that amount is taxed at 30%.
With effect in tax periods beginning in the course of 2009, 2010 and 2011, the tax rate applicable
to small and medium-sized enterprises is reduced (from 25% to 20% if their taxable income is
between €0 and €120,202.41, and from 30% to 25% in the case of taxable income above
€120,202.41) if the following requirements are met:
Guide to business in SpainTax system36
— Net revenues must be below €5 million.
— The average labor force must be smaller than 25 employees (regard will be had to the persons
employed, pursuant to employment and labor legislation, taking into account the number of
working hours engaged compared with full-time work).
— Jobs must be maintained or created by them.
To qualify for the reduced tax rate, in the twelve months following the beginning of each of the tax
periods in question, the enterprise’s average labor force must not be less than one or smaller than
the average labor force in the twelve months before the beginning of the first tax period starting
on or after January 1, 2009.
• Deduction of 9% of the volume of period investments and expenses aimed at improving access
through the Internet and at improving internal processes through the use of information and
communications technologies has been introduced.
2.1.9 Formal requirements
The tax period is the company’s business year, and its financial statements and accounting records
are the basic documentation to support its annual tax return.
The returns must be filed and the tax paid within 25 days following the six months after the end of
the business year.
2.2 Personal income tax
This tax, which is one of the pillars of Spain’s tax system, is currently governed by Law 35/2006, of
November 28, on Personal Income Tax, and by Royal Decree 439/2007, of March 30, 2007,
approving the Personal Income Tax Regulations.
As discussed below, the taxation of non-resident individuals is regulated in a separate law (the
Revised Non-Resident Income Tax Law).
2.2.1 Persons subject to the tax
The following persons are subject to personal income tax:
�• Individuals habitually resident in Spanish territory.
�• Individuals of Spanish nationality who are habitually resident abroad and fulfill any of the
conditions laid down in the Law (e.g. diplomatic and consular services, etc.). Moreover, any
Spanish national who establishes his residence for tax purposes in a tax haven will remain subject
to personal income tax (this rule will apply in the year in which residence is changed and for the
following four years).
A taxpayer is deemed to be habitually resident in Spanish territory if any one of the following
conditions is met:
Guide to business in SpainTax system37
�• The taxpayer is physically present in Spanish territory for more than 183 days in the calendar year.
Sporadic absences are included in determining the length of time a taxpayer is present in Spanish
territory, unless tax residence in another country is proved. In the case of territories designated in
the regulations as tax havens, the authorities may require the taxpayer to prove that he was
present in the territory in question for 183 days in the calendar year (excluding absences due to
cultural or humanitarian cooperation, for no consideration, with the Spanish authorities).
�• The main center or base of the taxpayer’s activities or economic interests is in Spain, either directly
or indirectly.
In the absence of proof to the contrary, an individual is presumed to be resident in Spain if his/her
spouse/husband (from whom he/she is not legally separated) and dependent under-age children
are habitually resident in Spain.
Individuals who are payers of non-resident income tax and are resident in a Member State of the
European Union may elect to be taxed under Spanish personal income tax if they demonstrate
that their habitual domicile or residence is in another EU Member State and that at least 75% of
their total income during the year was obtained as salary income or business income in Spain.
Finally, it should be borne in mind the existing regime by virtue of which non-resident individuals
who are seconded to Spain due to labor reasons, and become tax resident in Spain, can elect to
be taxed in Spain as non-residents, when certain requirements are met, during the year in which
residence is changed and for the following five tax periods (See heading 2.3.3 in this Chapter).
2.2.2 Taxable event
Taxpayers subject to personal income tax are taxed on their entire worldwide income, including the
income of foreign entities in certain circumstances (international fiscal transparency system), unless
the non-resident entity is resident of a EU Member State in a manner similar to that described above
for corporate income tax, and capital gains (and losses) in the calendar year, net of the necessary
expenses (as defined in the Law) incurred to obtain such income.
2.2.3 Taxation system and taxpayer
The possibility of being taxed individually or jointly (as a family unit) is regulated. However, there is
only one tariff but divided in two parts: the general one and the Autonomous Community one.
2.2.4 General structure of the tax
The Law distinguishes a general tax base and a savings tax base.
The general base is the result of adding the following two balances:
a) The balance resulting from adding and offsetting against each other, without limit, the following
income and attributions of income:
• Salary income.
Guide to business in SpainTax system38
� • Income from real estate.
• Income from movable capital derived from the assignment of own funds to entities related to
the taxpayer. This rule does not apply (in which case such income must be included as savings
income) where:
— they are entities of the kind provided for in Article 1.2 of Legislative Royal Decree
1298/1996, of June 28, Adapting the Law Currently in Force on Credit Institutions to the
Law of the European Communities, provided that such income does not differ from the
income that would have been offered to groups similar to the persons related to such
institutions;
— the amount of own funds assigned to a related entity does not exceed the result
multiplying equity by three, to the extent that it relates to the taxpayer’s interest in the
related entity.
• Other income form movable capital which is not considered savings income, such as that
derived from the assignment of the right to use the image, that from intellectual property
when the taxpayer is not the author and that from industrial property which is not attached to
business activities performed by the taxpayer.
• Income from business activities.
• Imputation of income from real estate.
• Imputation of income from entities under the international fiscal transparency system.
• Imputation of income from assignment of rights of publicity.
• Changes in the value of units in collective investment undertakings established in tax havens.
b) The positive balance resulting from adding and offsetting against each other, exclusively, capital
gains and losses which are not considered savings income (i.e. those not derived from the transfer
of assets). If its balance is negative, it may be offset against 25% of the positive balance, if any, of
income and attributions. The rest of the negative balance will be offset in the following four years
with the same setoff rules, the legislation establishing an express mandate for the setoff to be
made of the maximum amount that the rules allow.
The savings tax base is formed by the positive balance resulting from adding the following balances:
a) On the one hand, the positive balance resulting from adding and offsetting against each other,
exclusively, the following income:
• Income derived from an entity due to the status of partner, shareholder, associate or
stakeholder.
Guide to business in SpainTax system39
• Income from movable capital derived from the assignment of own funds to third entities not
related to the taxpayer or derived from related entities that meet the requirements in order
not to be included as general income (indicated in the previous section).
• The monetary return or payment in kind on capitalization transactions and life or disability
insurance contracts.
If the inclusion and setoff of such income against each other leads to a negative result, this
amount may only be offset against the positive balance of this income which is obtained in the
following four years, and only the maximum limit allowed by the law may be offset.
b) On the other hand, only the capital gains and losses which are classified as savings income will be
included and offset against each other. If such result is negative, it may only be offset against
positive balances of this type of income which are shown in the following four years, and only the
maximum limit allowed by the law may be offset.
2.2.5 Exempt income
Noteworthy among the exemptions is that relating to salary income for work performed abroad. This
exemption will apply to salary income accrued during the days spent by the employee abroad up to a
limit of €60,100 per year, if certain requirements are met:
�• Salary income has to be paid in respect of work effectively performed abroad. Namely, the
taxpayer must be rendering services physically abroad.
�• In the case of services rendered by related entities to each other, an advantage or benefit occurs or
may occur for the recipient.
�• The recipient of the services must be either a non-Spanish-resident entity or a permanent
establishment situated abroad of a Spanish resident company.
�• A tax identical or similar to the Spanish personal income tax must exist in the other country, and
such country must not be a territory classified as a tax haven. This requirement will be deemed to
be met when in that territory a Convention for the Avoidance of Double Taxation with an exchange
of information clause with Spain is applied.
The exempt income received for work performed abroad must be calculated (i) by reference to the
number of days that the worker actually spent abroad and the specific income relating to the services
provided outside the country; and (ii) to calculate the daily amount earned for the work performed
abroad a proportional distribution method must be used, by reference to the total number of days in
the year, aside from the specific income relating to the jobs concerned.
This exemption is incompatible with the regime established for non-taxable excess allowances (i.e.
exempt per diems for travel), but not with the regime established for ordinary travel,
accommodation and meal allowances (not subject to tax).
Guide to business in SpainTax system40
Furthermore, an exemption is envisaged for capital gains arising on the transfer of the taxpayer’s
principal residence, where the total amount is reinvested in the acquisition of a new principal
residence within two years following the transfer date, under certain conditions15.
2.2.6 Salary income
�• Imputation of salary income:
When the salary income has been generated over a period exceeding two years and, at the same
time, the requirement that it has not been obtained on a periodic or recurring basis is met, or
when the income is classified by regulations as irregular, only 60%16 of this income will be
imputed.
The reduction is extended in certain circumstances for certain types of income.
If the income arises from the exercise by employees of stock options, the amount of the income to
which the 40% reduction applies cannot exceed the result of multiplying the annual average
salary of the aggregate of personal income taxpayers (€22,100) by the number of years during
which the income is generated. For these purposes, in the case of income obtained at particularly
irregular time intervals, the applicable time period will be five years.
The limit mentioned in the previous paragraph will be multiplied by two in certain circumstances.
�• The main permitted deductions from gross salary income to determine net salary income are
social security contributions.
�• Once the net salary income has been calculated, the following reductions will be applied:
� — A total of 2,652 euros in general.
� — For net income equal to or less than 9,180 euros, the reduction will amount to 4,080 euros
annually.
� — For net income between 9,180.01 and 13,260 euros, the reduction will amount to 4,080 euros
less the result of multiplying by 0.35 the difference between the income obtained and 9,180
euros.
The above-mentioned reductions will be increased by 100% in the case of:
� — Active workers over 65 years who continue or prolong their labor activity (under the conditions
which may be established by regulations).
15 In cases in which a new home is acquired prior to the transfer of theprincipal residence and such acquisition took place in the 2006, 2007 or2008 fiscal years, the two-year term established for transferring theprincipal residence will be extended to December 31, 2010.16 At present, the Sustainable Economy Law (currently at the PreliminaryBill stage) is undergoing passage through the Spanish Parliament andseeks to impose a cap on the 40% reduction (currently set at €600,000).
Guide to business in SpainTax system41
� — Unemployed persons registered in the Employment Office who accept a job which requires a
change of their habitual residence to another municipality. This increase will be applied in the
tax period in which the change of residence takes place or in the following period (under the
conditions which may be established by regulations).
In addition, persons with disabilities may reduce their net income by 3,264 euros annually (if they
obtain salary income as active workers); this reduction will be 7,242 euros when the need for the
assistance of third parties is proven or in the case of persons with reduced mobility or with a degree
of disability equal to or greater than 65%.
The foregoing reductions are also applicable in the case of income from business activities, where the
following requirements are met:
— The income must be determined under the direct-estimate method.
— All supplies of goods or services must be made to one unrelated party.
— The deductible expenses must not exceed 30% of the entire amount of reported income.
— Certain formal and reporting requirements must be fulfilled.
— No salary income must be received (unemployment benefit does not count for these purposes).
— At least 70% of the revenues must be subject to tax withholdings or prepayments.
— The taxpayer must not carry out any business activity through pass-through entities.
These reductions cannot result in a negative figure for the net salary income and income from the
business activity.
�• The main features relating to compensation in kind are as follows:
— The valuation of salary income in kind paid by companies which have as their habitual activity
the performance of activities which give rise to such income, may not be less than retail price of
the goods, right or service in question, ordinary or common discounts being deducted (that
discount may not exceed either 15% or 1,000 euros annually).
� — The compensation in kind consisting of the use of company vehicles is valued annually at 20%
of the vehicle’s acquisition cost for the payer (weighted by the percentage of private use of the
vehicle). In the case of vehicles under lease, rental or similar arrangements, the 20% rate will
apply to the value of the vehicle as if it were new. The result will be weighted according to the
percentage of the vehicle’s private use.
� — Compensation in kind relating to the use of housing owned or leased by the employer is
limited to 10% of the cadastral value (5% if the cadastral value has been updated), subject to a
ceiling of 10% of the other salary income. Where there is no cadastral value or the value has
not been notified, the value of the compensation will be 5% of 50% of the value for wealth tax
(wealth tax) purposes (acquisition cost or value verified by the tax authorities for the purposes
of other taxes).
� — The portion of shares or other ownership interests not exceeding €12,000 awarded annually to
all employees free of charge or at lower-than-market value, will not be considered to be
compensation in kind, provided that certain requirements are met.
� Certain reporting requirements are established (notification to the CNMV where the shares are
traded on a stock exchange) in the case of shares or stock options awarded to executives and
directors. In addition, in cases where a company acquires treasury stock for this purpose, the
resolution of the shareholders‘ meeting must include authorization for the acquisition as well
as other particulars.
�• Entities resident in Spanish territory must withhold tax from salary income paid to their
employees, regardless of whether the payer of the income is the entity itself or another related
resident or non-resident entity.
2.2.7 Rental income
For the calculation of the net income all the expenses necessary to obtain it can be deducted. The
financial expenses and repair and maintenance expenses that can be deducted may not exceed the
gross income generated by each property (i.e. such expenses must be calculated property by
property, and may not give rise to negative income per property). However, the excess may be
deducted under identical conditions in the following four years.
The rest of the expenses may give rise to negative net income from immovable property.
In cases of leases of residential properties, a 50%17 reduction will apply to the net income (i.e. gross
income less depreciation and amortization, non-State taxes and surcharges, etc.), (the reduction is
applied irrespective of whether the net income is positive or negative).
The reduction is increased to 100% for cases in which the lessees are aged between 18 and 3518 and
have certain net salary income or income from business activities in the tax period exceeding the
public indicator of income for multiple purposes (in other words, €532.21 per month for 2010).
In addition, if the income was generated over a period exceeding two years, or if it was obtained at
irregular time intervals, a 40% reduction will apply.
2.2.8 Taxation of savings income
Effective January 1, 2010, savings income will be taxed as follows:
• 19%, applicable to the first €6,00019 of the net savings tax base.
Guide to business in SpainTax system42
17 The Sustainable Economy Preliminary Bill increases the rate of reductionto 60%.18 The Sustainable Economy Preliminary Bill lowers the age to 30.19 This amount will be calculated by aggregating all items of savingsincome.
Guide to business in SpainTax system43
• 21%, thereafter.
The following types of income (called under the Law “other income from movable capital”) can
benefit from a 40% reduction if they are generated over more than two years or are classified by
regulations as clearly irregular: (i) That derived from intellectual property, when the taxpayer is not
the author, (ii) That derived from industrial property not used for business activities, (iii) That derived
from the lease of furniture, businesses or mines or from the sublease of such assets (received by the
sublessor) which are not business activities, and (iv) that derived from the assignment of the right to
exploit an image or from the consent or authorization for the use thereof, when the aforementioned
assignment does not take place in the course of a business activity.
In relation to the income derived from a stake in the equity of entities, there is an exemption limited
to 1,500 euros applicable to dividends, premiums for attendance at shareholders’ meetings, share in
profits of any kind of entity (the discrimination of foreign-source dividends being therefore
eliminated) as well as the income derived from any kind of assets, except the transfer of bonus
shares, which confer a right (under the bylaws or by decision of the corporate bodies) to share in
profits, sales, operations, income or similar items of an entity for a reason other than the
remuneration of employment. However, this exemption will not apply to dividends and profits
distributed or derived from: (i) Collective Investment Institutions, (ii) Securities or shares acquired
within two months before the date on which they have been paid when, after this date, within the
same period, a transfer of homogenous securities occurs.
With respect to capital gains and losses the following aspects shall be considered:
�• Valuation and tax rate
� A capital gain or loss on a transfer, whether for valuable consideration or for no consideration, is
valued as the difference between the acquisition and transfer values (as legally defined) of the
items transferred.
� All gains and losses which are derived from the transfer of assets will be included in the savings tax
base at a rate of 19% for the first €6,000 and 21% thereafter. All other capital gains and losses
will be included in the general tax base being taxed according to the general Personal Income Tax
scale.
�• Adjustment rates
The Law does not envisage the use of adjustment rates except for real estate. The adjustment
rates are aimed at correcting for inflation and were applied to the acquisition cost of the
transferred real estate and to the related depreciation.
�• Capital gains derived from assets acquired before December 31, 1994
� — There is a transitional regime applicable to assets acquired before December 31, 1994, which
although involves the disappearance of the so-called “diminishing coefficients”, consolidates
the reduction applicable to the capital gains generated up to a certain date, the transfer of
which occurs after that date.
� — In general terms, the gain must be calculated as follows:
– First of all, the amount of the capital gain will be calculated by applying the rules to
determine the gains in force in the year of the transfer.
– Of that amount a distinction must be drawn between the portion of the gain generated
before January 20, 2006 (i.e. up to May 19, inclusive), meaning the proportion which
corresponds to the number of days which have elapsed between the date of acquisition and
January 19, 2006 in relation to the total number of days which the asset has been owned by
the taxpayer.
� — The portion of the gain generated before January 20, 2006 will be reduced by application of
the diminishing rates (if these are applicable, i.e. for the assets acquired before December 31,
1994):
– In the case of real estate or of real estate companies, the gain will be reduced by 11.11% for
each year that has elapsed from the acquisition of the asset until December 31, 1994. The
gain will not be subject to tax in the case of real estate acquired before December 31, 1985.
– In the case of shares traded on secondary markets except for securities investment
companies and real estate investment companies, the reduction will be of 25%.
Consequently, the capital gains derived from assets acquired before December 31, 1991, are
not taxed. The application of this percentage extends to securities which are traded on
secondary markets defined in Directive 2004/39/EC.
– In all other cases the reduction will be 14.28%. Consequently, the gain derived from assets
acquired before December 31, 1988 will not be taxed.
– A special rule is established applicable to securities traded on any of the regulated markets
and to shares in collective investment institutions.
– The rest of the gain, i.e. that which is deemed to be generated after January 20, 2006
(inclusive) will be taxed in full (without prejudice to the application, in the case of real estate,
of the revision coefficients to correct inflation, in the determination of the price or cost of
acquisition).
�• Capital gains on the transfer for no consideration of a family business and on the transfer of units
or shares in collective investment institutions.
Capital gains on the transfer for no consideration of a family business are tax exempt provided
that the assets used by the taxpayer in the business activity after its acquisition had been so
deployed for at least five years prior to the transfer date. For this exemption to apply the following
requirements shall be met: (I) the transferor must be at least 65 years old or suffer from absolute
Guide to business in SpainTax system44
permanent disability or comprehensive disability; (II) if the transferor was performing
management functions in relation to the family business he must relinquish such functions and
not be remunerated after the transfer takes place, (III) the recipient must keep the assets received
for at least 10 years as from the date of the public deed documenting the transaction, and he
must not carry out acts or transactions which could lead to a significant decrease in the acquisition
value of the business received.
In addition, capital gains obtained on the transfer of units or shares in collective investment
institutions (investment funds) will not be included provided that the amount obtained is
reinvested in assets of a similar nature. In case of capital gains obtained on the transfer of units or
shares in collective investment institutions (SICAVs), said capital gains will not be included if, in the
year prior to the transfer, the transferor’s ownership interest in the collective investment institution
has at no time exceeded 5%, and if the number of the entity’s shareholders exceeds 500. In both
cases, the new shares or units subscribed will maintain the value and the acquisition date of the
shares or units transferred.
In addition, there are setoff rules applicable to losses pending setoff on January 1, 2007.
2.2.9 Net tax base
The general net tax base will be the result of applying the reductions for situations of dependence
and old age and for contributions to social provision systems, including those established for persons
with disabilities, contributions to protected estates of persons with disabilities and reductions for
compensatory pensions. The application of the above-mentioned reductions may not generate a
negative general net tax base.
Notable among these reductions are contributions to pension funds. In applying this reduction, a
number of limits must be respected:
The overall maximum amount of the employer’s contributions to pension funds is €10,000, in
general, although this limit increases to €12,500 for employees aged over 50.
There is also an overall annual limit on reductions in the general component of taxable income (the
lower of (i) 30% of the sum of net earned income and net income from business activities, with the
possibility of a 50% increase for employees aged over 50; and (ii) €10,000, or €12,500 for
employees aged over 5020) for contributions to the following pension funds (company’s own fund or,
where possible, a third-party fund):
(i) Individual or group pension plans (in the latter case, the employer’s contributions to the
pension plan must be reported for tax purposes), including plans regulated by Directive
2003/41/EC.
Guide to business in SpainTax system45
20 The limits on annual contributions, qualifying for reductions, to pensionsystems arranged for persons with disabilities are €24,250 forcontributions by the participant with disabilities and €10,000 forcontributions by relatives or guardians, subject to the overall limit of€24,250 for all contributors, including the person with disabilities.
(ii) Mutual benefit funds (employer’s contributions must be reported for tax purposes).
(iii) Group insurance plans (employer’s contributions must also be reported for tax purposes).
(iv) Insured pension plans.
(v) Private insurance policies covering solely the risk of severe dependence or major dependence.
The reductions will also benefit persons who are related to the taxpayer by kinship, guardianship or
fosterage and make contributions to the insurance policies.
Premiums paid in this new product category must fulfill the same requirements applicable to
contingencies covered, interest guaranteed and actuarial methods employed in insured pension
plans, in order to qualify for a reduction.
Additionally, the total reductions applied by all the persons that pay premiums in favor of the same
taxpayer (including the premiums paid by the taxpayer) may not exceed €10,000 per annum. These
premiums are not subject to inheritance or gift tax.
Where the general component of taxable income is insufficient to apply the reduction or the above-
mentioned limit (30%-50%) is reached, the amount in question may be applied for five years
following the year in which the contribution is made.
This rule does not extend to cases in which the total contributions to pension plans exceed the
amount stipulated in the legislation governing pension plans and funds, or to cases in which the
overall maximum contributions limit provided by the “financial” stipulations of the Law on Pension
Plans and Funds is exceeded.
Contributions to pension plans in which the taxpayer’s spouse is the participant or member may also
qualify for a reduction provided that the spouse does not obtain earned income or income from
business activities, or where such income is lower than €8,000 per annum. The maximum reduction
limit is €2,000 and the contribution is not subject to inheritance or gift tax.
Reductions may be applied to taxable income irrespective of the form of the benefit, i.e. lump sum or
annuity (for contributions made as from January 1, 2007, lump sum benefits no longer qualify for the
40% reduction applicable under the Law in force to December 31, 2006).
The savings net tax base will be the result of deducting from the savings tax base the remainder (not
applied to reduce the general tax base), if any, of the reduction for compensatory pensions, but such
operation may not lead to a negative savings net tax base.
2.2.10 Reductions in the net tax base to adapt the tax to the personal and family situation of thetaxpayer
There are certain reductions which will be used first to reduce the general net tax base without
making it negative, while any remainder will be used to reduce the savings net tax base. The main
applicable reductions are:
Guide to business in SpainTax system46
�• The taxpayer’s personal allowance: 5,050 euros annually which will be increased by 918 euros
annually for persons over 65 years and by 1,122 euros for persons over 75 years.
�• Allowance for descendants: for each unmarried descendant aged under 25, or descendant with
disabilities regardless of age, or person under a guardianship or foster care arrangement living
with the taxpayer and not obtaining annual income above €8,000, the taxpayer will be entitled
to a reduction of €1,836 for the first, €2,040 for the second, €3,672 for the third and €4,182 for
the fourth and subsequent of these. Where the descendant is aged under 3 the foregoing
amounts will be increased by €2,244 annually.
The family reductions will not apply if the taxpayers generating entitlement to these amounts file
personal income tax returns obtaining income exceeding 1,800 euros or an application for a
refund.
�• Allowance for ascendants: 918 euros for each ascendant over 65 years or a person with disabilities
who lives with the taxpayer (or dependent boarders) who does not obtain income exceeding
8,000 euros. For ascendants over 75 years it is increased by 1,122 euros.
�• Allowance for disability: (i) Of the taxpayer: in general, 2,316 euros annually, although it will be
7,038 euros annually for persons who prove they have a disability equal to or greater than 65%
(there will be an increase of 2,316 euros annually for assistance, if the need for assistance from
third parties, or the existence of limited mobility or a disability of at least 65% is proven); (ii) Of
ascendants or descendants: for those that confer a right to the above-mentioned allowances, a
reduction of 2,316 euros per person and year, although it will be 7,038 euros annually for persons
who prove they have a disability equal to or greater than 65% and an increase of 2,316 euros
annually for assistance, if the need for assistance of third parties, limited mobility or a disability of
at least 65% is proven.
�• For family units formed by spouses who are not separated and, where relevant, underage children
or persons with disabilities, before the application of the personal and family allowances, a
reduction will be made of 3,400 euros which will be applied, first of all, to the regular net tax base
(which may not be negative) and subsequently, if there is a surplus, to the savings net tax base.
This prior reduction will be 2,150 euros for single-parent family units, except in cases of living with
the father or mother of one of the children that form part of the family unit.
2.2.11 Determination of the gross tax payable: tax rates
For the calculation of the (national and regional) gross tax payable for the general net tax base
which exceeds the amount of the personal and family allowances, a general tax scale and an
Autonomous Community tax scale are established. The marginal rate is 43%.
Law 21/2001, on the tax and administrative measures under the financing system of common
regime Autonomous Communities and cities with a statute of autonomy, includes, among the taxes
transferred, personal income tax, and grants the Autonomous Communities regulatory powers over
the taxes transferred.
Guide to business in SpainTax system47
The taxpayer’s place of habitual residence determines the Autonomous Community in which income
is deemed to be obtained for personal income tax purposes. The Law also lays down specific rules to
prevent tax-motivated changes of residence. Where an Autonomous Community has not approved
tax tables or where tax powers have not been devolved to it, the Autonomous Community tax table
below will apply (the general tax table will also apply in all cases).
As stated above, the tax scales do not vary on the basis of the type of return (joint or separate)
chosen by the taxpayer. Consequently, the only tax scales are those below (for year 2010):
Guide to business in SpainTax system48
General Table Autonomous Community Table
Tax base up to
(Euros)
Gross tax payable
(Euros)
Remainder of tax base
up to (Euros)
Applicable
rate (%)
Tax base up to
(Euros)
Gross tax payable
(Euros)
Remainder of tax base
up to (Euros)
Applicable
rate (%)
0.0017,707.20
33,007.2053,407.20
0.002,772.955,568.26
10,492.82
17,707.2015,30020,400
and above
15.6618.2724.1427.13
0.0017,707.20
33,007.2053,407.20
0.001,476.78
2,965.475,588.91
17,707.2015,30020,400
and above
8.349.73
12.8615.87
Table 2
TAX SCALES
The maximum applicable rate is 43% (27.13% plus 15.87%).
For the calculation of the tax payable for the general base, referred to above, the following procedure
will be followed:
�• First the scale will be applied to the general net tax base without taking into account the personal
and family allowances.
�• The sum derived from applying the same scale to the personal and family allowances will be
deducted from the resulting amount (thus, it is intended to tax the allowances progressively at the
zero rate and, therefore, that the saving is generated at the minimum rates instead of the current
system under which the reductions to the base involve savings at the marginal rates applicable).
The tax payable thus obtained divided by the general net tax base will determine the average rate of
general taxation.
Any net savings tax base not corresponding to the remainder of the personal and family allowances will
be taxed at a flat rate of 11.72% for the first €6,000 and at 12.95% thereafter in the case of the national
component of the tax, and at 7.28% for the first €6,000 and 8.051% thereafter in the case of the
regional component of the tax; in other words, it will be taxed at a combined rate of 19% and 21%,
respectively .
The sum of the amounts resulting from applying the national and regional tax rates to the general tax
base and to the savings tax base as described will determine the national and regional gross tax
payable respectively.
2.2.12 Net tax payable and final tax payable: Tax credits
a) The national net tax payable will be the result of deducting from the national gross tax payable (i)
the national tax credits for investment in the habitual dwelling; (ii) 50% of the tax credits for
business activities, donations (25% of the amounts donate to certain institutions), income
obtained in Ceuta and Melilla, measures for the protection and dissemination of the Spanish
Heritage (and of the cities, collections and properties declared World Heritage. A 15% tax credit on
the investments and expenses made in relation to such assets). Company savings account and the
tax credit for renting the habitual dwelling; on the other hand, the regional net tax payable will be
the result of deducting from the regional gross tax payable in the regional tranche the tax credit
for investment in a habitual dwelling and 50% of the rest of the above-mentioned tax credits, as
well as the tax credits which may be established by the Autonomous Community in question
exercising its powers, but the (national and regional) net tax payable may not be negative.
�• Tax credit for investments in the habitual dwelling21
A credit of 15% of the amount invested in acquiring or refurbishing the taxpayer’s habitual abode
is granted; the percentage is applied to the investment made, the purchase expenses and the
interest and expenses paid on debt, and the amounts deposited in home-purchase saving
accounts and used for the acquisition of the habitual abode.
In cases of annulment of a marriage, divorce or judicial separation, the taxpayer can continue
applying the tax credit for a habitual dwelling, for the amounts paid in the tax period for the
acquisition of what was his habitual dwelling while the marriage existed, provided that it continues
to be the habitual dwelling of the common children and the parent in whose company they remain.
The maximum base for the tax credit under this heading is €9,015.
Amounts deposited in home-purchase saving accounts only qualify for the tax credit if they are
used to purchase the habitual abode within a four21 year-period since the date on which the
home-purchase saving account was opened by the taxpayer.
Guide to business in SpainTax system49
20 At present, the Sustainable Economy Law (currently at the PreliminaryBill stage) is undergoing passage through the Spanish Parliament. ThisLaw modifies the tax credit for investment in the habitual dwelling bylimiting or, where appropriate, eliminating its applicability .21 Royal Decree 1975/2008, of November 28, 2008, on urgent measuresto be adopted in relation to economic, tax, employment and housingaccess matters, establishes that the balances of homebuyer savingsaccounts existing at the end of the term of 4 years and which, due to theexpiration of such term, must be used to acquire a home for the first timeor to restore the principal residence within the period running fromJanuary 1, 2008, to December 30, 2010, may be used for such purposeuntil December 31, 2010, without its entailing the loss of the right toapply the tax credit for investment in the principal residence.
A specific system for taxpayers with disabilities is established. Thus, for cases of “adaptation” or
“accessibility” works for persons with disabilities, the rate will be 20% regardless of whether or not
the works are financed.
Additionally, a transitional regime is established for taxpayers who acquired their habitual
dwelling before May 4, 1998, and who were entitled to the tax credit.
�• Tax credit for renting the habitual dwelling
A new addition to the General State Budget Law for 2008 was the grant of a tax credit equal to
10.05% of the sums paid by taxpayers in the tax period to rent their habitual dwelling, provided
that the taxpayer’s taxable income is less than €24,107.20 per year.
The maximum amount of taxable income for this tax credit will be as follows: (i) where taxable
income is equal to or less than €12,000 per year: €9,015 per year22; (ii) where taxable income is
between €12,000.0123 and €24,020 per year: €9,015 less the figure obtained by multiplying the
difference between taxable income and €12,000 per year by 0.75.
b) The final tax payable will be the result of deducting from the total net tax payable (regional plus
national) the sum of the international double taxation credits, the €400 tax credit for salary
income or income obtained from economic activities , the withholdings, payments on account
and split payments and the deductions of the underlying tax in relation to income attributed by
international fiscal transparency or due to assignment of image rights.
Effective January 1, 2010, the General State Budget Law modifies the €400 tax credit for obtaining
salary income or income from economic activities. In particular, the following credit can be taken:
— €400 per year where the taxable income is equal to or less than €8,000.
— €400 less the result of multiplying by 0.1 the difference between the taxable income and
€8,000 per year, where the taxable income is between €8,000.01 and €12,000 per year.
— Taxable incomes in excess of €12,000 per year will not qualify for the tax credit.
The final tax payable may be reduced in turn by the maternity tax credit (subject to the limit, it
should be remembered, of 1,200 euros annually).
A new addition relating to births and adoptions that took place on or after July 1, 2007 is that
taxpayers can reduce the final tax payable by an annual sum of 2,500 euros for each child born or
adopted in the tax period, provided that they satisfy any of the following conditions: (i) they must
be carrying out an activity on a self-employed basis or for an employer for which they have been
registered under the relevant social security or mutual insurance system at the time of the birth or
adoption; (ii) they must have obtained in the previous tax period income or capital gains, subject
Guide to business in SpainTax system50
22 The Sustainable Economy Preliminary Bill increases this tax credit to€9,040.23 The Sustainable Economy Preliminary Bill raises this amount to€17,707.20.
Table 3
THE BASE, RATE OF WITHHOLDING AND PREPAYMENT FOR THE MAIN TYPES OF INCOME
Income Base Rate
Salary income
General(*)
Total amount of compensationpaid
See below
Contracts lasting less than one year See below (Minimum 2%)
Special dependent employmentrelationships
Minimum 18%
Board of Directors members 35%
Courses, talks, assignment of literary,artistic or scientific works
15%
Income frommovable capital(**)
General (***) Full consideration claimable orpaid
19%
Professionalactivities
GeneralAmount of revenues orconsideration obtained
15%
Commencement of activity and subsequenttwo years
7%
to withholdings or prepayments, or income from business activities on which they have made the
relevant split payments.
The deduction will be made in the tax period in which the descendant was registered at the Civil
Registry.
2.2.13 Withholding
Payments of income from movable capital, gains on shares or units in collective investment
undertakings, salary income, etc. are subject to withholding at source which is treated as a
prepayment on account of the final tax.
Moreover, employers are obliged to make personal income tax prepayments in respect of
compensation in kind paid to their employees.
The base and rate of withholding and prepayment for the main types of income are detailed in the
table hereunder:
Guide to business in SpainTax system51
Guide to business in SpainTax system52
Table 3
THE BASE, RATE OF WITHHOLDING AND PREPAYMENT FOR THE MAIN TYPES OF INCOME
Capital gains(**)
Transfers or reimbursements of sharesand participations in collectiveinvestment schemes (****)
Amount to be included in thetax base, calculated accordingto the Personal Income TaxRegulations
19%
Cash prizes Amount of the prize 19%
(*) Effective as of January 1, 2009, a new two point reduction of the withholding rate is established (without it being able to be negative),
applicable to salary income of taxpayers who have notified the payer of their salary that a portion thereof is used to acquire or refurbish their
principal residence for which they use external financing and in respect of which they will be entitled to the tax credit for investment in the principal
residence, provided that the total amount of their expected annual income is less than €33,007.20.
(**) The establishment of a flat withholding tax/tax prepayment rate of 19% in these cases means that the tax difference between 19% and 21%
(in the case of net tax bases exceeding €6,000) must be paid over when filing the relevant tax self-assessment.
(***) The amount of the tax prepayment to be made in respect of compensation in kind is calculated by applying the 19% rate to the result of
increasing the acquisition value or the cost for the payer by 20%.
(****) In general, the withholding obligation will not exist if the transferor decides to reinvest the whole amount obtained in the sale in the
purchase of new shares or participations in collective investment schemes (deferral regime envisaged in article 94 of the Law 35/2006).
Income Base Rate
Other income(**)
Lease/sublease of urban property Amount of rent and other itemspaid to the lessor or sublessor -VAT
19%
Intellectual an industrial propertylease/sublease of movable property andbusinesses
Full amounts paid 19%
Licensing of rights of publicity Full amounts paid 24%
To calculate the withholding tax applicable to salary income, the deductible expenses and reductions
and the personal and family allowances are deducted from the total amount of such income to
obtain the taxable income. The tax scale (aggregate of State and Autonomous Community rates) is
applied to this amount to obtain the amount of withholding. The applicable withholding tax rate is
obtained by dividing the amount withheld by total income.
2.2.14 Self-assessment
Taxpayers who are required to file a personal income tax return must, when filing their returns,
calculate the related tax payable and pay it over in the place and manner and by the deadlines
determined by the Ministry of Economy and Finance. The deadline is usually June 30.
Taxpayers who are married and not legally separated, and who are obliged to file a personal income
tax return under which tax is payable, may request the suspension of their tax debt in an amount
equal to or less than the refund to which their spouse is entitled for the same tax and in the same tax
period.
To calculate the withholding tax applicable to salary income, the deductible expenses and reductions
and the personal and family allowances are deducted from the total amount of such income to
obtain the taxable income. The tax scale (aggregate of State and Autonomous Community rates) is
applied to this amount to obtain the amount of withholding. The applicable withholding tax rate is
obtained by dividing the amount withheld by total income.
2.3 Non-resident income tax
Non-resident income tax is currently governed by the Revised Non-Resident Income Tax Law,
approved by Legislative Royal Decree 5/2004, of March 5, and the Non-Resident Income Tax
Regulations approved by Royal Decree 1776/2004. Both of them establish the tax regime applicable
to non-resident individuals or entities that obtain Spanish-source income.
Taxation of non-residents is dealt with separately from taxation of resident individuals and entities.
As was mentioned before, the abovementioned law envisages that non-resident individuals who
prove that they are habitually resident in another EU country and that they have obtained in Spain
salary income and income from business activities which amounts to at least 75% of their worldwide
income, may opt to be taxed as resident individuals.
The key factor in determining the tax regime for non-residents is whether or not they have a
permanent establishment in Spain. This factor determines the following two ways in which non-
residents may be subject to taxation:
2.3.1 Income obtained through a permanent establishment
Non-resident individuals or entities that obtain income through a permanent establishment located
in Spain will be taxed on the total income attributable to said establishment, regardless of the place
where it was obtained or produced.
The concept of permanent establishment in Spanish law is in line with the OECD Model Tax
Convention. In the case of a foreign entity or individual resident in a country with which Spain has a
tax treaty, the treaty provisions and, specifically, the exceptions to the definition of permanent
establishment, will govern the existence of a permanent establishment in Spain.
In general terms, permanent establishments in Spain are taxed on their net income at the same rate
as Spanish companies (in general, 30%). Non-resident entities or individuals operating through a
permanent establishment in Spain are required to withhold taxes or make tax prepayments on the
same terms as resident individuals or entities (i.e. on salary income paid, income from movable
capital satisfied, etc.).
There is a 19% tax (branch profit tax) on the remitted profits of non-residents doing business through
a permanent establishment in Spain. In this respect, the Law provides protection to the other EU
Member States and also exempts from taxation income obtained in Spain through permanent
establishments by entities resident for tax purposes in a State that has signed a tax treaty with Spain
Guide to business in SpainTax system53
which does not expressly provide otherwise, provided that there is reciprocal treatment (unless it
resides in a tax haven). This tax would therefore be additional to that already borne by the
permanent establishment on its income (30% on revenues net of expenses).
Non-residents who operate in Spain through a permanent establishment are generally required to
keep accounting records here, in accordance with the rules and procedures established for Spanish
companies.
The taxation of the income of permanent establishments envisages three different situations, as
follows:
�• As a general rule, taxable income is determined in accordance with the same regulations as are
applicable to Spanish-resident companies and, accordingly, the tax rate of 30% (35% in the case
of oil and gas research and exploitation activities) would be applicable to net income. Allocated
parent company general and administrative overhead expenses are deductible under certain
conditions. The permanent establishment’s tax year will be the calendar year unless stated
otherwise.
The tax period is also deemed to have ended in the event of the discontinuation of a permanent
establishment’s business activities, withdrawal of the investment initially made in the permanent
establishment, or the change of residence of the head office.
The permanent establishment may also take the tax credits and relief that might be applicable, in
general, for Spanish resident companies.
�• For permanent establishments engaging in installation or erection projects with a duration of over
6 months, for those with seasonal or sporadic activity, or for those engaged in the exploration of
natural resources, the tax base is determined in accordance with the rules applicable to non-
residents obtaining income in Spain not through a permanent establishment. Such rules also
apply in determining the tax return filing and tax accrual obligations of the permanent
establishment, which is not obliged to keep books of account (but only documentary support of its
transactions).
However, these non-residents who operate through a permanent establishment in Spain may also
choose to be taxed under the general rules, but such option may only be taken if separate
accounts are kept in Spain. This choice must be made at the date of registration in the entities’
index.
�• If the permanent establishment does not complete a business cycle in Spain which leads to
income in Spain, and the business cycle is completed by the parent company (or the non-resident
individual who operates in Spain through a permanent establishment) or by other permanent
establishments, the tax liability is determined by applying the general taxation rules, whereby
revenues and expenses are valued at market prices.
Guide to business in SpainTax system54
However, the tax base will secondarily be determined by applying the percentage established by
the Ministry of Economy and Finance for this purpose to the total expenses incurred, and by
adding any “passive” (unearned) income not obtained in the normal course of business (interest,
royalties, etc.) and any other capital gains arising from the assets assigned to the permanent
establishment. This percentage has been set at 15%.
The gross tax payable in this case is determined by applying the standard tax rate, but the tax
credits and tax relief provided by the standard corporate income tax system may not be taken.
The tax period and tax return filing deadlines are those envisaged in the standard tax rules.
2.3.2 Income obtained not through a permanent establishment
Non-resident entities or individuals that obtain income in Spain not through a permanent
establishment will be taxed separately on each total or partial accrual of Spanish-source income.
Spanish-source income obtained not through a permanent establishment, as defined by the Non-
Resident Income Tax Law, consists mainly of the following items:
�• Earnings derived from economic activities pursued in Spain.
�• Earnings derived from the rendering of services where such services (i.e. studies, projects, technical
assistance or management support services) are used in Spanish territory.
�• Salary income, which is directly or indirectly derived from work performed in Spain.
�• Interest, royalties and other income from movable capital which remunerate capital used in
Spanish territory.
�• Income from marketable securities issued by companies resident in Spain.
�• Income from real estate located in Spain or from certain rights arising there from Legislative Royal
Decree 5/2004 treats as income obtained in Spain income attributed to non-resident individuals
derived from urban real estate located in Spain and not connected to business activities.
�• Capital gains on the sale of assets located in Spain and on the sale of securities issued by
residents.
However, certain types of income originated in Spain are not taxable in Spain, most notably the
following:
�• Income paid for international sales of goods.
�• Income paid to non-resident persons or entities relating to permanent establishments located
abroad, with a charge to these establishments, if the consideration paid is related to the activity of
the permanent establishment abroad.
Guide to business in SpainTax system55
Interest and earnings derived from the transfer of equity to a third party, as well as capital gains on
movable assets owned by residents of other EU Member States (except tax havens) obtained not
through a permanent establishment are deemed to be tax-exempt in Spain. However, capital gains
on holdings in entities whose assets consist principally of real estate in Spain, or in which the seller
has had, directly or indirectly, at least a 25% interest at some time during the twelve months
preceding the sale, are taxable.
In addition, gains on transfers of securities or redemptions of participation units in mutual funds on
official secondary securities markets in Spain obtained by non-resident individuals or entities without
a permanent establishment in Spain that are resident in a State with which Spain has signed a tax
treaty and such treaty contains an exchange of information clause are also tax exempt. The
exemption does not apply when the non-resident entity resides in a country or territory classed as a
tax haven.
Similarly, yields derived from Spanish Government debt securities accruing to non-resident entities
obtained not through a permanent establishment are not taxable in Spain, unless they are routed
through tax havens.
Income derived from “non-resident accounts” paid by banks or other financial institutions to non-
resident entities or individuals (unless payment is made to a permanent establishment in Spain of
such entities) as well as that obtained not through a permanent establishment located in Spain and
derived from the rental or assignment of containers or ship and aircraft bare-boat charters are also
tax exempt.
In addition, dividends and shares in profits received by individuals resident in other Member States of
the EU or in countries or territories with which there is an effective exchange of information, will be
tax exempt subject to the limit of 1,500 euros of the entire income obtained in the calendar year.
Finally, dividends from a Spanish subsidiary to its EU parent company are tax-exempt in Spain,
provided that certain requisites are met (among others, 10% of participation held during one year).
This rule is not applicable if the parent company is located in a tax haven, or when a majority of the
voting rights of the parent company is held directly or indirectly by an individual or legal entity non-
resident in the EU, unless the parent company effectively engages in a business activity directly
connected with the activity of the subsidiary, or has as its business purpose the administration and
management of the subsidiary, or evidences that the parent company was formed for valid economic
reasons and not merely to take advantage of the tax exemption.
In 1991 the Spanish tax authorities identified 48 territories classified as tax havens. These include
such “traditional” havens as the Bahamas, Liechtenstein, Monaco, Gibraltar, certain holding
companies resident in Luxembourg, etc. The Royal Decree which approved such list is still in force
(see regulations on tax havens in the Corporate Income Tax Law).
Spanish law generally sets tax rates lower than the standard rate for residents for income accruing to
non-residents that do not have a permanent establishment in Spain. The tax is normally levied on
Guide to business in SpainTax system56
Type of Income Tax Rate (%)
General 24 (*)
Dividends
Interest
Transfers or reimbursements of shares and participations in collective investment schemes
Capital gains
19
Special cases:
• Income from reinsurance activities
• Income obtained by entities engaging in international shipping or aviation
• Capital gains
• Seasonal foreign workers
1.5
4
19
2
(*) See exemptions above. The tax rates applicable to retirement pensions obtained by a nonresident individual will vary between 8% for amounts
of up to €12,000, 30% for the following €6,700 and 40% for amounts in excess of €18,700.
Royalty payments to entities or permanent establishments residing in the EU are subject to a 10% rate, under certain circumstances.A 0% rate will
be applicable as of July 1, 2011.
Table 4
TAX RATES FOR NON-RESIDENTS
the gross income, except for income for services rendered, technical assistance and installation and
erection projects, in which case the tax is levied on the difference between the gross income and the
payroll, material procurement and supplies expenses as defined in the relevant regulations. In this
connection, non-residents operating in Spain not through a permanent establishment are obliged to
withhold and make payments on account from salaries paid as well as other payments subject to
withholding or payment on account which can be considered deductible expenses in order to
determine the non-resident income obtained in Spain.
Capital gains are generally calculated on the basis of the difference between acquisition cost and sale
price, to which the same rules as those established for resident individuals are generally applicable.
Purchasers of property located in Spain from non-residents that do not have a permanent
establishment in Spain must deduct withholding tax at 3% from the purchase price on account of the
vendor’s capital gains tax liability.
If the transferred property was acquired by the transferor more than two years prior to December 31,
1996, for withholding tax purposes it should be considered the application of the reduction
coefficients commented in the section referred to Personal Income Tax.
There are certain exceptions to this obligation to make a withholding, such as cases in which the
property is transferred as a non-monetary contribution for the formation of, or capital increase at, a
company resident in Spain.
The tax rates are as follows:
Guide to business in SpainTax system57
In the case of non-residents without a permanent establishment in Spain there is no possibility of
offsetting losses against future profits or capital gains. Moreover, a non-resident without a
permanent establishment can only deduct from the tax payable the amount of the taxes withheld
from its income and the amounts corresponding to donations and allowances as described in the
Personal Income Tax Law for resident individuals.
Liability for non-resident income tax arises whenever Spanish-source income becomes claimable by
the non-resident entity or is paid, whichever is earlier; as for capital gains, liability arises when they
are generated and in the case of income attributed to urban real estate, on December 31.
In general, a separate tax return and supporting documentation must be filed within one month
from the above date. It is not necessary to file a separate tax return where tax has already been
withheld at source or prepaid on the income.
In most cases the above-mentioned tax returns can be filed monthly or quarterly declaring different
types of income obtained during the preceding period.
In addition, the Law establishes a general obligation of making withholdings and prepayments on
account of the income paid to non-residents by entities, professionals and entrepreneurs who are
resident in Spain. Some exceptions to this general rule are envisaged in the Law and the Regulations.
2.3.3 Tax regime for non-resident employees assigned to Spain (inbound expatriates)
Spanish personal income tax legislation contains a very attractive regime for personnel assigned to
Spain due to labor reasons by multinational companies, since it allows individuals who become tax
resident in Spain as a result of their assignment to Spain to opt to be taxed either under personal
income tax rules or under non-resident income tax rules during the tax period in which their tax
residence changes and for the next five tax periods. Under the non-resident income tax rules option,
they are only taxed on the income and/or gains that are deemed to have been obtained in Spain, at
a standard rate of 24%.
The requirements necessary to apply this regime are as follows:
�• The inbound expatriate must not have been resident in Spain during the 10 years preceding his or
her assignment to Spain.
�• The assignment to Spain must be the result of an employment contract.
�• The work must actually be performed in Spain.
�• The work must be performed for a company or entity resident in Spain or for a permanent
establishment located in Spain of an entity not resident in Spain.
�• The salary income resulting from the work must not be exempt from non-resident income tax.
Guide to business in SpainTax system58
�• The foreseeable compensation under the employment contract in each of the tax periods in which
this special regime applies must not exceed €600,000 per year24.
All salary income received by the taxpayer will be subject to withholding in Spain, even when it is not
paid by an entity or establishment resident or located (respectively) in Spain, if the payor of the
income is an entity related to the entity or establishment for whom the taxpayer performs his services
(in Spain).
In order to exercise the option to be taxed under this regime, it is necessary to notify the tax
authorities within six months following the date of commencement of the employment that is stated
in the notice informing the social security authorities that the employee was hired.
The way to notify the tax authorities of the election is through Form 149, as approved by the Ministry
of Economy and Finance, which must be filed with the provincial or local tax office applicable to the
taxpayer’s tax domicile.
The Form must contain certain information and must be accompanied by certain documentation.
2.3.4 Tax treaties25
Tax treaties may reduce, or even completely eliminate, the taxation in Spain on the income earned
by entities which do not have a permanent establishment here.
Companies without a permanent establishment in Spain which are resident in countries with which
Spain has a tax treaty are generally not taxed in Spain on their business income earned here, nor for
capital gains (other than on real estate).
However, capital gains on the sale of shares of companies can be taxed in Spain under the special
clauses of certain treaties (including most notably shares of real estate companies, transfers of
shares when a substantial interest is held, etc.).
Certain other types of income (royalties, interest or dividends) are taxed at reduced treaty rates in
force, as detailed in the following table:
Guide to business in SpainTax system59
24 Amendment inserted by 2010 General State Budget Law 26/2009, ofDecember 23, not applicable to workers arriving in Spain before 2010.25 For more detailed information visit web page www.aeat.es, section“Fiscalidad internacional”.
Guide to business in SpainTax system60
Table 5
TREATY TAX RATES (*)
Type of Income
Recipient Company's Country of Residence
Dividends (%) Interest (%) Royalties(%)
Algeria 15 or 5 (53) 5 or 0 (54) 14 or 7 (55)
Argentina 15 or 10 (1) 12,5 or 0 (65) 3, 5, 10 or 15 (19)
Australia 15 10 10
Austria 5 or 10 (2) 5 5
Belgium 15 or 0 (1) 10 or 0 (25) 5
Bolivia 15 or 10 (1) 15 or 0 (65) 15 or 0 (66)
Brazil 15 15 or 10 (4) 15 or 10 (5)
Bulgaria 15 or 5 (1) 0 (14) 0
Canada 15 15 10
(*) The Double Tax Treaty signed between Spain and the former USSR is, from a Spanish tax perspective, currently applicable to the following
republics: Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Uzbekistan, Tajikistan, Turkmenistan, and Ukraine.
Notwithstanding the above, said Double Tax Treaty is not being applied by certain former USSR republics.
Notes:
(1) The lower rate applies if the recipient company owns 25% or more of the capital of the payer company.
(2) 10% if the recipient company has owned 50% or more of the capital of the payer company for at least one year before the date of distribution of
the dividend.
(3) The lower rate applies if the recipient company owns 50% or more of the capital of the payer company.
Spain-Tunisia treaty: other than a partnership.
(4) 10% on interest (paid to a financial institution in one of the treaty States) on loans and credits at a term of 10 years or more to finance the
acquisition of capital equipment and tools.
(5) The lower rate applies for royalties for the use of or license to use the copyright on literary, artistic or scientific works if these are produced by a
resident of a contracting State.
Spain-Brazil treaty: Films included
Spain-Poland treaty: Copyright royalties exempt in source country
Spain-Cuba, Spain-Czech Republic, Spain-Slovakia Spain-Italy, Spain-Bolivia and Spain-Morocco treaties: Films excluded.
(6) 10% if the recipient company has owned 25% or more of the capital of the payer company for at least six months before the year out of whose
earnings the dividend is distributed.
(7) 1) 10% if:
a. The recipient company owns 50% or more of the capital of the payer company.
b. The recipient company owns 25% or more of the capital of the payer company and at least one other company resident in The Netherlands also
owns 25% or more of the payer company's capital.
5% if the recipient company is not taxable in The Netherlands under Dutch corporate income tax for the same dividends.
15% in all other cases.
(8) 10% if the recipient company owns at least 10% of the capital of the payer company.
(9) Royalties for licenses for use of patents, drawings, etc.
(10) In Germany, interest from Spain is exempt when paid to:
Deutsche Bundesbank or
Kreditanstalt für Wiederaufbau of the Federal Republic.
(11) Except for interest from Spain paid to a bank resident in Switzerland in respect of loans fully or partly repayable in five years or more.
(12) 5% in the case of loans exceeding 7 years.
(13) 10% if the recipient company has owned 25% or more of the capital of the payer company for at least one year before the date of distribution of
the dividend.
(14) Interest paid is not subject to withholding tax, unless the beneficial owner carries out an industrial or commercial activity in the Contracting
State where the payer is established, or renders professional services in that State through a permanent establishment to which the loan was
provided.
(15) No tax liability arises if the interest is paid in connection with a loan to a finance entity at more than 5 years or if the beneficiary is the State, a
local entity or a government agency or if it is paid in connection with loans for the transfer of industrial, commercial or scientific equipment.
(16) 5% for literary, dramatic, musical and artistic rights.
8% for film, tape and commercial, industrial or scientific royalty rights.
10% in all other cases.
(17) 5% for credits for the sale of industrial, commercial or scientific equipment, the sale of goods and the execution of construction, installation and
erection projects.
Loans at 5 years or over are tax-exempt, as is interest paid to the State of Ecuador or its political subdivisions or public financial institutions.
(18) Reduce rate for intellectual property rights in the country of origin, excluded films (Spain-Ecuador treaty: 5%).
(19) 3% for new rights.
5% for literary, dramatic, musical and artistic rights.
10% for commercial, industrial or scientific royalty rights.
15% in all other cases.
(20)The lower rate applies when the beneficiary is a bank (including savings banks in Spain). The 15% rate applies in the remaining cases.
(21)The lower rate applies if the recipient company owns 25% or more of the voting rights of the payer company and the provisions of the EU Parent-
Subsidiary Directive apply.
(22)10% for credits for the sale of industrial, commercial or scientific equipment, and interest paid in connection with bonds.
No tax liability arises if bonds are issued by the State, one of its political subdivisions or a local entity or the interest is paid in connection with a loan
granted, guaranteed or ensured by the Central Bank or certain financial institutions.
(23)10% for royalty payments made by entities registered with the Philippines Investment Council.
20% for film, TV and radio tapes
15% in all other cases
(24)No tax liability arises if:
The interest is paid in connection with loans for the transfer of industrial, commercial or scientific equipment or the transfer of goods.
The interest is paid to the State, its political subdivisions or public financial institutions, the Central Bank or in connection with loans guaranteed or
ensured by the State, one of its political subdivisions or a local entity.
(25)No tax liability arises if:
The interest is paid in connection with loans for the transfer of industrial, or commercial equipment, goods or services.
The interest is paid in connection with loans granted, guaranteed or ensured by a public institution to encourage exports.
The interest is paid in connection with accounts or nominative advances between financial institutions.
(26)No tax liability arises if the collector and beneficiary is the State, one of its political subdivisions, a local entity or the Central Bank.
(27)10% for the use of, or right to use, industrial, commercial or scientific equipment.
20% for technical assistance service royalty payments and in all other cases.
(28)No tax liability arises if the collector and beneficiary is a company subject to corporate income tax and:
Guide to business in SpainTax system61
Table 5 (cont.)
TREATY TAX RATES (*)
Type of Income
Recipient Company's Country of Residence
Dividends (%) Interest (%) Royalties(%)
Czech Republic 15 or 5 (1) 0 (14) 5 or 0 (5)
Chile 10 or 5 (44) 15 or 5 (45) 10 or 5 (46)
China 10 10 10
Colombia 5/0 (72) 10 10
Croatia 15 or 0 (1) 8 (60) 8 (59)
Cuba 15 or 5 (1) 10 or 0 (36) 5 or 0 (5)
Cyprus
Denmark 26 15 or 0 (21) 10 6
Ecuador 15 0 or 5 ó 10 (17) 10 or 5 (18)
26 Denmark has decided to terminate Treaty with Spain as of January 1,2009.
Guide to business in SpainTax system62
Table 5 (cont.)
TREATY TAX RATES (*)
Type of Income
Recipient Company's Country of Residence
Dividends (%) Interest (%) Royalties(%)
Egypt 12 or 9 (41) 10 or 0 (26) 12
El Salvador 12 or 0 (75) 0/10 (58) 10
Estonia 15 or 5 (47) 10 or 0 (48) 10 or 5 (46)
Finland 15 or 10 (1) 10 5
France 15 or 0 (28) 10 or 0 (29) 5 or 0 (30)
Germany 15 or 10 (1) 10 or 0 (10) 5
Greece 10 or 5 (41) 8 or 0 (43) 6
Hungary 15 or 5 (1) 0 (14) 0
Iceland 15 or 5 (41) 5 (42) 5
- Being resident in France, owns at least 10% of the capital of the payer company.
- Being resident in Spain, owns a significant holding in the capital of the payer company.
(29)No tax liability arises if the payer is the State or one of its political subdivisions, if the interest is paid in connection with loans for the transfer of
industrial, commercial or scientific activities or equipment, or loans granted by financial institutions.
(30)No tax liability arises for the use or license to use the copyright on literary or artistic works (films and tapes or visual recorded works excluded), or
for the use of, or the right to use, ships or aircraft under bare boat charter, or containers used in international traffic.
(31) - 10% if the recipient is a financial institution (including insurance entities)
- 0% if the loan is granted by the Central Bank or (in the case of Thailand) by the Export-Import Bank of Thailand, by local authorities or by those
institutions owned by the government.
- 15% in all other cases.
(32)5% for literary, dramatic, musical, artistic and scientific rights (film, TV and radio tapes excluded).
8% for commercial, industrial or scientific equipment under financial leasing.
15% in all other cases.
(33) 5% if a.- the beneficial owner is a company (other than a partnership) that has invested at least 100,000 ECU in the capital of the company
paying the dividends; b.- these dividends are exempt in the other Member State.
10% when only one of the above two conditions are met.
15% in all other cases.
(34)There is no taxation if:
a.- The beneficial owner or payer is a Contracting State, a political subdivisions, a local authority, or an organization of any of the above.
b.-Interest from debt securities guaranteed or underwritten by a State.
c.-Interest paid by reason of long-term loans (over five years) granted by banks or other financial institutions in a Contracting State may only be taxed
in that State.
d.-Interest paid in relation to the sale on credit of industrial, commercial or scientific equipment may only be taxed in the State in which the
beneficial owner is resident.
(35)The royalties received for the use of, or the right to use, ships or aircraft under bare boat charter, or containers used in international traffic, may
only be taxed in the Contracting State in which the recipient is resident.
(36)There is no taxation in the State of origin if the interest is paid:
By another Contracting State, a political subdivision or a local entity.
By an enterprise of a Contracting State to an enterprise of another State, in relation to the sale on credit of merchandise and industrial, commercial
or scientific equipment.
By reason of long-term loans (over five years) granted by a credit or financial institution resident in another Contracting State.
(37) Exempt when the recipient is the beneficial owner and 1) is a Contracting State or one of its political subdivisions; or 2) the interest is paid by
reason of long-term loans (at least seven years) granted by a financial institution.
(38)Exempt when paid in relation to loans granted or guaranteed by a State or any public financial institution determined by mutual agreement.
Reduced rate of 5% in relation to the sale on credit of industrial, commercial or scientific equipment.
(39) 5% for the use of, or the right to use, any copyright of literary, dramatic, musical or artistic work, or for the use of, or the right to use, industrial,
commercial or scientific equipment.
Guide to business in SpainTax system63
Table 5 (cont.)
TREATY TAX RATES (*)
Type of Income
Recipient Company's Country of Residence
Dividends (%) Interest (%) Royalties(%)
India 15 15 or 0 (26) 10 or 20(27)
Indonesia 15 or 10 (1) 10 ó 0 (26) 10
Iran 10 or 5 (44) 7,5 or 0 (60) 5
Ireland 15 or 0 (21) 0 (14) 5, 8 or 10 (16)
Israel 10 0 or 5 or 10 (38) 7 or 5 (39)
Italy 15 12 or 0 (61) 8 or 4 (5)
Jamaica 10 or 5 0/10 (78) 10
Japan 15 or 10 (6) 10 10
Korea 10 or 15 (1) 1 or 0 (24) 10
(40)Only taxable in the State where the recipient is located if it is the beneficial owner and, in addition is 1) a Contracting State, a political
subdivision or a local entity, or 2) the payer is a political subdivision or a local entity.
(41) The lower rate applies if the recipient company (excluding partnerships) is the beneficial owner and owns 25% or more of the capital of the
payer company.
(42)Only taxable in the State where the recipient is located if it is the beneficial owner, or the beneficial owner is a Contracting State, a political
subdivision or a local entity.
(43)Interest from a Contracting State is exempt from taxation in that State if: 1) the payer is the Contracting State, one of its political subdivisions, or
one of its local entities, 2) is paid to the other Contracting State, to one of its political subdivisions, to one of its local entities, or to a body (including
financial institutions) that belongs in full to this other Contracting State, political subdivision or local entity, or 3) is paid to another body (including
financial institutions) in connection with loans granted under an agreement concluded between the contracting States.
(44) The lower rate applies if the recipient company (excluding partnerships) is the beneficial owner and owns 20% or more of the capital of the
payer company.
(45) Reduced rate of 5% in relation to gross interest deriving from:
1) Loans granted by banks and insurance companies, 2) Bonds and securities that are regularly and habitually traded on a recognized securities
market, 3) Interest paid in relation to the sale on credit of machinery and equipment by the beneficial owner that is the seller of said machinery and
equipment.
15% in all other cases
(46) 5% for the use of, or the right to use of industrial, commercial or scientific equipment. 10% in all other cases.
(47) Reduce rate applies if the recipient company (excluding partnerships) is the beneficial owner and owns directly at least 25% of the capital of the
payer company.
(48) Tax exempt if the beneficial owner is the other Contracting State, a political subdivisions, the Central Bank or any other entity fully controlled by
the State, or if there are interest paid in relation to a credit guaranteed by such other State, political subdivisions, public entity or institution, acting in
the frame of the promotion of export activities mutually agreed by the authorities of both States. Also exempt when the beneficial owner is a
company residing in the other contracting State and the interest is paid in relation to a debt as a consequence of a sale on credit by a company of
that other contracting State of any goods or industrial, commercial or scientific equipment to a company residing in the contracting State firstly
mentioned, to the extent that such debt does not arise between related parties.
(49) Reduce rate applies if the beneficial owner is a partnership and owns directly at least 25% of the capital of the payer company.
(50) 10% in relation to interest deriving from a loan granted by a bank, or paid in relation with the sale on credit of goods or equipment to an entity
residing in a contracting State.
(51) Reduce rate applies if the beneficial owner is a financial entity. 10% in all other cases.
(52) 7% if the beneficial owner owns at least 50% of the capital of the payer company, and 10% if it owns at least 25% of the capital of the payer
company.
(53) Reduce rate applies if the beneficial owner owns, directly or indirectly, at least 10% of the capital of the payer company.
(54) Tax exempt if the payer is the other Contracting State Government, a political subdivision, or the beneficial owner is the other Contracting State
Government, or one of its political subdivisions, or to a body (including financial institutions) that belongs in full to this other Contracting State,
political subdivision or local entity, or Central Bank of that State. Also exempt when the interest is paid in relation to a debt as a consequence of a
sale on credit of any goods or equipment, or in relation to a loan granted by a bank residing in the other contracting State.
Guide to business in SpainTax system64
Table 5 (cont.)
TREATY TAX RATES (*)
Type of Income
Recipient Company's Country of Residence
Dividends (%) Interest (%) Royalties(%)
Latvia 10 or 5 (41) 10 or 0 (48) 10 or 5 (46)
Lithuania 15 or 5 (47) 10 or 0 (48) 10 or 5 (46)
Luxembourg 15 or 10 (13) 10 or 0 (62) 10
Macedonia 15 or 5 (56) 5 or 0 (57) 5
Malaysia 5/0 (74) 10 7/5(73)
Malta 5 or 0 (1) 0 (14) 0
Mexico 15 or 5 (1) 15 ó 10 (20) 10 or 0 (18)
Moldova 0, 5 or 10 (77) 0/5 (78) 8
Morocco 15 or 10 (1) 10 10(9) or 5 (5)
(55) 14% for the use of, or the right to use of literary, artistic or scientific works.
(56) Reduce rate applies if the recipient company (excluding partnerships) is the beneficial owner and owns, directly or indirectly, at least 10% of the
capital of the payer company.
(57) Exempt when the interest is paid in relation to a debt as a consequence of a sale on credit by a company of that other contracting State of any
goods or industrial, commercial or scientific equipment to a company residing in the contracting State firstly mentioned, or paid by reason of long-
term loans (at least five years) granted by a financial institution
(58) Tax exempt if the beneficial owner is the other Contracting State Government, a political subdivision, or the Central Bank. Also exempt when
the interest is paid in relation to a loan granted or guaranteed by the Government of the other Contracting State, one of its political subdivisions, or
the Central Bank.
(59) According to the Protocol, once five years have elapsed as of the date on which the Treaty entered into force (i.e. April 20, 2001), the applicable
rate for interest and royalties will become zero.
(60) Exempt if the recipient is the beneficial owner of the interest and:
1) Interest is paid in relation to the sale on credit of machinery and equipment to an entity of a Contracting State, 2) Interest is paid in relation to a
loan granted by a bank or other financial institution residing in a Contracting State, 3) Interest is paid to the other Contracting State, the Central
Bank, or to other banks fully controlled by the other Contracting State.
(61)There is no taxation in the State of origin if the interest is paid:
1) By another Contracting State or one of its local entities, a political subdivision or a local entity, 2) is paid to the other Contracting State, or to one
of its local entities, or to a body (including financial institutions) that belongs in full to this other Contracting State or one of its local entities, 3) is
paid to other institutions or bodies (including financial institutions) in connection with loans granted under an agreement concluded between the
contracting States.
(62) There is no taxation in the State of origin if the interest is paid:
1) in connection with loans granted by a Contracting State or a resident in such State to the other Contracting State, or to one of its local entities, and
2) in connection with loans granted by a resident of a Contracting State and guaranteed by one of the Contracting States, to a resident of the other
Contracting State.
(63) Interest paid in relation to public debt issued by a Contracting State could be taxed in the State where the debtor is located.
(64) If the recipient of the dividends is the beneficial owner the withholding tax could not exceed the 10% of the gross amount of the dividends.
(65) Tax exempt if:
a)the payer is the other Contracting State Government, a political or administrative subdivision or local entity;
b)are paid to the other Contracting State Government, or one of its political subdivisions, or to a body (including financial institutions) that belongs
in full to this other Contracting State, political subdivision or local entity;
c)are paid to other institutions or bodies (including financial institutions) in the frame of the financing mutually agreed by the authorities of both
States, provided that the term of such loan is less than 5 years.
d)Also exempt when the interest is paid in relation to a debt as a consequence of a sale on credit of scientific, industrial or commercial equipment.
(66) Tax exempt if royalties are paid for the use of, or the right to use, any copyright of literary, dramatic, musical or artistic work (films excluded).
(67) Tax exempt if paid in connection with loans granted or guaranteed by the other Contracting State.
Guide to business in SpainTax system65
Table 5 (cont.)
TREATY TAX RATES (*)
Type of Income
Recipient Company's Country of Residence
Dividends (%) Interest (%) Royalties(%)
Netherlands 15, 10 or 5 (7) 10 6
New Zealand 15 10 or 0 (42) 10
Norway 15 or 10 (1) 10 or 0 (34) 5 or 0 (35)
Philippines 10 or 5 (8) 0 or 15 or 10 (22) 10,20,15 (23)
Poland 15 or 5 (1) 0 (14) 10 or 0 (5)
Portugal 15 or 10 (1) 15 5
Romania 15 or 10 (1) 10 or 0 (67) 10 or 0 (68)
Russia 15 or 10 or 5 (33) 5 or 0 (37) 5
Saudi Arabia 5/0 (1) 5 8
(68) The 10% rate is applicable if the beneficial owner carries out, in the Contracting State where the royalties come from, an industrial or
commercial activity, or renders professional services through a permanent establishment to which the right or property triggering the payment is
effectively linked (provisions of article 7 or 14 will apply).
(69)5% if the actual beneficiary is a company that directly owns at least 10% of the capital stock of the paying company.
It will only be taxed in the contracting state where the recipient lives if the actual beneficiary is the contracting state, or one of its political
subdivisions, one of its local entities or the Central Bank.
(70) There is no tax if the recipient resident in another State is the actual beneficiary unless it performs in the other State where the royalties are
from a business activity though a permanent establishment and the right or the asset on which the royalties are paid are actually related to it.
(71) The 0% rate applies to the interest on loans in which the lender is the State or one of its political subdivisions, or financial institutions under
certain conditions, or where the loans are granted in relation to a credit sale of equipment or goods to a company resident in a contracting State.
(72) The reduced rate applies if the beneficial owner is a company that directly or indirectly holds at least 20% of the capital stock of the company
that pays the dividends.
(73) The 5% rate applies to payments for technical services
(74) The 0% rate applies where the recipient entity’s capital stock is divided into shares or units and it is direct owner of at least 5% of the capital
stock of the entity that distributes the dividend.
(75) The 0% rate applies if the El Salvadoran payee company directly possesses at least 50% of the capital of a Spanish company which has been tax
in connection with the dividend distributed. .
(76) The 0% rate applies if the payee directly possesses at least 50% of the capital of the Spanish company; the 5% rate applies if it possesses at least
25% but less than 50% .
(77) The 0% rate applies if the beneficial owner is a company that directly possesses at least 50% of the capital of the company paying the dividend.
The 5% rate applies if the beneficial owner is a company directly possessing at least 25% of the capital of the company paying the dividend, and the
10% rate will apply in the other cases.
(78) Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State if the
recipient is the beneficial owner of the interest and
a) is the State, a political subdivision or local authority thereof, or the Central Bank;
b) the interest is paid by the State in which the interest arises or by a political subdivision, a local authority or statutory body thereof;
c) the interest is paid in respect of a loan, debt-claim or credit that is owed to, or made, provided, guaranteed or insured by, that State or a political
subdivision, local authority or export financing agency thereof;
d) is a public financial institution;
e) is a pension fund that is approved for tax purposes by that State and the income of that fund is generally exempt from tax in that State.
Guide to business in SpainTax system66
Table 5 (cont.)
TREATY TAX RATES (*)
Type of Income
Recipient Company's Country of Residence
Dividends (%) Interest (%) Royalties(%)
Slovakia 15 or 5 (1) 0 (14) 5 or 0 (5)
Slovenia 15 or 5 (1) 5 or 0 (40) 5
South Africa 15 or 5 (1) 5/0 (71) 5
Sweden 15 or 10 (2) 15 or 0 (63) 10
Switzerland 15 or 10 (1) 10 or 0 (11) 5
Thailand 10 (64) 0 or 15 or 10 (31) 5, 8 or 15 (32)
Trinidad and Tobago 0, 5 or 10 (77) 8 5
Tunisia 15 or 5 (3) 10 or 5 (12) 10
Turkey 15 or 5 (49) 15 or 10 (50) 10
United Arab Emirates 15, 5 or 0 (69) 0 (14) 0 (70)
United Kingdom 15 or 10 (8) 12 10
United States 15 or 10 (1) 10 or 0 (15) 5 or 8 ro 10 (16)
Venezuela 10 or 0 (1) 10 or 4,95 (51) 5
Vietnam 15, 10 ó 7 (52) 10 ó 0 (58) 10
USSR (*) 18 0 5
Currently, there are various treaties which are at different stages of negotiation or coming into force.
Among them, the treaties with Albania, Armenia, Bosnia and Herzegovina, Colombia, Costa Rica,
Georgia, Kazajstan, Kuwait, Namibia, Nigeria, Peru, Serbia and Montenegro27, Senegal, Syria, and
Uruguay. Additionally, certain treaties are being nowadays renegotiated (for instance, the Spain-USA
Treaty).
�• Tax sparing arrangements
Due to the existence under Spanish regulations of relief from the tax on certain types of income
(mainly interest income), the tax sparing arrangements contained in many of Spain’s tax treaties are
relevant. Under these arrangements the non-resident lender benefits from tax sparing, and therefore
can deduct in its country not only the effective tax withheld in Spain from the interest but also the tax
that would have been payable had relief not been provided by Spain.
27 Treaty with Serbia and Montenegro has been published in the SpanishOfficial Gazette of January 25, 2010 and enters into force on March 28,2010.
(*) The Double Tax Treaty signed between Spain and the former USSR is, from a Spanish tax perspective, currently applicable to the following
republics: Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Uzbekistan, Tajikistan, Turkmenistan, and Ukraine.
Notwithstanding the above, said Double Tax Treaty is not being applied by certain former USSR republics.
Guide to business in SpainTax system67
2.3.2.1 Tax on property in Spain of non-resident companies
Non-resident companies owning real estate in Spain are subject to an annual tax of 3% on the
cadastral value of the property at December 31 each year.
This tax does not apply to:
�• International bodies and foreign States and public institutions.
�• Companies resident in countries with which Spain has a tax treaty in force which includes an
exchange of information clause, provided that their direct or indirect owners are either Spanish
residents or residents in a country with which Spain has a tax treaty with an exchange of
information clause.
For this exemption to be applicable, non-resident entities must report certain information to the
tax authorities on an annual basis (e.g. real estate owned in Spain and the names of the direct or
indirect individual owners of the company) to which the related residence certificates must be
attached.
�• Companies which have a business activity in Spain, as defined in the regulations, other than
merely managing property.
�• Listed companies.
�• Nonprofit charitable or cultural entities which are recognized as such by the State with which Spain
has a tax treaty with an exchange of information clause, provided that real estate owned in Spain is
used in their ordinary activities.
This tax is a deductible expense of the non-resident entity for corporate income tax purposes.
2.3.2.2 Tax representative
Non-residents (I) obtaining income in Spain through a permanent establishment, or (II) obtaining
income in Spain from economic activities which do not constitute a permanent establishment and
provide entitlement to the deduction of certain expenses, or (III) which are entities subject to the pass-
through regime and carry on business activities in Spain, all or a portion of which is carried on by them,
continuously or habitually, through installations or workplaces of any kind, or which act in Spain
through an agent authorized to conclude contracts in the name and for the account of the entity, (IV)
when they are specifically required to do so by the tax authorities because of the nature or the amount
of income obtained, or (V) persons and entities resident in countries or territories with which there is no
effective exchange of information, that there are owners of property situated or rights which are fulfilled
or exercised in Spain (except for securities listed on organized secondary markets), are required to
appoint a Spanish resident as their tax representative before the end of the period for reporting income
obtained in Spain. The appointment must be notified to the authorities within two months. Failure to
appoint a representative or to notify the authorities can lead to a fine of €2,000. Such penalty will
Guide to business in SpainTax system68
amount to €6,000 for those taxpayers residing in countries or territories with which there is no effective
exchange of information.
The tax representatives (if residents) of permanent establishments are deemed to be the persons
registered as their representatives in the Mercantile Register, or the persons empowered to contract on
their behalf.
Persons who, pursuant to the Non-Resident Income Tax Law, are:
a) representatives of permanent establishments of non-resident taxpayers, or
b) representatives of the entities described in (III) above, are jointly and severally liable for paying
over the tax debts relating to them.
The payer of income accrued without the intermediation of a permanent establishment by non-
resident taxpayers, or the bailee or manager of the assets or rights of non-resident taxpayers not
used by a permanent establishment, shall be jointly and severally liable for the payment of tax debts
relating to income paid by him or to income and/or gains from assets or rights whose bailment or
management has been entrusted to him.
This liability shall not exist where the payer or manager is subject to the obligation to withhold and
prepay tax (since they already have such specific obligation and the responsibility that from it could
eventually derive).
The depository and the party managing the assets of a non-resident or paying income to a non-
resident are jointly and severally liable for the tax liabilities arising from those assets or on such
income when there is no obligation of withholding.
2.4 Wealth tax
Law 4/2008, of December 23, 2008, in practice abolished net worth tax as it establishes a tax
reduction of 100% of the gross tax due for resident and nonresident taxpayers effective from the
2008 fiscal year onwards. This Law also eliminates the articles regulating the obligation to file a net
worth tax return and, for nonresidents, to appoint a tax representative in Spain for purposes of this
tax.
2.5 Inheritance and gift tax
Inheritance and gift tax applies to Spanish resident heirs, beneficiaries and donees and is charged on
all assets received (located in Spain or abroad). Non-resident beneficiaries are also subject to this tax
as non-resident taxpayers, and must pay the tax in Spain only on the acquisition of assets and rights
(whatever their nature), that are located, exercisable or to be fulfilled in Spain.
The inheritance and gift tax base can be reduced by 95% if it results from a transmission mortis causa
to spouses, children or adopted children or, in their absence, ascendants, foster parents or collateral
relatives up to the third degree of a professional business, an individual enterprise, or interests in
Guide to business in SpainTax system69
entities or usufructs on them of the donor or deceased which were exempt from wealth tax. The
requirements are as follows:
�• The beneficiary of a transmission mortis causa must keep the assets received for at least 10 years.
�• The beneficiary cannot carry out transactions that result in a substantial diminution in the value ofthe assets.
The 95% reduction in the tax base also applies to “inter vivos” transfers of interests in an individual
enterprise, professional business or in entities belonging to the donor which are exempt from wealth
tax28 to spouses, descendants or adopted children provided that the following requirements are met
(in addition to the two requirements imposed for transmissions “mortis causa”):
�• The donor must be at least 65 years old or have permanent disabilities.
�• If the donor had been discharging management duties, he/she must discontinue them and stop
receiving remuneration in that connection.
There is another 95% reduction in the value of the habitual abode of the deceased in case of mortis
causa transmission to spouses, ascendants, descendants or collateral relatives of over 65 years when
they had lived with the deceased during the two previous years.
The tax is calculated by adjusting a tax scale of progressive rates (depending on the value of the
estate or gift) with a coefficient that takes into account the previous net worth and the degree of
kinship with the donor.
As with other taxes transferred to the Autonomous Community Governments, inheritance and gift tax
legislation has been adapted to recognize the legislative power of those governments to approve
reductions in the tax base and rates and in the coefficients for adjusting the tax payable, based on
the taxpayer’s previous net worth.
Inheritance and gift tax legislation also provides that in the case of transmissions “mortis causa”, the
tax must always be paid in the Autonomous Community in which the deceased was habitually
resident (except in the case of non-resident testators, jurisdiction for whom rests with the State tax
authorities). As for acquisitions of assets or rights by way of gift, or any other “inter vivos” legal
transaction for no consideration, the tax must be paid in the Autonomous Community in which the
acquirer is habitually resident (except in the case of transfers of real estate, in which case the
Autonomous Community with jurisdiction will be that in which the property is located).
Law 22/2009, of December 18, also establishes the reductions, rates and coefficients to be applied if
the Autonomous Community in question has not assumed the powers transferred, or where it has
not yet made any regulations, in that connection.
The Government is considering the possibility of progressively eliminating this tax at central
government level, although since it is a tax which the Autonomous Community Governments are
27 Or meet the requirements to claim the exemption.
Guide to business in SpainTax system70
Table 6
APLICABLE RATES
Tax Base Tax Payable Remaining Tax Base Applicable Rate
(up to Euros) (Euros) (up to Euros) (%)
0,00 7,993.46 7.65
7,993.46 611.50 7,987.45 8.50
15,980.91 1,290.43 7,987.45 9.35
23,968.36 2,037.26 7,987.45 10.20
31,955.81 2,851.98 7,987.45 11.05
39,943.26 3,734.59 7,987.46 11.90
47,930.72 4,685.10 7,987.45 12.75
55,918.17 5,703.50 7,987.45 13.60
Tax Base Tax Payable Remaining Tax Base Applicable Rate
(up to Euros) (Euros) (up to Euros) (%)
63,905.62 6,789.79 7,987.45 14.45
71,893.07 7,943.98 7,987.45 15.30
79,880.52 9,166.06 39,877.15 16.15
119,757.67 15,606.22 39,877.16 18.70
159,634.83 23,063.25 79,754.30 21.25
239,389.13 40,011.04 159,388.41 25.50
398,777.54 80,655.08 398,777.54 29.75
797,555.08 199,291.40 upwards 34.00
responsible for collecting, it has already been eliminated in practice by some Autonomous
Community Governments (Cantabria, the Basque Country, Madrid, etc.)28.
The tax rates and adjustment coefficients applicable for 2010 (in the absence of rates and coefficients
specifically approved by the relevant autonomous community) are the following:
28 Note that in the case of non-resident heirs or donees the applicablelegislation will always be central government legislation, regardless of theresidence of the decedent or donor, or of the location of the real estate,for instance.
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Table 7
REDUCTIONS IN THE TAX BASE IN TRANSMISSIONS MORTIS CAUSA
Transferees Reduction
Based on degreeof kinship:
Group I: Children and adopted children under 21 €15,956.87 plus €3,990.72 for each yearunder the age of 21 of the successor up to€47,858.59
Group II: Children and adopted children aged 21 andover, spouses, ascendants and adoptive ascendants
€15,956.87
Group III: Collateral family members in second andthird degree of kinship, ascendants and descendant byaffinity
€7,993.46
€0Group IV: Collateral family members in fourth degreeof kinship or further removed and nonfamily heirs
Othercompatiblereductions:
Persons with physical, mental or sensorial disabilities(disability of between 33% and 65%)
€47,858.59
Persons with physical, mental or sensorial disabilities(disability of greater than 65%)
€150,253.03
Spouses, ascendants, descendants, adoptive oradopted, if beneficiary of insurance policy.
100% of the amounts received under theinsurance policy, up to €9,195.49,generally
Spouses, ascendants, or adopted in case of familybusinesses or habitual abode.
Up to 95% under certain circumstances
Table 8
RATES BASED ON DEGREE OF KINSHIP AND PREVIOUS NET WORTH
Groups under article 20
Previous net worth in EurosI and II III IV
0 – 402,678.11 1.0000 1.5882 2.0000> 402,678.11 – 2,007,380.43 1.0500 1.6676 2.1000> 2,007,380.43 – 4,020,770.98 1.1000 1.7471 2.2000> 4,020,770.98 1.2000 1.9059 2.4000 (1)
(1) This coefficient is applicable if the successors are not known, without prejudice to the refund of the respective amount when they are known.
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2.6 Spanish Value Added Tax
The EU VAT Directives have been implemented in Spanish law (Law 37/1992, in force since January 1,
1993), and the main provisions of these Directives are harmonized in the different Member States of
the European Union.
VAT is an indirect tax, and its main feature is that it does not normally entail any cost for traders or
professionals, only for the end consumer, since traders or professionals are generally entitled to offset
their input VAT against their output VAT.
Within Spain, VAT is not applicable in the Canary Islands, Ceuta and Melilla.
In the Canary Islands, the Canary General Indirect Tax (“IGIC”), in force since January 1, 1993, is very
similar to VAT and is an indirect tax levied on the supply of goods and services in the Canary Islands
by traders and professionals and on imports of goods. The general IGIC rate is 5%.
Ceuta and Melilla charge a different indirect tax of their own (tax on production, services and
imports).
2.6.1 Taxable transactions
The following transactions are subject to VAT when they are carried out by traders and professionals
in the course of their business:
�• Supplies of goods, generally defined as the transfer of the right to dispose of tangible property,
although certain transactions not involving a transfer of this kind may also be treated as supplies
of goods for the purposes of VAT.
�• Intra-Community acquisitions of goods (generally, acquisitions of goods dispatched or transported
to Spanish VAT territory from another Member State).
�• Imports of goods: These transactions are subject to VAT regardless of who performs them.
• Supplies of services.
2.6.2 VAT rates and exemptions
VAT rates are as follows:
The standard rate is 16% , applicable to most supplies of goods and services.
However, there is a reduced rate of 7%29 applicable to supplies, intra-Community acquisitions and
imports of the following, among others:
�• Foodstuffs intended for humans or animals, not including alcoholic beverages.
28 Effective July 1, 2010, the General State Budget Law increases thestandard rate from 16% to 18%, while the reduced rate is raised from 7%to 8%.
Guide to business in SpainTax system73
�• Water.
�• Housing.
And to the following services, among others:
�• Transportation of passengers and their luggage.
�• Hotel services.
�• Restaurants.
�• Tickets to the theater and cinema.
There is also a very reduced rate of 4% applicable to:
�• Bread, flour, milk, cheese, eggs, fruit and vegetables.
�• Books, newspapers and magazines that are not mainly composed of advertising.
�• Pharmaceutical products.
�• Cars for persons with disabilities.
�• Prostheses for persons with disabilities.
�• Certain subsidized housing.
Certain transactions are exempt from VAT (for example, financial and insurance transactions, medical
services, educational services, rental of housing). Since the trader or professional performing these
activities does not charge VAT on them, they do not give the right to deduct input VAT, as described
further on in this report.
Other exempt transactions, however, (mainly those relating to international trade, such as exports)
do confer the right to deduct input VAT.
2.6.3 Place of supply of taxable transactions
Spanish VAT is charged on the transactions referred to above which are deemed to be supplied in
Spanish VAT territory.
The Law provides rules for determining the place where the various transactions are deemed to take
place.
In the case of supplies of goods, the general rule is that the goods are deemed to be supplied in
Spanish VAT territory where they are handed over to the recipient in Spain. But, however, if the goods
are transported in order to be handed over to the recipient, the supply will be deemed to be made in
the place where the transportation commences.
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There are other exceptions to the general rule, such as those established for supplies of goods to be
installed or assembled, etc.
As for the place of supply of services, it should be noted that February 2008 saw the publication of
Directives 2008/8/EC and 2008/9/EC making various amendments to EU VAT legislation, the
transposition of which into national law must be phased in as from January 1, 2010. These
amendments have been included in a Bill which has yet to be passed by the Upper House of the
Spanish Parliament. In view of this situation, the Directorate General of Taxes rendered a Decision
dated December 23, 2009, on the application and interpretation of these EU VAT Directives.
The following cases can be differentiated with regard to the place of supply of services:
As a general rule, services will be deemed to be supplied at the recipient’s place of business or
permanent establishment, where the recipient is a trader or professional; however, if the recipient is
a final consumer, the services will be deemed to be supplied at the supplier’s place of business.
There are, however, exceptions to this general rule:
�• Services related to real estate are deemed to be supplied in the place where the property is
located. This rule also applies to services of accommodation at hotels, camping sites and spas.
�• Transportation services (intra-Community or otherwise) are deemed supplied at the recipient’s
place of business, and it is no longer necessary to provide the VAT number that was required in
some cases until now.
• Services consisting of passenger transportation (whatever the recipient’s status) and of the
transportation of goods (except intra-Community transportation) where the recipient is the final
consumer, are taxed proportionately to the distance covered within Spanish VAT territory.
• The intra-Community transportation of goods to final consumers will be taxed in Spain the
transportation begins within that territory.
�• Certain services are deemed to be supplied in Spain where they are physically performed in
Spanish VAT territory. This is the case, among others, of cultural, artistic, sports, scientific,
educational, recreational and similar activities.
• The same rule applies to ancillary transportation services and to work on movable tangible
property, experts’ reports, etc. where the recipient is not a trader (if he is, the general rule will
apply, i.e., the place of supply is the recipient’s place of business).
• Services supplied electronically and telecommunications and television and radio broadcasting
services will be deemed to be supplied at the recipient’s place of business, unless they are supplied
by a non-EU supplier to consumers domiciled in Spain, where the services are used or operated in
Spain (there is a presumption that the customer resides in Spain if the payment is made out of a
demand deposit opened in Spain. It is also established that services to final consumers not
established in the EU are not subject to VAT.
Guide to business in SpainTax system75
• Restaurant and catering services will be deemed to be supplied in Spain :
• Where supplied on board a vessel, an aircraft or a train during the section of a transport operation
effected within the EU, if the transportation begins within Spanish VAT territory. In the case of a
return trip, the return leg is regarded as a separate transport operation.
• The short-term hiring (30 days in general and 90 days in the case of vessels) of means of
transportation will always be taxed where such means are placed at the recipient’s disposal.
• Lastly, intermediation services will continue to be taxed where the main transaction is deemed to
be performed, if the recipient is not a trader. Otherwise, the general place-of-supply rule
(recipient’s place of business) will apply.
2.6.4 Permanent establishment
As mentioned above, the definition of “place of business” and permanent establishment are relevant
when determining the place where transactions subject to VAT are carried out. Additionally, as
described below, they are also relevant for defining the taxable person of such transactions.
Place of business is defined in the Law as the place where the taxable person centralizes the
management of, and habitually exercises, his business or professional activity.
Permanent establishment is defined as any fixed place of business from which a trader or
professional carries on business activities29. In particular, the following are deemed permanent
establishments for VAT purposes:
�• The place of management, branches, offices, factories, workshops, facilities, stores and, in
general, agencies or representative offices authorized to conclude contracts in the name and for
the account of the taxable person.
�• Mines, quarries or tips, oil or gas wells or other places of extraction of natural products.
�• A construction, installation or assembly project which lasts for more than twelve months.
�• Farming, forestry or livestock operations.
�• Facilities operated on a permanent basis by a trader or professional for the storage and
subsequent delivery of his merchandise.
�• Centers for purchasing goods or acquiring services.
�• Real estate operated under a lease or any other arrangement.
29 Following the entry into force of the new place-of-supply rules, the so-called “force of attraction” of permanent establishments is limited so thatan activity will only be attributable to a permanent establishment if it“acts” in the supply of services, that is, where material or humanresources attributable to the permanent establishment are organized forthe purpose of performing the transaction.
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�• It is noteworthy that although the definition and cases in which a permanent establishment is
deemed to exist are similar for purposes of direct taxes and VAT, they do not fully coincide.
2.6.5 Taxable person
The taxable person is the person with an obligation to charge or pay over VAT. This obligation
normally lies with the trader or professional that performs the supplies of goods or services or other
transactions subject to VAT.
There are, however, some exceptions in which the taxable person is the recipient in the transaction.
This is generally the case of transactions, located in the Spanish VAT territory, in which the person
performing them does not have a place of business or permanent establishment in Spanish VAT
territory and the recipient is a trader or professional, regardless of whether or not he is established in
Spanish VAT territory.
Apart from the obligation to charge VAT, the taxable person must also:
�• File notifications relating to the commencement, modification and end of activities.
�• Request a tax identification number from the tax authorities and notify and evidence it in the
cases established.
�• Issue and deliver an invoice for all its transactions.
�• Keep accounting records and official books (specific VAT books). Effective January 1, 2009 for
operators that elect to apply the monthly refund regime and January 1, 2012 for all other
operators, VAT books must be filed telematically.
�• File periodically, or at the request of the authorities, information relating to its business
transactions with third parties.
�• File tax returns (monthly or quarterly, depending on its volume of transactions, and an annual
summary return).
�• Appoint a representative in order to comply with its obligations where the taxable person does not
have an establishment in Spanish VAT territory. This obligation only applies to traders that are not
established in the EU, unless they are established in a State with which Spain has mutual
assistance arrangements in place.
2.6.6 Taxable amount
In general terms, the taxable amount for VAT purposes is the total consideration for the transactions
subject to VAT received from the recipient or from third parties.
VAT legislation also establishes a series of special rules on determining the taxable amount, including
rules on self-supplies of goods or services and on cases where the parties are related to each other.
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Following the reform introduced by the Law on the Prevention of Tax Fraud, the taxable amount for
these transactions carried out between related parties will be their normal market value.
“Normal market value” means the value that “a recipient at the same stage of sale as that at which
the supply of goods or services is made would have to pay on an arm’s length basis and at the same
time in Spanish VAT territory to acquire the goods or services in question from an independent
supplier.”
In the absence of comparables, the legislation establishes that “market value” means the acquisition
or cost price of the goods or the cost of the services.
Lastly, the legislation refers to the provisions of the Corporate Income Tax Law on the pricing of
transactions between related parties, where applicable.
2.6.7 Deduction of input VAT
Under Spanish VAT law taxable persons are generally entitled to deduct their input VAT from their
output VAT, provided that the goods and services acquired are used to perform the following
transactions, among others:
�• Supplies of goods and services subject to and not exempt from VAT.
�• Exempt transactions which give entitlement to a deduction, with the aim of securing that traders
act neutrally in intra-Community or international trade (e.g. exports).
�• Transactions performed outside Spanish VAT territory which would have given rise to the right to
deduct had they been performed within that territory. In general, the input tax paid on the
acquisition or import of goods or services that are not used directly and exclusively for business or
professional activities may not be deducted, although there are specific rules such as those
relating to the to tax paid on capital goods (partial offset).
The right to deduct input VAT is also subject to formal requirements and may be exercised within four
years.
There are several deduction systems, and the main features of each are as follows:
2.6.7.1 General deductible proportion rule
This rule applies when the taxable person makes both supplies of goods or services giving rise to the
right to deduct and other transactions which do not (e.g. exempt financial transactions).
Effective from January 1, 2006, the effect of subsidies on the right to deduct VAT was eliminated.
This rule applies when the taxable person makes both supplies of goods or services giving rise to the
right to deduct and other transactions which do not (e.g. exempt financial transactions).
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In other words, the percentage of deductible VAT is determined under the following formula:
Transactions that give the right to deduct– – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x 100
Total transactions
The resulting percentage is rounded up.
2.6.7.2 Special deductible proportion rule
This system is generally elected by the taxable person (the election must normally be made in the
month of December prior to the year in which it will apply). The basic features of this deduction
system are the following:
�• VAT paid on acquisitions or imports of goods and services used exclusively for transactions giving
the right to deduct may be deducted in full.
�• VAT paid on acquisitions or imports of goods and services used exclusively for transactions not
giving the right to deduct may not be deducted.
�• VAT paid on acquisitions or imports of goods and services used only partly for transactions giving
the right to deduct, may be deducted in the proportion resulting from applying the general
deductible proportion rule.
2.6.7.3 Deduction system for different sectors of business activity
Where the taxable person carries on business activities in different sectors, it has to apply the relevant
deductible rules to each of those activities separately.
“Business activities in different sectors” means activities classed in different groups in the National
Classification of Business Activities and the deduction systems applicable to them are also different
(this requirement is deemed to be met, among other cases, where under the general deductible
proportion rule, the percentage of deductible VAT differs by more than 50 percentage points).
In such a case, the taxable person must apply the general or the special deductible proportion rule,
on the terms described above, in each of the business sectors. The VAT paid on acquisitions or
imports of goods and services that cannot be specifically allocated to any of the activities will be
deducted in the general deductible proportion resulting from its activities as a whole.
2.6.8 Refunds
If the VAT charged exceeds the amount of deductible VAT, the taxable person must pay over the
difference in its periodic (monthly or quarterly) returns.
If, conversely, the amount of deductible VAT exceeds the amount of VAT charged, the taxable person
may request a refund of the excess which, as a general rule, can only be claimed in the last return for
the year.
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However, provided certain regulatory requirements are met, taxable persons who register on the
Monthly Refund Register may claim a refund of the balance existing at the end of each assessment
period.
Registering on this Refund Register carries with it the obligation to file VAT returns monthly by
telematic means (regardless of the taxable person’s turnover) as well as to file VAT books
telematically.
The period for obtaining the refund is six months from the end of the period for filing the last return
of the year (January 30 of the immediately following year) as a general rule and from the end of the
period for filing monthly returns in the case of taxable persons registered on the Monthly Refund
Register.
There are specific rules on the refund of VAT paid in Spain by traders that are not established in
Spanish VAT territory. To obtain refunds in these cases, the following requirements must be met:
�• Persons applying for a refund must be established in the European Union or, otherwise, must
evidence a reciprocal arrangement in their country of origin for traders or professional established
in Spain (in other words, Spanish traders would obtain a refund of an equivalent tax in their
country of origin).
�• A trader that is not established must not have carried out transactions in Spanish VAT territory that
would make it qualify as a taxable person.
�• Unlike taxable persons established in the European Union, those persons who are not established
in the European Union must appoint a representative, resident in Spanish VAT territory; the
representative will be responsible for fulfillment of the relevant formal and procedural
requirements and will be jointly and severally liable in the case of incorrect refunds and sufficient
security may be sought from it for these purposes.
�• Input VAT is refundable in Spain if it was paid on acquisitions of goods and services or imports of
goods used to perform transactions that give the right to deduct (both in Spain and in the country
where the trader is established).
Refund claims may only be related to the immediately preceding year or quarter, and the time limit
for filing them is June 30 of the following year30.
2.6.9 Special system for groups of entities
This system, effective from January 1, 2008, is the result of implementing in Spanish legislation
the option, set out in the EU VAT Directive, to treat entities that are sufficiently related as a single
taxable person.
30 A new procedure has been established whereby applications for refundsby EU traders not established in Spain must be submitted via theelectronic portal set up for that purpose by their own tax authorities.
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“Sufficiently related” is defined in the law as applying to a parent company (which cannot be the
subsidiary of another company in Spanish VAT territory, on the terms described) and the entities in
which it holds a direct or indirect interest in their capital stock of at least 50%, held throughout the
calendar year, provided that the entities included in the group have places of business or permanent
establishments located in Spanish VAT territory.
This system is optional and applies for at least three years, which term is automatically extendible,
and any potential waiver of the system also applies for at least three years.
The option must be elected by the parent company in the month of December prior to
commencement of the calendar year in which it must take effect. The decision to elect the special
system must be adopted by the boards of directors of each of the entities that will belong to the
group.
In its simplest form, the system merely consists of the ability to aggregate the individual VAT returns
of the group companies that elect to apply the system, so that the balances of offsettable or
refundable VAT of some companies may be offset immediately against the balances of tax payable
belonging to the others, thereby reducing or eliminating any financial expense resulting from
reporting balances to the tax authorities, for which a refund cannot be claimed as a general rule
until the final tax return of the year.
Optionally, group companies may request to use a specific method for determining the taxable
amount, deductions and waiver of exemptions in intra-group transactions.
Under this specific method, the taxable amount would be any direct or indirect costs incurred in
whole or in part in supplying goods or services to group companies, provided VAT has actually been
paid on them (the costs on which no VAT has been paid cannot be included).
This optional method also envisages the power to waive certain exemptions that may be applicable
to intra-group transactions, which power which may be exercised on a case-by-case basis for each
transaction, and a special system is established for making deductions.
As a general rule, the special system for groups of companies establishes a series of specific
obligations for the parent company of the group, such as, for example, the obligation to keep a cost
accounting information system and prepare a report supporting the allocation method used (in the
case of the extended version of the system).
The head company must file a joint return once all the individual returns of the group entities have
been filed. VAT is settled on a monthly basis, regardless of the volume of transactions.
The group of entities may also elect to apply the new monthly refund regime, in which case the
parent company will be responsible for filing the relevant census declaration.
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However, if the vendor is a company or an individual real estate developer, the transfer of buildable
land or the first supply of buildings is taxed under VAT. Second and subsequent supplies of real estate
by companies, traders or professionals in the course of their activity may opt to pay either transfer tax
or VAT. This option is applicable if the acquirer is a trader or professional who can deduct all his VAT
borne and the vendor waives to the VAT exemption, in such case, the acquirer will pay VAT rather
than transfer tax (this option is only possible if the recipient can deduct all of the VAT borne ).
Transfers of shares of Spanish companies are generally exempt from any indirect taxation, except
when more than 50% of the capital stock of a company is transferred (or shares increasing the stake
in a certain entity when the acquirer already has more than 50%) and at least 50% of the assets of
such company, (the participation units or shares of which are transferred) consist of real estate
located in Spain: in this case the transaction will be considered for indirect taxation purposes to be a
transfer of real estate subject to transfer tax at 6% (or 7% depending on the Autonomous
Community Government competent to levy the tax).
Transfer tax is a cost to the acquirer/beneficiary.
In real estate transfers, taxpayers not resident in Spain will have their tax domicile, for the purposes
of compliance with their transfer tax and stamp tax obligations, in the domicile of their
representative, who they must appoint pursuant to the Non-Resident Income Tax Law.
In the event of failure to appoint a representative or to notify the authorities, the tax domicile of the
non-resident taxpayer will be deemed to be the real estate transferred.
Table 9
TRANSFER TAX AND STAMP TAX
Tax rate (*) (%)
Corporate transactions such as incorporation, capital increase/reductionat companies, contributions made by shareholders that do not implya capital increase, etc. (**) 1
Transfers of real estate 6
Transfers of movable assets and administrative concessions 4
Certain rights on real estate 1
Certain mercantile law public deeds 0.5
(*) The Autonomous Communities are entitled to opt to apply a different rate in certain cases. In fact, most of them have opted to apply a 7% rateto real estate transfers, and a 1.5% rate of Stamp Tax to certain transactions.(**) Effective as of January 1, 2009, Law 4/2008 has eliminated the cases in which tax is levied on mergers, spin-offs, asset contributions andexchanges of securities, these transactions being defined in accordance with Articles 83 and 94 of the Corporate Income Tax Law. (special taxneutrality regime, as already commented on ).
2.7 Transfer tax and stamp tax
Transfer tax is levied on a limited number of transactions, including most notably:
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2.8 Excise taxes
In Spain there are several excise taxes in line with the EU Directives on this matter.
These specific consumption taxes are levied on the related products (alcohol and alcoholic
beverages, beer, oil and gas and manufactured tobacco) in the manufacturing, processing or import
phases.
In general, these excise taxes are not applicable in the Canary Islands, Ceuta and Melilla (taxes on
alcohol and beer are also applicable in the Canary Islands).
The special tax on certain means of transportation was introduced as a consequence of the
elimination of the higher VAT rate. This special tax is also applicable in the Canary Islands, Ceuta and
Melilla (although in Ceuta and Melilla the applicable rate is 0%).
The following headings are provided to determine the applicable rates:
Heading 1: Zero rate in mainland Spain, the Balearic Islands and the Canary Islands.
a) Vehicles whose official CO2 emissions are not higher than 120 g/km, except for quad vehicles and
vehicles included under Headings 6, 7, 8 and 9.
b) Vehicles with a single engine which is not an internal combustion engine, except for quad vehicles.
Heading 2: A 4.75% rate in mainland Spain and the Balearic Islands, and a 3.75% rate in the Canary
Islands.
Vehicles whose official CO2 emissions are higher than 120 g/km and lower than 160 g/km, except for
quad vehicles and vehicles included under Heading 9.
Heading 3: A 9.75% rate in mainland Spain and the Balearic Islands, and an 8.75% rate in the
Canary Islands.
Vehicles whose official CO2 emissions are not lower than 160 g/km and are lower than 200 g/km,
except for quad vehicles and vehicles included under Heading 9.
Heading 4: A 14.75% rate in mainland Spain and the Balearic Islands, and a 13.75% rate in the
Canary Islands.
a) Vehicles whose official CO2 emissions are equal to or higher than 200 g/km, except for quad
vehicles and vehicles included under Heading 9.
b) Vehicles with respect to which a measurement of their CO2 emissions may be required if they are
not substantiated.
c) Vehicles falling under categories N2 and N3 equipped as homes.
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d) Quad vehicles. “Quad vehicle” means a vehicle of four or more wheels, with a handlebar steering
system; the driver sits astride and it is equipped with a traction system suitable to be used off the
roads.
e) Water scooters. “Water scooter” means a vessel propelled by an engine and designed to be driven
by one or more persons sitting, standing or kneeling, on the outside of a hull, not in the inside.
Heading 5: A 12% rate in mainland Spain and the Balearic Islands, and an 11% rate in the Canary Islands.
a) The vehicles not included under Headings 1, 2, 3, 4, 6, 7, 8 or 9.
b) Vessels and boats for recreational or sea sports activities, except for water scooters.
c) Planes, light aircraft and other aircraft.
Heading 6: A 0% rate on mainland Spain, the Balearic Islands and the Canary Islands.
Motorcycles not included under letter c) of Heading 9 whose official CO2 emissions are not higher
than 100 g/km.
Heading 7: A 4.75% rate on mainland Spain and the Balearic Islands, and a 3.75% rate in the Canary
Islands.
Motorcycles not included under letter c) of Heading 9 whose official CO2 emissions are higher than
100 g/km and lower than 120 g/km.
Heading 8: A 9.75% rate on mainland Spain and the Balearic Islands, and an 8.75% rate in the
Canary Islands.
Motorcycles not included under letter c) of Heading 9 whose official CO2 emissions are higher than
120 g/km and lower than 140 g/km.
Heading 9: A 14.75% rate on mainland Spain and the Balearic Islands, and a 13.75% rate in the
Canary Islands.
a) Motorcycles not included under letter c) of this Heading whose official CO2 emissions are equal to
or higher than 140 g/km.
b) Motorcycles not included under letter c) of this Heading whose official CO2 emissions are evidenced.
c) Motorcycles with an EEC horsepower equal to or higher than 74 kW (100 cv) and a ratio of net
maximum power to mass of vehicle in running order, expressed in kW/kg, equal to or higher than
0.66, regardless of their official CO2 emissions.
The rates mentioned above will apply unless the autonomous communities have approved other
different rates pursuant to Article 43 of Law 22/2009, of December 18, on the tax and administrative
measures of the new financing system for the autonomous communities under the ordinary system
and cities with a charter of autonomy.
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There is a 50% reduction in the tax base for vehicles with five to nine seats which are for families with
three or more children.
Also, there is a special tax on electricity (applicable to all Spanish territory). This tax is levied on the
intra-EU production, importation and acquisition of electric power. The tax base is determined by
taking that used for VAT purposes and multiplying it by a coefficient of 1.05113. The applicable tax
rate is 4.864%.
2.9 Customs duties on imports
Most customs duties levied in Spain are standard-rate duties which are generally payable on imports
when the goods clear customs. With very few exceptions the duties are ad valorem, i.e. on CIF or
similar invoice value. The rest are minor customs duties relating to storage and deposit rights and the
sale of abandoned goods.
Following Spain’s accession to the EU in 1986, the gradual decrease in customs duties between Spain
and the EU culminated in their complete elimination on January 1, 1993. Customs duties on imports
from countries which do not belong to the EU are those included in the EU’s Common Exterior Tariffs.
The “Harmonized Goods Classification System” and the EU Tariff (TARIC) have been in force in Spain since
1987.Also, since Spain’s accession to the EU, only the exemptions established by the EU have been applicable.
2.10 Tax on insurance premiums
This is an indirect tax which is levied in a single payment on insurance and capitalization transactions
based on actuarial techniques and arranged by insurance entities operating in Spain, including those
operating under the principle of freedom to provide services, its regulation being as follows:
�• Transactions arranged by insurance entities under agreements with State social security agencies or with
public companies entrusted with the management of specific social security regimes are not subject to
this tax. There are also numerous exempt activities, such as compulsory social welfare insurance, group
insurance providing alternative systems to pension plans, life insurance, capitalization transactions,
reinsurance transactions, surety insurance, export credit insurance, agricultural insurance, health
insurance, transactions relating to guaranteed pension plans, and certain insurance transactions
relating to international transportation and the vessels and aircraft used for such transportation.
�• The tax is levied at a single rate of 6% on paid premiums.
�• The taxpayers under this tax are generally insurance entities carrying out taxable transactions,
which must charge this tax in full to the persons taking out insurance subject to the tax. The rules
set forth in the VAT regulations shall be applicable for the purposes of charging this tax.
�• The tax becomes due at the time of payment of the premium by the policyholder.
�• Taxpayers (insurance companies) are generally obliged to file a tax return and pay the tax on a
monthly basis.
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3. Special regimes of certain autonomous communities
3. SPECIAL REGIMES OF CERTAIN AUTONOMOUS COMMUNITIES
3.1 Canary Islands Tax Regime
The Canary Islands enjoy a number of tax benefits intended to compensate for the disadvantages
brought about by insularity and distance from the Spanish mainland whose main goal is the
attraction of investments to the Canary Islands.
The economic and tax regime of the Canary Islands is considered an State Aid, and for that reason is
subject to authorization by the European Union. The application of some of the tax benefits has been
extended for the 2006 fiscal year, and on December 20, 2006, the European Commission approved
the extension of the State Aids for the 2007-2013 period. Royal-Decree Law 12/2006, of December
29, 2006, introduced the appropriated modifications in Law 19/1994, of July 6, of modification of
the economic and tax regime of the Canary Islands, adapting the Spanish regulation to the
conditions for the extended application of this regime.
The extended application of the special tax and economic regime for the Canary Islands implied its
maintenance, although there are certain changes affecting the main tax benefits in order to comply
with the new Rules for State Aids of the European Union for the 2007-2013 period.
In addition, on January 16, 2008, it was published in the Official Gazette the Royal Decree
1758/2007, of December 28, which approves the Regulations for the clarification of the enforcement
of the main tax incentives included in the Tax and Economic Regime (REF) of the Canary Islands, as
established in Law 19/1994, of July 6.
The main features of the regime for the 2010 fiscal year are the following:
3.1.1 Direct Taxation
• Reduction in a 50% of the portion of gross tax payable that relates to income from the sale of
tangible goods specific to agricultural, livestock farming, industrial or fishing activities, provided
that they have been produced by the taxpayer itself in the archipelago. This reduction applies both
to companies (Corporate Income Tax) and to individuals that develop a business activity by the
direct assessment method (Personal Income Tax). This tax benefit remains the same way for the
2007-2013 period.
• The tax credit for investment in fixed assets consisting of 25% of the investment up to a limit of
50% of tax payable net of tax reductions and double taxation credits remains in force in the
Canary Islands despite being derogated in the rest of Spain.
• Increased tax credits rates for investments made in the Canary Islands, with respect to those
applicable to investments in the Spanish mainland. In this sense, the tax credit rates in the Canary
Islands are increased an 80% over the ones applied in the general regime, with a minimum
difference of 20 percentage points. Likewise, the limits for the offsetting of the tax credit against
the tax debt will be increased an 80% over the ones applied in the general regime, with a
minimum difference of 35 percentage points.
• Reduction in the tax base (up to 90% of undistributed income per books for the year) by such
amounts as are allocated by companies, in relation to their permanent establishments in the
Canary Islands, from their income to a Canary Islands Investment Reserve (“Reserva para
Inversiones en Canarias” or RIC). According to the stance adopted by the tax authorities,
taxpayers have a maximum of five years to invest the RIC: the year in which the income is
obtained, the year in which the reserve is recorded for accounting purposes and the following
three years. Investments will be considered made when put into operation.
For the 2007-2013 period, the extended application of the tax regime has produced some very
relevant modifications in relation with the RIC. The most important aspects of the regime are as
follows:
— The application of the RIC is exclusively limited to the benefits, obtained from economic
activities, that have not been distributed, being excluded, among others, benefits obtained
from the transmission of capital goods not allocated to an economic activity (such us the ones
that represent the holding in a company’s share capital, or the assignment to third parties of
own capitals), being excluded also the benefits deriving from the transfer of property of capital
goods when the capital gain is offset against the deduction for reinvestment of extraordinary
profits as regulated in Article 42 of Corporate Income Tax Law, or from capital goods that have
already been used to invest the RIC. It will be deemed as benefits proceeding from permanent
establishments in the Canary Islands the ones deriving from operations performed through
human and capital resources assigned to it, provided that a mercantile cycle yielding economic
results is obtained.
— Taxpayers whose main business activity concerns rendering financial services or rendering
services to other entities of the same Group will only be able to meet their RIC compromises
through initial investments.
— It is distinguished between initial and no initial investments.
— Initials investments are related to the following assets:
– New fixed assets: As a consequence of the following operations:
• Setting up of a new establishment, circumstance that it is understood to happen when the
initial investment determines that the permanent establishment is put into operation for
the first time for the development of a business activity.
• Extension of an existing establishment, when the initial investment has as a consequence
the overall increase of the value of the fixed assets assigned to it.
• Diversification of the activity of an establishment for the manufacturing of new products, or
for the purpose of obtaining a different product or service, or ones which represent an
essential novelty and not merely formal or secondary, compared to the products or services
that the establishment was offering prior to the investment.
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• Fundamental change in the production process of an existing establishment, when the
new process has features or applications from a technical point of view that differ
essentially from the ones existing in the establishment prior to the investment.
– Land investments are valid only if these assets have not taken advantage of the RIC before
and only if these lands are assigned to lease state subsidized housing, to industrial
development or to commercial zones or the restoration of a tourist building located in the
last two cases in decline tourist areas.
– Transportation elements used only for internal purposes.
– Investments in certain immaterial assets (patents rights, licenses, know-how or unpatented
technical knowledge), with the limit of 50% of the value of the investment, except for Small
and Medium-sized Enterprises which limit will be 100%.
– Small and Medium-sized Enterprises can invest in used assets that have not taken advantage
of the RIC before. Nevertheless, in case of investment in land, the requirements mentioned
before must be observed.
– Job creation. Job creation in direct relation with initials investments aforementioned in a
period of six months since they have came into operation. It means a net increase in the
number of employees directly employed in a particular establishment compared with the
average over the previous 12 months, which increase must be maintained during 5 years (3
years for Small and Medium-sized Enterprises). Job creation and the variations in the
average labor force must be measured regarding all the permanent establishments of a
given taxpayer in the Canary Islands. The amount of investment will be the average wage
cost of the labor force hired plus Social Security costs, calculated over a period of the first two
years after the labor force increase.
— Non-initial investments (operating aids). Investments that do not comply with the
requirements to be considered as initials investments detailed before, or assets that contribute
to the improvement and development of the environment, R&D investments, maritime and
ground transportation vehicles exclusively assigned to public services. Used assets that have
not taken advantage of the RIC before and land investment in the same conditions as
mentioned above.
— Investments consisting in subscription of stock share capital, securities or book-entry debt. The
following are considered valid investments:
– Subscription of shares issued by companies that develop its business activities in the Canary
Islands, as well as ZEC companies if these companies invest the amount subscribed in initial
investments or in job increase investments.
– Subscription of shares issued by venture capital companies that make investments in the
other two mentioned companies.
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– In the previous cases, it will be deemed that the RIC investments have been made in the date
in which the company that issues the shares puts into operation the capital goods acquired.
The three previous cases are considered initial investments, whereas the following ones are
considered operating aids.
– Subscription of book-entry debt issued by the Canary Islands Autonomous Community
government, or by Canary Islands local corporations or Autonomous Community
government agencies with the limit of the 50% of the RIC allocations.
– Subscription of securities issued by public entities in order to build or develop public interest
infrastructure, with the limit of the 50% of the RIC allocations, and subjected to certain
administrative proceedings.
– Subscription of securities issued by companies in order to build or develop public interest
infrastructure for the Canary Islands Autonomous Community, by administrative concession
or empowered administrative title, subjected to certain administrative proceedings, and
limited as well to the 50% of the RIC allocations.
— Other relevant requirements are the following:
– Assets must be situated or be received and used in the Canary Islands, and must also be
assigned and needed for the development of an economic activity.
– In case of investments held in shares or other securities, the amount of the investment to be
considered will be the one effectively paid out (including the share premium) at the moment
of the subscription.
– A company that has acquired fixed assets to invest its RIC compromises must maintain the
ownership, and actually use, those assets for at least five years (ten years for land
investments) or for their useful life, if shorter, and cannot transfer, lease, or assign them to
third parties, unless they are used, through an economic activity, for lease or assignment to
third parties for their use, provided there is no direct or indirect link with the lessees or
assignees of such assets and provided the transactions in question are not financial lease
transactions. The possibility of substituting the assets is regulated and it will be applicable
only when its useful life is shorter than the period of maintenance. Furthermore, during this
same period the Reserve cannot be disposed of (e.g., as a dividend distribution).
– In relation with real estate lease activity, only tourist companies, state subsidized housing,
real estate related to industrial development or shopping areas located in decline tourist
areas can take advantage of this regime.
– Taxpayers will be able to carry out anticipated investments of future RIC allocations for the
benefits obtained until December 31, 2013, but only regarding the profits to be obtained in
the three fiscal years following the anticipated investment.
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– The RIC benefit will also apply to personal income taxpayers who perform business activities
and determine their income by the direct assessment method, through a tax credit, subject
to the limit of 80% of the portion of the gross tax payable that proportionally relates to the
net income from economic operations in the Canary Islands.
– The extended application of the economic and tax regime of the Canary Islands entails
formal and information requirements that must be fulfilled when the Income Tax Form is
filed (filing of an investment plan) and also in the Annual Accounts (giving detailed
information about the RIC allocated, investments made, and maintenance periods). On the
other hand, it must be borne in mind that the investment plan might be amended only in
certain cases.
– This tax benefit is incompatible, in relation to the same assets, with the tax credit for
investment and with the tax credit for the reinvestment of extraordinary income.
– Companies whose main business purpose is to render financial services and the entities
whose main business purpose is to render services to other companies of the same group
will only be able to meet their RIC compromises through initials investments.
3.1.2 Indirect taxation
�• Application of the Canary Islands Indirect General Tax, which is similar to VAT, at the standard rate
of 5%.
• Application of the Tax on Imports and Deliveries of Goods in the Canary Islands (AIEM) on the
production and import in the Canary Islands of certain tangible goods.
• The economic and tax regime of the Canary Islands includes also indirect tax benefits. The entities
subject to Corporate Income Tax and residing in the Canary Islands can claim an exemption from
transfer tax31 when they are incorporated, increase their capital or acquire capital goods located in the
Canary Islands or certain intangible assets (in this last case, 50% of the investments except for Small
and Medium-sized Enterprises) only in the acquisitions of investments assets considered as initials
investments according to the previously indicated concept regarding the RIC. Goods acquired must be
new (only Small and Medium-sized Enterprises can acquire used assets), limitations are introduced for
transportation elements, and must be acquired and enter into operation in a period of three months
(or at least the promotion, installation or setup, or the filing of permits or projects must be initiated at
once) and must be situated or be received in the Canary Islands.
Under the transfer tax “corporate transactions” heading, incorporations or capital increases will
only be exempt to the extent that they are allocated to the investments mentioned above. Are
expressly excluded from the application of this benefit capital increases to offset credits.
31 With effects as of January 1, 2005, in the Canary Islands Transfer Taxrate has been increased from 6% to 6.5%, and Capital Duty rate from0.5% to 0.75%.
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Supplies and imports of goods to the companies referred to in the preceding section as initial
investments in new goods (except small and medium-sized companies) that are classed as
investment goods for such companies are also exempt from Canary Islands Indirect General Tax.
The execution of projects having the status of supplies of services resulting in investment goods
will also be exempt. This exemption in IGIC will only be applied to taxpayers who do not have the
right to deduct the total amount of IGIC borne.
Land investments would be valid only if the said lands have not benefited before of the exemption
and in relation with lands assigned to lease state subsidized housing, to certain industrial
development activities or to the commercial areas or tourist activities focused on the restoration of
tourist buildings located on decline tourist areas.
On the other hand, Investments and the residence or permanent establishment in the Canary
Islands must be kept during five years (ten years for leasing state subsidized housing). If the useful
life of goods is shorter than the indicated deadlines or the good is lost or destroyed, they should
be replaced.
It is allowed the transfer of the assets through an economic activity, for lease or assignment to
third parties for their use, provided there is no direct or indirect link with the lessees or assignees
of such assets and provided the transactions in question are not financial lease transactions. In
relation with real estate leasing activity, only tourist companies, state subsidized housing, real
estate related to certain industrial development activities or shopping zones located in decline
tourist areas can take advantage of this regime.
This exemption can also be applied to the acquisition of capital goods by permanent
establishments of companies not residing in the Canary Islands, provided that the requirements
above mentioned are met.
�• Vessels and shipping companies registered in the Canary’s Vessel Special Register can claim
exemption from stamp tax on acts and contracts subject to that tax.
Furthermore, for the crew of such vessels, a 90% reduction in employer social security
contributions is established, and 50% of the salary income earned by taxpayers subject to
Personal Income Tax or to Non-Resident Income Tax, when sailing on those vessels is treated as
exempt income for personal income tax purposes. On the other hand, a 90% reduction can also
be claimed on the portion of the corporate income tax charge (net of any tax credits for double
taxation), which relates to the portion of the tax base resulting from the operation of those
vessels.
In the case of vessels that regularly travel between ports of the European Union, the benefits for
Personal Income Tax, Non-Resident Income Tax and Social Security will only be applied to the crew
members that are nationals of any country belonging to the European Union or the Economic
European Space.
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3.1.3 ZEC – Canary Islands Special Zone
Canary Islands legislation also establishes the special tax regime of the Canary Islands Special Zone
(“Zona Especial Canaria” or “ZEC”), which was authorized by the European Commission in January
2000, since the Commission took the view that its application was consistent with the legislation
governing the Single Market.
The extended application of this regime was included in the negotiating process of the 2007-2013
Guidelines and the ZEC will remain in force until December 31, 2019 for the companies authorized
before December 31, 2013, albeit with minor changes in the regime.
Nevertheless, entities that obtained the authorization to enter the Official Register of ZEC entities
before December 31, 2006 will apply the previous tax regulations until December 31, 2008, that is,
Law 19/1994 in its version in force until December 31, 2006.
The regime applies to newly-formed entities domiciled in the Canary Islands and registered in the ZEC
Official Register of Entities. Registered entities must meet the following requirements:
�• Their registered office and effective place of management must be located in the Canary Islands.
�• At least one of their directors must reside in the Canary Islands.
�• Their corporate purpose must be to engage in the activities expressly provided in the Law.
Financial activities are excluded in all cases.
�• They must create at least five jobs within the first six months after authorization, and maintain an
annual average labor force headcount of at least the same number while they remain under the
regime (this requirement is reduced to three years for the islands that are not head of the
province, that is, different than Gran Canaria and Tenerife).
�• In the first two years after authorization, they must make investments of at least €100,000 in the
acquisition of tangible fixed assets or intangible assets located or received within the geographical
area of the ZEC, and such assets must be used and required for the pursuit of the activities carried
on within the ZEC (this requirement is reduced to €50,000 for the islands that are not head of
their province).
�• They must file before the authorities a registration application and a report describing the
activities to be carried on. The purpose of the report, the contents of which will be binding on the
entity, is to provide assurance of its solvency, viability, international competitiveness, and
contribution to the economic and social development of the archipelago.
As for the tax regime, operating income obtained by ZEC entities is subject to corporate income tax at
a special rate of 4%. Furthermore, the special rates are only applied up to certain maximum amount
of taxable base, depending on the type of business activity and net job creation (ranging from 1.5 to
120 million euros per year).
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Shareholders (whether individuals or legal entities) of a ZEC entity who are resident in Spain cannot
claim a tax credit for double taxation of dividends from ZEC entities to the extent that those ZEC
entities have been taxed at reduced rates.
However, interest, capital gains, and dividends obtained by non-residents from ZEC entities are
exempt for non-resident income tax purposes in Spain on the same terms as those applicable to EU
residents (even if the shareholder is not an EU resident) when such income or gains are paid by a ZEC
entity and originate from transactions performed physically and effectively in the geographical area
of the ZEC. The only case in which these exemptions do not apply is if the income or gains are
obtained through countries or territories classed by regulations as tax havens, or if the parent
company has its tax residence in such territories.
ZEC entities are exempt from transfer and stamp tax on acquisitions of assets and rights used by the
taxpayer in the course of its business, provided that such assets and rights are located, may be
exercised, or must be complied with in the geographical area of the ZEC. Similarly, corporate
transactions by ZEC entities are exempt, except for the dissolution of those entities, and legal
instruments related to transactions by, those entities in the geographical area of the ZEC (subject to
certain exceptions).
Additionally, supplies of goods and services between ZEC entities and imports of goods by ZEC
entities are exempt from Canary Islands Indirect General Tax.
Finally, it must be borne in mind that, for the 2007-2013 period, ZEC entities are considered valid
vehicles for RIC indirect investments made by other taxpayers through the subscription of shares.
3.2 Special regime applicable in the Basque Country
3.2.1 The Economic Accord
The Economic Accord with the Autonomous Community Government of the Basque Country
recognizes the power of the institutions of the provinces of the Basque Country (Álava, Guipúzcoa
and Vizcaya) to regulate taxes. In general, they have full or shared regulatory authority in the area of
direct taxation, but far more limited authority in the indirect taxation area.
The institutions of the provinces of the Basque Country also have the power to levy, manage, assess,
inspect, review and collect taxes, except with respect to import duties and excise taxes on imports.
The Economic Accord regulates the applicable connecting factors in order to determine which body of
laws, namely, those pertaining to Spain (excluding the Basque Country and Navarra) or those
pertaining to the provinces of the Basque Country and to Navarra, apply to taxpayers and the powers
to collect and inspect each tax, with revenue-raising power being shared in some cases between
various tax authorities.
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3.2.2 Corporate income tax
Among the principal special features of the provincial corporate income tax legislation, the following
are particularly noteworthy:
• The standard tax rate in force is 28%.
• In the Basque provinces of Álava and Vizcaya, tax losses and credits may be offset and applied in
future fiscal years without any time limits (the maximum term of 15 years is maintained in
Guipúzcoa).
• Tax deductible nature of goodwill implicit in the acquisition price of holdings in other companies
(financial goodwill), if a series of requirements are met.
• General reduction of 30% of income from intellectual or industrial property, subject to certain
requirements. The reduction is 60% where the intellectual or industrial property has been
developed by the entity itself.
• Definitive exemption of capital gains obtained on the transfer of tangible fixed assets and
intangible assets (full exemption), as well as holdings in companies (60% exemption), subject to
reinvestment.
• 10% tax credit on the amount invested in the acquisition of new noncurrent assets forming part of
the tangible fixed assets or of real estate investments assigned to the entity’s economic
operations, which excludes land, subject to certain requirements.
• 30% tax credit on expenses incurred in research and development activities. An additional 50%
applies for the excess over the average expenses of the two preceding fiscal years- Additionally, a
20% tax credit applies in respect of qualified personnel costs and expenses relating to projects
engaged with universities, public research agencies or innovation and technology centers. A
15%/20% tax credit is also established for certain technological innovation activities. These tax
credits apply with the limit of 100% of the tax payable.
• Possibility of applying a tax credit for job creation in respect of the hiring of all types of workers,
subject to certain requirements.
• There is no obligation to make installment payments on account of the final tax payable.
3.2.3 Personal income tax
Among the special features of provincial personal income tax legislation, the following are
particularly noteworthy:
• The standard tax scale has five brackets and the maximum marginal rate is 45%.
• Possibility of reduction through contributions to a voluntary provident entity (EPSV), a type of
vehicle existing only in the Basque Country and more flexible than a pension plan arrangement
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since it allows funds to be surrendered, provided that they have been held in the entity for at least
10 years, regardless of whether the stipulated contingencies have materialized.
• Reduction in taxable income as a result of contributions made to EPSVs, pension plans and mutual
entities by up to a limit of €8,000 for contributions made by the taxpayer himself, or higher in the
case of participants over 52 years of age, and additionally, the same limit for employer
contributions made for and attributed to the taxpayer.
• Adjustment coefficients are applicable for the calculation of the amount of gains and losses with
respect to the acquisition cost of all types of assets transferred (and not only real estate).
• Tax credit for acquisition of principal residence: tax credit of 18% of the amounts paid (investment
and financing) each year for the acquisition of principal residence, subject to a maximum amount
of €2,160 in tax payable. In the case of legally-defined “large families” and homebuyers under 35,
the tax credit rises to 23%, subject to a limit of €2,760. The total limit is €36,000 per taxpayer.
• On general terms, the time limit for buying a home with amounts deposited in a housing account
is 6 years, although it is extended to 8 years subject to certain requirements.
• Personal and family tax credits are available, with the main tax credits being for descendants, for
ascendants, for disability, and according to personal and family circumstances.
3.2.4 Inheritance and gift tax
One of the main features of the provincial inheritance and gift tax regime is the exemption from this
tax of acquisitions by way of inheritance by the spouse, spousal equivalent, ascendants or
descendants of the deceased.
3.2.5 Wealth Tax
This tax has been abolished effective as of January 1, 2008, in the provinces of Álava and Vizcaya, so
as from the 2008 fiscal year, the obligation to declare and pay this tax no longer applies. As of
January 1, 2009 the obligation to declare and pay this tax no longer applies in Guipúzcoa.
3.3 Special regime applicable in Navarra
Financial and tax dealings between Central Government and the Provincial Government of Navarra
are governed by the Economic Agreement, with terms and conditions and powers similar to those
under the Economic Accord.
3.3.1 Corporate income tax
The main highlights include the following:
• As from January 1, 2008, the standard tax rate is 30%.
• Tax credit for new fixed assets equal to 10% of the acquisition cost, subject to certain conditions.
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• Taxable income can be reduced by 45% of the amounts allocated to a special investment reserve.
• There is provision for a tax credit for job creation, for both permanent employment (€4,207.08
per worker) and the conversion of temporary contracts into permanent contracts (€1,502.53 per
worker).
3.3.2 Personal income tax
The principal special features are as follows:
• The standard tax scale has 6 brackets and the maximum marginal rate is 42%.
• The tax rate applicable to savings will be:
— 18% up to €6,000.
— 21% thereafter.
• Reduction in taxable income as a result of contributions made to pension plans and mutual
entities by up to the lower of the following limits: €8,000 per year, or 30% of salary income and
income from economic activities; in the case of people over 50 the referred limits are increased up
to €12,500 per year, or 50% of salary income and income from economic activities.
• The time limit for buying a home with amounts deposited in a housing account is 10 years.
• There are no adjustment coefficients for the acquisition cost of transferred assets.
3.3.3 Wealth Tax
A 100% tax reduction applies to the gross tax payable, thereby eliminating the obligation to declare
and self-assess this tax, effective as of January 1, 2008.
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4. Local taxes
4. LOCAL TAXES
The Revised Local Finances Law approved by Legislative Royal Decree 2/2004, of March 5, establishes
a scheme aimed at rationalizing the local taxation system and facilitating the activity of local entities.
Under this legislation, local authorities are empowered to modify some aspects of this type of taxes.
This Law, establishes two different types of municipal taxes, which can be classified as follows:
�• Periodic taxes:
— Tax on real estate (Impuesto sobre Bienes Inmuebles).
— Tax on business activity (Impuesto sobre Actividades Económicas).
— Tax on motor vehicles (Impuesto sobre Vehículos de Tracción Mecánica).
• Other taxes:
— Tax on erection and installation projects and construction works (Impuesto sobre
Construcciones, Instalaciones y Obras).
— Tax on increase in urban land value (Impuesto sobre el Incremento del Valor de los Terrenos de
Naturaleza Urbana).
4.1 Periodic Taxes
4.1.1 Tax on real estate
This tax is levied annually on owners of real estate or on holders of rights “in rem” thereon based on
the cadastral value determined pursuant to the Property Cadastre regulations, at different rates up to
a maximum of 1.30% for urban property and 1.22% for rural property.
4.1.2 Tax on business activity
This tax is levied annually on any business activity conducted within the territory of the municipality.
However, the following taxpayers are exempted from this tax:
�• Individuals.
�• Taxpayers who start a business activity within Spanish territory, during the two first tax periods in
which they carry out said activity.
�• Taxpayers subject to corporate income tax and entities without legal personality whose net sales (at
group level according to article 42 of the Commercial Code) in the previous year were under €1 million.
�• In the case of taxpayers subject to non-residents’ income tax, the exemption will only apply to
those operating in Spain through a permanent establishment, provided that they obtained net
sales of under €1 million in the previous year.
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The tax payable is calculated on the basis of various factors (type of activity, area of premises, net
revenues, etc.). The minimum tax rates published by the Government can be adapted by the
municipal authorities.
4.1.3 Tax on motor vehicles
This tax is charged on the ownership of motor vehicles and is levied annually on the basis of the
horsepower of the vehicle. Municipal councils can double the minimum tax rate.
4.2 Other taxes
4.2.1 Tax on erection and installation projects and construction work
This tax is levied on the actual cost of any work or construction activity that requires prior municipal
permission, excluding VAT and any similar taxes.
The tax rate will be set by each municipal council up to a top rate of 4%, and the tax falls due at the
start of the project regardless of whether the permit has been obtained.
4.2.2 Tax on increase in urban land value
This tax is levied on the increase disclosed in the value of urban land whenever land is transferred.
The taxpayer in transfers for consideration is the transferor and in donations, the transferee.
The tax rate is set by the municipal council up to a top rate of 30%. The tax base is the increase in the
value of the land . The tax base is determined by reference to the value of the land when the tax falls
due, which in the transfer of land will be the value that has been determined for the purposes of
property tax. Certain annual percentages will be applied to this value based on the ownership
period, which will be determined by each municipal council, and may not be higher than the
following limits: (i) Between one and five years: 3.7; (ii) Up to 10 years: 3.5; (iii) Up to 15 years: 3.2;
(iv) Up to 20 years: 3.
This tax is deductible for personal income tax purposes from the transfer value of real estate.
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EXHIBIT I.– Calculation of corporate income tax
EXHIBIT I: CALCULATION OF CORPORATE INCOME TAX
A Limited Liability Company tax resident in Spain (Teleco, S.L.) is engaged in the supply of
telecommunications services. According to the 2010 financial statements, the company obtained a
profit per books of €7,225,000. The company has recorded in its accounts the following transactions
which may give rise to the need to make the relevant tax adjustments to the income per books:
�• Teleco, S.L. has its offices in a rented building, and pays to the owner of that building an annual
amount in this respect of €200,000. In addition, the company owns a building, which has been
rented to a third party. The rental income obtained by Teleco, S.L. amounted to €100,000, and
the withholding taxes borne by it amounted to €19,000.
�• The company has recorded a corporate income tax expense amounting to €2,167,500.
�• The company recorded a provision for impairment losses in relation to foreseeable bad debts
amounting to €170,000. Of that amount, €125,000 relate to accounts receivable less than six
months past-due on the date on which the corporate income tax relating to that year fell due.
�• Teleco, S.L. purchased certain software on July 1 of the previous year, for €600,000. This tax
period it recorded an amortization expense for that software amounting to €300,000.
�• In the previous tax period the company recorded a provision for impairment losses in relation to
foreseeable bad debts amounting to €350,000, relating to accounts receivable two months past-
due at the date on which the corporate income tax relating to that year accrued.
�• The company recorded a provision for other expenses (provision for incentives) in the amount of
€225,000 to cover the expense to be incurred in relation to the bonus payable to employees.
However, there is no contract or similar document that records the company’s commitment to pay
the aforementioned bonus.
�• The company purchased some computers on October 1, 2008 amounting to €60,000. In this tax
period it recorded a depreciation expenses totaling €20,000 in relation to those computers.
�• The company incurred expenses on scientific R&D in the amount of €620,000 during the year.
The average expenses incurred in the previous two years amounted to €120,000.
�• Teleco, S.L. incurred training expenses for its employees in the amount of €30,000. The average
of the expenses incurred in this respect in the two preceding years amounts to €50,000.
�• The company purchased shares in certain companies. In this connection, the company obtained
dividends in a gross amount of €105,000, and bore withholding taxes in the amount of €19,950.
Such shares were acquired by February 15 and transferred by the end of March.
�• According to the information furnished by the company, tax installment payments were made
during the tax period in the amount of €2,400,000.
Guide to business in SpainTax system99
Exhibit I
2010 CORPORATE INCOME TAX CALCULATION
Income for the year 7,225,000
POSITIVE ADJUSTMENTSCorporate income tax expense 2010 2,167,500Provision for impairment losses on receivables 125,000Excess amortization of Software 102,000Excess depreciation of computers 5,000Provision for incentives 225,000
NEGATIVE ADJUSTMENTSProvision for impairment losses on receivablesrecorded in the previous tax year <350,000>
Tax base 9,499,500Tax rate 30%
Gross tax payable 2,849,850
TAX CREDITSExpenses in scientific R&D <240,000>Employees training expenses <1,100>
Net tax payable 2,608,750
Withholdings and prepaymentsWithholding on dividends <19,950>Withholding on rental income <19,000>Tax installments payments <2,400,000>
Net amount payable 169,800
Guide to business in SpainTax system100
EXHIBIT II.– Non-resident case study: income obtained without a permanent establishment
EXHIBIT II:NON-RESIDENT CASE STUDY: INCOME OBTAINED WITHOUT A PERMANENT ESTABLISHMENT
The Dutch company TPC, B.V. posted one of its employees to Spain in September 2010. This
employee worked in the Netherlands until August 2010. The salary of the employee corresponding to
the September-December period amounts to €12,000, and is paid by the Spanish branch. The
employee continues making contributions to the Dutch Social Security System, amounting to €800
for those four months.
In addition, the employee opened a bank account in Spain and he received interest amounting to
€100 and bore a withholding tax of €19 on said interest.
In 2010 he buys and sells shares of a Spanish company and obtains a capital gain of €100. On
another transaction of the same type with shares in another Spanish company, he obtains a capital
loss of €20. He also transfers shares of a Dutch company and obtains a capital gain of €50.
The employee will be considered as a non-resident in Spain for tax purposes in 2010, as he was not
physically present in Spain for more than 183 days and his centre of economic interest was not
located in Spain this year.
The employee will be taxed separately on each item of income obtained and the tax will accrue when
the income falls due or on the date of actual payment if it is sooner.
1. Salary income: the Spanish branch pays his salary and, therefore, it must pay each month (or every
three months if its volume of operations in the previous year was less than €6,010,121) withholdings
on the gross salary paid, without deducting any expenses. As a result, in this case, the branch would
have to pay, in total and in the periods mentioned, to the tax authorities 24% of the gross salary paid
to the employee, which amounts to €2,880.
2. Interest on the bank account: as a non-resident, the employee could claim a refund of the €19
withheld by the Bank, as the interest obtained from non-residents’ bank accounts is exempt from tax.
3. Shares: Only the sale of Spanish shares is subject to taxation. Additionally, gains and losses cannot
be offset against each other.
Therefore, the capital gain obtained from the sale of the first shares would be taxable. However,
according to the Tax Treaty between Spain and the Netherlands, that capital gain can only be
taxed in the Netherlands, as the country of residence of the employee, and as a result, it will be
exempt in Spain.
Guide to business in SpainTax system101
EXHIBIT III.– Vat case study
EXHIBIT III:VAT CASE STUDY
A Spanish company, leader in the sale of specialized machinery, delivers measuring machines for the
automotive industry to various countries, among others Spain. The recipients of these machines are
taxable persons for VAT purposes, duly registered in their respective countries of residence.
In the course of its business activities, the company incurs every month in the following expenses:
�• €900,000 plus VAT for the purchase of raw materials necessary for its production, being all the
purchases made within the Spanish market.
�• €30,000 plus VAT for the rental of its factory.
�• €7,500 plus VAT for other business expenses.
The goods and services acquired are subject to Spanish VAT at the standard rate of 16% (said
acquisitions have taken place in the first semester of 2010). Consequently, the input VAT for the
Spanish company every month amounts to €150,000 (i.e. 937,500 x 16%).
On the other hand, the Spanish company sells every month of 2010 first semester its products in the
Spanish, EU and other international markets according to the following.
�• Spanish sales: €1,000,000 plus VAT.
�• EU Sales: €200,000.
�• International Sales: €100,000.
The Spanish company must charge VAT for the supplies performed within the Spanish market at the
standard rate of 16% (i.e. 1,000,000 x 16% = 160,000). However, the supply of goods to an EU
Member State, or the supply of goods to other third territories (export of goods), would be exempt
from VAT provided that all the regulatory requirements are met; among others, the demonstration of
the transportation of products outside the Spanish VAT territory and that the recipient of the goods is
a VAT entrepreneur when the goods are supplied to other EU Member State.
As the Spanish company’s turnover of the previous year exceeded the amount of €6,010,121.04, the
company is considered to be a large company and therefore it is obliged to submit the returns on a
monthly basis. Otherwise, the returns must be submitted quarterly.
The output VAT must be recorded in such return (i.e. €160,000). However, this amount may be offset
with the input VAT borne in the prior acquisitions of goods and services derived from its business
activity (i.e. €150,000).
The difference between the output VAT and input VAT will amount to €10,000 that will be the final
quota to be paid to the Tax Authorities when submitting the return.
Prepared by:
Sociedad Estatal para la Promoción y Atracción de las
Inversiones Exteriores, S.A.U. RM: Tomo 21818, libro 0, folio
15, sección 8, hoja M-388683,
Inscripción 1. NIF: A-84479013. Depósito legal: M-3674-2007.
Published 2010
This guide was researched and written by Garrigues on behalf
of INVEST IN SPAIN.
This guide is correct to the best of our knowledge and belief at
the date indicated below. It is, however, written as a general
guide so it is necesary that specific professional advice be
sought before any action is taken.
Madrid, January 2010
4With the aim of fostering investment,employment, competitiveness and economicgrwoth, the Spanish ventral goverment and allother public authorities have developed andimplemented a wide and comprehensive rangeof aid instruments and incentives, placingspecial emphasis on the forstering of indefinite-term employment and on research,development and technolocical innovation(R&D and TI)
Furthermore, since Spain is an EU MemberState, potential investors are able to accesEuropean and programs, which provide furtherincentives for investing in Spain.
Guide to business in Spain
Investment aid andincentives in Spain
&
4Guide to business in Spain
Investment aid andincentives in Spain
& 1. Introduction
2. State incentives for training and employment
3. State incentives for specific industries
4. Incentives for investment in certain regions
5. Sme incentives
6. Internationalization incentives
7. E.U. aid and incentives
8. Compatibility
3
5
16
50
59
66
68
86
Guide to business in SpainInvestment aid and incentives in Spain2
Galicia
Asturias Cantabria PaísVasco
La Rioja
Navarra
Castilla y León
Extremadura
Andalucía
Castilla - La Mancha
Comunidad de Madrid
Aragón
Cataluña
Murcia
ComunidadValenciana
Canarias
Baleares
FRANCE
PORTUGAL
MORROCO
La Coruña
Santiago de Compostela Lugo
Orense
OviedoSantander
León
Palencia
Valladolid
Segovia
Ávila
Soria
Logroño
Vitoria
Pamplona
Huesca
Zaragoza
Lérida
Tarragona
Castellón de la Plana
Valencia
Alicante
Murcia
Albacete
Cuenca
Madrid
Toledo
Cáceres
Mérida
Córdoba
Sevilla
Huelva
Cádiz
Ceuta
Málaga
Granada
Jaén
Almería
Melilla
BadajozCiudad Real
Guadalajara
Palma De Mallorca
Barcelona
Gerona
Teruel
BilbaoSan Sebastián
Salamanca
Burgos
Zamora
Pontevedra
Las Palmas de Gran Canaria
Santa Cruz de Tenerife
Guide to business in SpainInvestment aid and incentives in Spain3
1. Introduction
1. INTRODUCTION
With the aim of fostering investment, employment, competitiveness and economic growth, the
Spanish central government and all other public authorities have developed and implemented a
wide and comprehensive range of aid instruments and incentives, placing special emphasis on the
fostering of indefinite-term employment and on research, development and technological innovation
(R&D and TI).
Furthermore, since Spain is an EU Member State, potential investors are able to access European aid
programs, which provide further incentives for investing in Spain.
These investment aid measures can be classified as follows:
�• State and regional incentives for training and employment.
�• State incentives for specific industries.
�• Incentives for investments in certain regions.
�• State incentives for SMEs.
�• Incentives for internationalization.
�• EU aid.
Guide to business in SpainInvestment aid and incentives in Spain4
Most of the aid that can be obtained from the various agencies depends largely on the specific
characteristics of each investment project (i.e. the better the prospects of the project, the more
possibilities there are of obtaining financing and aid).
In this respect, a search engine for Spanish grants and incentives can be found at the INVEST IN SPAIN
website (www.investinspain.org). Using this tool, companies can gain easy access to updated
information regarding the grants available for their investment projects. Users can sign up to the
automatic alert system which prompts a tailor-made newsflash as suitable grants or subsidies are
published.
Notwithstanding the tax incentives discussed in other chapters (the basic tax incentives analyzed in
Chapter 3 are investment tax credits – For further information go to Chapter 3, epigraph 2–), the
main general State incentives for investors are described in the following paragraphs.
2. STATE INCENTIVES FOR TRAINING AND EMPLOYMENT
These incentives, which form part of the Government's employment promotion policy and can signify
important savings in labor costs, can be divided into two types:
2.1 Training incentives
The Vocational Training system in Spain is divided into two subsystems:
�• Regulated Vocational Training.
�• Vocational Training for Employment, carried out the area of employment in a strict sense.
Traditionally, Vocational Training for Employment was, in turn, subdivided into two subcategories,
depending on whether it was aimed at employed workers (Ongoing Vocational Training) or
unemployed workers (Occupational Training).
Nonetheless, Royal Decree 395/2007, regulating the Vocational Training for Employment subsystem,
combined the aforesaid two subcategories, creating a single model of Vocational Training for
Employment aimed at both employed and unemployed workers.
In this context, the Vocational Training for Employment subsystem encompasses a set of instruments
and actions aimed at encouraging and extending to companies and to employed and unemployed
workers a type of training that meets their needs and contributes to the development of a
knowledge-based economy.
The Vocational Training for Employment subsystem is made up of the following training initiatives:
�• Demand-based training, company training initiatives and individual leaves of absence for training,
financed in whole or in part with public funds, to meet the specific training needs raised by
enterprises and their workers.
�• Supply-based training, training initiatives aimed primarily at employed workers and training
initiatives aimed primarily at unemployed workers with a view to offering them training which
capacitates them for qualified work and access to jobs.
�• Training alternating with work, training initiatives under vocational training contracts and public
training/work programs, permitting the worker to combine training with professional practice on
the job.
�• Programs to support and accompany training, aimed at improving the efficiency of the Vocational
Training for Employment subsystem.
The main characteristics of the Vocational Training for Employment subsystem are as follows:
�• It is fundamentally financed with funds from the vocational training contributions of enterprises
and workers, aid from the European Social Fund and specific contributions established in the
2. State incentives for training and employment
Guide to business in SpainInvestment aid and incentives in Spain5
National Employment Service budget. Autonomous Communities may also earmark their own
funds to finance the management of projected training initiatives.
�• Groups of workers with difficulties for entering or remaining in the job market (i.e., unemployed
women, the disabled, those affected by and victims of terrorism, etc.) can be given priority to
participate in training programs.
�• Additionally, reference must be made to the credit allocated to enterprises for demand-based
vocational training, which is subdivided into two types:
— Credit for carrying out own training programs.
Enterprises can avail themselves of a credit for the training of their workers, in the form of
reductions in their social security contributions, calculated by applying the percentage
stipulated annually in the General State Budgets Law to the amount paid in for vocational
training by each enterprise during the preceding year.
In particular, in 2010 enterprises may avail themselves of a credit for the training of their
workers equal to the result of applying to the amount paid by the enterprise for vocational
training in 2010, the reduction percentage, based on size of enterprise, indicated below:
a) Enterprises of 6 to 9 workers: 100%.
b) Enterprises of 10 to 49 workers: 75%.
c) Enterprises of 50 to 249 workers: 60%.
d) Enterprises of 250 or more workers: 50%.
Enterprises of 1 to 5 workers may avail themselves of a reduction credit per enterprise equal to
€420 instead of a percentage.
These figures, which apply to all enterprises in general, are improved for industries especially
affected by structural changes in world trade: the textile and clothing, shoe, furniture and toy
industries.
In turn, enterprises opening new workplaces during any given year, as well as newly formed
enterprises, may also avail themselves of a credit for the vocational training of their workers
(equal to the amount stipulated in the General State Budgets Law for that year) when they add
new workers to their workforce.
In particular, in 2010, the reduction credit available to these enterprises will be equal to the
result of applying €65 to the number of new workers.
— Credit for granting workers individual leaves of absence for training.
Enterprises granting their workers individual leaves of absence for training may avail
themselves of an annual reduction credit additional to that indicated in the preceding
Guide to business in SpainInvestment aid and incentives in Spain6
paragraph, albeit up to the limit available in the budget stipulated annually in the General
State Budgets Law.
Enterprises granting their workers individual leaves of absence for training in 2010 may avail
themselves of an additional annual reduction credit equal to the salary cost of the leaves
reported, up to the following limits:
– The equivalent of 200 hours’ costs for enterprises with a workforce of between 1 and 9
workers.
– The equivalent of 400 hours for enterprises with a workforce of between 10 and 49 workers.
– The equivalent of 600 hours for enterprises with a workforce of between 50 and 249
workers.
– The equivalent of 800 hours for enterprises with a workforce of between 250 and 499
workers.
– The equivalent of the salary costs of another 200 hours for each additional 500 workers on
the enterprise’s workforce.
Notwithstanding the foregoing, the additional credit allocated to all enterprises granting
such leaves of absence cannot exceed 5% of the credit stipulated in the National
Employment Service budget for the financing of reductions in social security contributions for
vocational training for employment.
�• In connection with programs to support and accompany training, Order TIN/2805/2008,
implementing Royal Decree 395/2007 on programs to support and accompany training,
stipulating the terms regulating the grant of the public subsidies to be used to finance those
programs, was published in the Official State Gazette on October 7, 2008.
In particular, this Order stipulates the terms regulating the grant of the public subsidies to be
used to finance the research and innovation programs foreseen among the programs to support
and accompany training provided for under Royal Decree 395/2007, and introduces a transitional
provision regarding the possibility of developing the information and guidance programs also
provided for under the aforesaid Royal Decree.
— Subsidies to be used to finance research and innovation programs.
— Research and innovation programs, as a basis for generating knowledge and experience, are
aimed at contributing to the improvement of the vocational training for employment
subsystem, fostering quality training of employed workers and the unemployed at industry or
inter-industry levels, and disseminating and promoting the subsystem as a whole.
In particular, the following types of research and innovation programs are distinguished:
a) Prospecting and analysis programs.
Guide to business in SpainInvestment aid and incentives in Spain7
These programs are aimed at obtaining a more detailed knowledge of the factors making
up training demands, of specific training problems and needs in the various industries or
territories and of other matters generally affecting vocational training for employment, with
a view to anticipating changes in professional qualifications and adapting training modules
to the provisions regulating Professional Certificates.
b) Programs for preparing and experimenting with innovative products, techniques and/or
tools of interest to the improvement of vocational training for employment.
These programs will be aimed at furnishing the companies and the various agents active in
the management of training unemployed and employed workers with instruments enabling
them to improve their organization, planning and development.
c) Programs to evaluate vocational training for employment.
These programs will be aimed at evaluating training in the various industries or territories
and developing evaluation methodologies and tools for use by the parties participating and
managing training, with a view to improving quality.
d) Promotion and dissemination programs.
These programs are aimed at generating vocational training for employment knowledge
networks using virtual workplaces, documentary consultation bases, dissemination
campaigns, publications, on-line or in-person discussion forums, good practices guides and
any other measure favoring the promotion and dissemination of professional training for
employment initiatives, studies, tools and products among employees, employers, business
organizations and labor unions and the various training agents, as well as the promotion of
groupings of small and medium sized companies for the organization and management of
their training programs.
Employers, entities or organizations meeting the requirements stipulated in the order
regulating the subsidies, and in their respective calls for applications, will be eligible for the
subsidies.
The procedure for granting these subsidies is initiated “ex officio” in a public call for
applications issued by the Director-General of the National Employment Service or the
Autonomous Community body with jurisdiction on the matter.
— Subsidies to be used to finance information and guidance programs.
Information and guidance programs are to furnish employees with information,
acompaniment and guidance regarding possibilities for training and professional mobility, as
well as regarding the ways to access vocational training for employment programs generating
vocational skills.
Guide to business in SpainInvestment aid and incentives in Spain8
Although Order TIN/2805/2008 does regulate the financing of this type of program, its sole
transitional provision provides that until specific regulations are approved for this type of
program, calls for applications may be published on the basis of the guidelines stipulated in
the Order. Thus, a Decision was issued by the State Employment Public Service on February 3,
2009, in which it approved the call for applications for the grant of public subsidies with a
charge to fiscal year 2009, to be used for support and accompaniment programs.
2.1.1 European Social Fund
Other subsidies are granted by the State and by the EU for projects fostering the training of workers
(see "Structural Funds" in Section 7.3 below).
2.2 Employment incentives
2.2.1 Fostering of indefinite-term employment and of the conversion of temporary contracts intoindefinite-term contracts
The Spanish Central Government offers a wide range of employment incentives, consisting mainly of
reductions in employer social security contributions, aimed at promoting stable or indefinite jobs
(especially for unemployed persons included in groups such as women in general, young people
aged 16-30, the long-term unemployed, unemployed people over the age of 45, individuals receiving
the unemployment benefit granted under the Special Social Security System for Agriculture, and
people with disabilities).
The possibility of benefiting from reductions in social security contributions pursuant to the Special
Plan for the indefinite-term contracting of unemployed workers with family responsibilities, will only
apply to contracts executed from December 2008 through December 31,2010.
Notwithstanding the foregoing, on an exceptional basis, reductions in social security contributions
are maintained for temporary contracts executed with disabled workers or with socially-excluded
individuals, provided that in both cases they are unemployed and registered at the Employment
Office, as well as with persons providing evidence of having been a victim of gender-based violence.
Where the indefinite-term or temporary contract is part-time, the reductions stipulated for each case
will be reduced by applying a percentage equal to the percentage of the working day stipulated in
the contract, increased by 30%, the result of which may in no case exceed 100% of the stipulated
reduction, except in the case provided deductions for hiring people with disabilities through special
employment centers.
The incentives, which are contained in Law 43/2006, of December 29, 2006, on improved growth
and employment, are summarized in the following table:
Guide to business in SpainInvestment aid and incentives in Spain9
Guide to business in SpainInvestment aid and incentives in Spain10
Table 1
GRANTS FOR EMPLOYMENT CONTRACTS
Group Description Annual amount (in euros) Duration
DEDUCTIONS FOR INDEFINITE-TERM CONTRACTS
Young people Aged 16 through 30 (Article 2.1.e) 850 4 years
Women
People aged over 45 (Article 2.1.d)
Unemployed women(Articles 2.1.a)
850 4 years
Victims of gender-basedviolence (Article 2.4)
850 4 years
1,200Entire term of the
contract
Women hired in the 24months following childbirth(Article 2.1.b)
1,200 4 years
Women hired after 5 yearsof unemployment if, prior totheir withdrawal from work,they had worked for at least3 years (Article 2.1.c)
1,200 4 years
Other groups andgroups in specialcircumstances
Unemployed workersregistered as job seekersfor at least six months andsocially-excluded workers(Articles 2.1.f and 2.5)
600 4 years
People with disabilities (Article 2.2)
Women withdisabilities(Article2.2.3)
People agedover 45 (Article2.2.3)
Entire term of thecontract— In general (Article 2.2.1) 4,500 5,350 5,700
— In the case of severedisability (Article 2.2.2)
5,100 5,950 6,300
(Training, hand-over andsubstitution-due-to-retirement contractsconverted to indefinite-termcontracts (Article 2.6)
500 4 years
Table 1
GRANTS FOR EMPLOYMENT CONTRACTS
Indefinite-term contracts for workers aged 60 orover, with 5 or more years’ service at the company(Article 4.1)
50% of the employer contributions forcommon contingencies, excludingtemporary disability, increased by 10% eachyear up to 100%
Entire term of thecontract
SPECIAL PLAN FOR OFFERING INDEFINITE-TERM CONTRACTS TO UNEMPLOYED PERSONS WITH FAMILY RESPONSIBILITIES
Offering indefinite-term contracts tounemployedpersons with family responsibilities(Article 3)
1,500 2 years
DEDUCTIONS FOR EXCEPTIONAL TEMPORARY CONTRACTS
People with disabilities hired undertemporary contracts to promoteemployment (Article 2.2.4)
Men under45
— In general(Article 2.2.4)
3,500 4,100Entire term of the
contract
— In the case of severe disability(Article 2.2.4)
4,100 4,700 Entire term of the
contract
Victims of gender or domestic violence(Article 2.4)
600Entire term of the
contract
Socially-excluded individuals (Article 2.5) 500Entire term of the
contract
Men over45
Womenunder 45
Womenover 45
4,100 4,700
4,700 5,300
DEDUCTIONS FOR MAINTENANCE OF INDEFINITE-TERM EMPLOYMENT
Women whose contract is held in abeyance(indefinite-term or temporary contract convertedinto indefinite-term) returning after maternity(Article 4.2)
1,200 4 years
DEDUCTIONS FOR HIRING PEOPLE WITH DISABILITIES THROUGH SPECIAL EMPLOYMENT CENTERS
Indefinite-term or temporary contracts ,as well asthe conversion of temporary contracts to promotethe employment of disabled persons intoindefinite-term contracts, or the conversion offixed-term or temporary contracts into indefinite-term contracts (Article 2.3)
100% of employer social securitycontributions, including those foroccupational accident and disease, andjoint collection contributions
Entire term of thecontract
Group Description Annual amount (in euros) Duration
Guide to business in SpainInvestment aid and incentives in Spain11
In turn, Additional Provision 4 of the 2010 General State Budgets Law provides that indefinite-term
employment contracts of workers aged 59 or over, with 4 or more years’ service, may give rise to an
entitlement to a 40% reduction in employer social security contributions for ordinary contingencies,
except for temporary incapacity arising from them, with respect to the contributions paid as from the
date that the aforementioned requirements are met. If the worker has not worked at the enterprise
for four years by the time he turns 59, the reduction will apply as from the date on which the four-
year term is completed.
In general, the duration of the reduction will be one year.
Also included among the measures adopted by the Government under the Spanish Plan for the
Stimulation of the Economy and Employment (Plan E), was the enactment of Royal Decree-Law
2/2009, on Urgent Measures for the Maintenance and Fostering of Employment and the Protection
of Unemployed Persons, with a view to implementing special measures aimed at combating the
economic crisis, both in terms of its financial effects and its effects on the actual economy and, in
particular, on employment or the so-called Renta Activa de Inserción (funds to aid unemployed
persons with special economic needs and difficulties finding employment).
One of the measures targeted at maintaining employment is a 50% reduction in the employer’s
contributions to social security for common contingencies payable for employees whose contract is
being held in abeyance or who have temporarily reduced their working hours as part of a collective
layoff procedure, including contracts collectively held in abeyance pursuant to insolvency legislation.
The duration of the reduction will be equal to the length of the employee’s unemployment, and may
in no case exceed 240 days per employee.
The aforesaid Royal Decree-Law 2/2009 also includes a measure to foster employment consisting of
a 100% reduction in the employer’s social security contributions for common contingencies for
employers who hire unemployed workers receiving unemployment benefits or subsidies or the Renta
Activa de Inserción. This reduction will be received until the total account reaches an amount equal
to the gross amount of the benefit, subsidy or Renta Activa de Inserción not yet paid to the employee
by the commencement date of the employment relationship, and may in no case exceed 3 years.
As a corollary to the foregoing measures, on December 31, 2009 the Official State Gazette published
Law 27/2009, on Urgent Measures for the Maintenance and Fostering of Employment and the
Protection of Unemployed Persons. This Law, in which most of the measures were taken from Royal
Decree-Law 2/2009, contains significant additional measures aimed at favoring the maintenance of
employment, most notably the following:
• It retains the 50% reduction relating to the employer’s social security contributions in cases of
collective layoff procedures, provided for under Royal Decree-Law 2/2009, although it introduces
two relevant specifications: (a) first, enterprises which have terminated or are planning to
terminate, by dismissal acknowledged or declared unjustified or by collective layoff, contracts to
which the aforesaid reduction had been applied will be ineligible for twelve months for the
reductions established under the Program for the Fostering of Employment regulated under Law
Guide to business in SpainInvestment aid and incentives in Spain12
Guide to business in SpainInvestment aid and incentives in Spain13
43/2006; (b) secondly, it increases the possibility of applying the 50% reduction to applications
for collective layoff procedures filed though December 31, 2010.
• It retains the 100% reduction relating to the employer’s social security contributions for common
contingencies, provided for under Royal Decree-Law 2/2009 for the hiring of workers under
indefinite-term contracts where those workers had been collecting unemployment benefits,
although it includes employers who hire workers under indefinite-term contracts through
December 31, 2010.
• It also adds two measures aimed at boosting the use of part-time indefinite-term contracts, as
well as part-time temporary contracts for certain groups which are difficult to employ. In this
connection, two amendments are introduced into Law 43/2006: (a) the first includes among
workers whose hiring may give rise to a reduction, the applicant for a better job who, having
worked part-time with very few working hours (less than one third of the full working day) is hired
by another company, if such applicant is included in the groups regulated under the Program for
the Fostering of Employment; (b) the second entails providing proportionally more incentives for
the part-time contract than for the full-time contract.
• Lastly, it attempts to encourage the employment of disabled workers with: (a) a transitional
increase (through December 31, 2010) in the subsidies for maintaining jobs at Special Job Centers;
as well as with (b) the improvement of the reductions in favor of Special Job Centers and of the
social security exclusion rules.
2.2.2 Incentives and reductions in the employer’s social security contribution to facilitate theadjustment of employment in industries affected by structural changes in world trade
With a view to facilitating the adjustment of employment in various industries affected by structural
changes in world trade, a Decision of the Council of Ministers dated June 9, 2006 authorized the
financing, through the budget of the State Employment Public Service, of the grant of various
subsidies which, as part of the active employment policies, were aimed at facilitating the adjustment
of employment and the re-hiring of surplus workers from industries affected by structural changes
due to the opening of world trade. Thus, in 2009, various industries were give a specific treatment
through the following provisions implementing socio-labor measures aimed at supporting those
industries:
• Royal Decree 100/2009, for the shoe manufacture, shoe parts, tanning and leather working
industry.
• Royal Decree 1679/2009, for the furniture industry.
• Royal Decree 1678/2009, to facilitate the adjustment of employment of the toy industry.
These provisions use reductions in the employer’s social security contribution to support enterprises
in connection with training and to provide incentives for keeping employees of 55 or more years of
age on the workforce and favoring the re-hiring of the industry’s surplus workers.
Guide to business in SpainInvestment aid and incentives in Spain14
2.2.3 Local employment initiatives (no time limit)
In addition to the employment incentives and to socio-labor adjustments, aid and subsidies may also
be granted for investment projects aimed at generating economic activity and stable employment in
local and regional areas of Spain, subject to the National Employment Institute classing them as
investment and employment (I+E) projects or entities.
For a project to be classed as “I+E”, it must meet the following requirements:
�• A local corporation must support the corporate project by contributing economic and/or material
resources, such as infrastructures or services assisting it in the start-up and management of the
business.
�• Projects must provide for the hiring of workers or the recruitment of new partners in the case of
projects involving cooperatives or labor companies.
�• Projects must provide for the incorporation of a new company with a maximum number of 25
employees at the time of incorporation.
�• Projects must provide for the production of products and/or services which relate to emerging
economic activities or, in the case of traditional activities in the area, which cover needs not
covered by the existing structure.
�• Projects must meet technical, economical and financial viability requirements.
Incentives available for selected projects are as follows:
�• A financial subsidy aimed at the reduction by up to three percentage points of interest rates on
loans granted to the company related to its incorporation and establishment. The maximum
amount of this subsidy will be €5,108 per indefinite-term job created.
�• A subsidy for the support of management activities (e.g. subsidies for the external contracting of
market or technical studies, reports, and/or training programs). This subsidy will only be available
during the first year after the incorporation of the company and will cover 75% of the cost of the
qualifying services up to a maximum of €12,020.
�• A subsidy for technical assistance for the hiring of highly-qualified technical experts, covering 50%
of total labor costs (including employer social security contributions for a maximum period of one
year). This is a one-time subsidy with a ceiling of €18,030.
�• A one-time subsidy for each indefinite-term employment contract amounting to €4,808 for each
worker hired on a full-time basis (or the related proportion of such overall amount in the case of
indefinite-term part-time contracts).
This subsidy is not compatible with that described in the preceding point.
�• A subsidy for cooperatives and labor companies amounting to €4,808 per unemployed working
partner recruited on an indefinite-term basis. This subsidy is not compatible with those described
in the two preceding points.
All the aforementioned incentives may be increased by 10% when the project is related to certain
activities, among which are those connected with the protection and maintenance of natural areas,
waste management, collective transport, the development of local culture and the care of children,
the handicapped and the aged.
Applications for these incentives must be submitted to the National Employment Institute (INEM).
This is the government body in charge of selecting the eligible projects and granting the aid and
subsidies for such projects.
These incentives and subsidies are compatible with others granted by other government agencies or
public or private entities, although the total amount of the subsidy, whether taken alone or together
with aid or subsidies granted by other public authorities, private or public entities, may not exceed
80% of the cost of the subsidized activity.
Lastly, Autonomous Community Governments which, as a result of the increasing administrative
decentralization process currently underway in Spain, have been transferred management powers in
relation to these and other employment programs, may adapt these incentive measures to their own
organization.
2.2.4 Fostering of rural employment
Aid is provided for companies promoting employment initiatives in rural communities (see “State
incentives for specific industries”, Section 3 below).
Guide to business in SpainInvestment aid and incentives in Spain15
3. State incentives for specific industries
3. STATE INCENTIVES FOR SPECIFIC INDUSTRIES
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 the agrofood industry, energy, mining,
technological development, research and development, etc.). In addition, the Autonomous
Community 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.
The main official programs supporting the industrial development projects currently in force are:
3.1 Research, technological development and technical innovation
3.1.1 2008-2011 National Plan for R&D and TI
Encouraging technological improvement and innovation and research and development projects has
in recent years become one of the priorities of public authorities in Spain.
In this context, every four years since 1988 the government has prepared the related National Plan
for Scientific Research, Development and Technological Innovation, in which it establishes the
objectives and medium-term priorities of the research, development and innovation policy.
Upon expiration of the previous Plan (the Fifth National Plan for R&D and TI for the 2004-2007
period), the Government approved the Sixth National Plan for R&D and TI for the 2008-2011 period
(in line with the Seventh EU R&D and TI Framework Programme for the 2007-2013 period).
The Sixth National Plan for R&D and TI for the 2008 - 2011 period aims to double the financing with
respect to the preceding period and to improve aid management. Additionally, the subsidies
included under this Plan may be co-financed with EU Structural Funds on the terms and in the cases
set forth for such purpose in the respective calls for applications.
The basic objectives of the National Plan for R&D and TI (2008-2011), which was set up in line with
the provisions of the National Strategy for Science and Technology (Estrategia Nacional de Ciencia y
Tecnología or “ENCYT”) are, inter alia, (i) placing Spain in the vanguard of knowledge; (ii) promoting
a highly competitive corporate fabric; and (iii) creating a favorable environment for investment in
R&D and TI.
In summary, the National Plan for R&D and TI for the 2008-2011 period has a structure based on
four areas directly related with the Plan’s general objectives and linked to instrumental programs
which pursue specific objectives: (i) generation of knowledge and capacities; (ii) fostering of
cooperation in R&D; (iii) industry-wide technological development and innovation; and (iv) strategic
actions (health, biotechnology, energy and climatic change; telecommunications and information
society; nanoscience and nanotechnology, new materials and new industrial processes).
Guide to business in SpainInvestment aid and incentives in Spain16
In order to meet the objectives of the National Plan and in line with the four areas identified, the
new Plan covers a set of instruments grouped along six Instrumental Lines of Action:
1. Human Resources
2. R&D and TI Projects
3. Institutional strengthening
4. Infrastructures
5. Use of Knowledge
6. Articulation and internationalization of the system
These Lines are developed through thirteen national programs representing the major instrumental
initiatives under the National Plan, surpassing the thematic model of former plans: (i) human
resources training; (ii) human resources mobility; (iii) human resources hiring and incorporation; (iv)
basic research projects; (v) applied research projects; (vi) experimental development projects; (vii)
innovation projects; (viii) institutional strengthening; (ix) scientific/technological infrastructures; (x)
technology transfer, valuation and promotion of technologically based enterprises; (xi) networks;
(xii) public/private cooperation; and (xiii) internationalization of R&D.
Additionally, the R&D + TI Plan covers five Strategic Actions which relate to horizontal industries or
technologies: (i) strategic action in health; (ii) strategic action in biotechnology (iii) strategic action
in energy and climatic change; (iv) strategic action in telecommunications and the information
society; (v) strategic action in nanoscience and nanotechnology, new materials and new industrial
processes.
These Strategic Actions are aimed at supporting the Government’s firmest R&D + TI commitments,
with an integral concept valuing the research carried out, as well as its transformation into processes,
products and services for society.
Also, in the area of administrative management, this new R&D Plan is aimed at reducing the
excessive bureaucratic red tape that has to be supported by applicants for the public aid offered
under the Plan.
The new features include most notably (i) the creation of a “single window” managed through a
single website, as a system for accessing all public aid from the National Government for R&D and TI;
(ii) the use by the National Government of a single standardized form to configure calls for
applications for all national programs, etc.
Notwithstanding the provisions of each of the relevant calls, in general, the beneficiaries of the aid
included under the R&D + TI Plan may be, inter alia, (i) public R&D agencies; (ii) universities; (iii)
other public R&D centers; (iv) public and private non-profit R&D centers, (v) enterprises; (vi)
technological centers; (vii) business groupings or associations; (viii) innovative business groupings
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Guide to business in SpainInvestment aid and incentives in Spain18
(innovative clusters) and technological platforms; (ix) organizations supporting technological
transfer and technological and scientific dissemination and disclosure.
Most of the Orders regulating the particular features of each Instrumental Line of Action were
published in 2008 and only that relating to Institutional Strengthening is currently pending
regulation.
Thus, as an example, we set forth below the most important characteristics of (i) the Instrumental
Line of Action for R&D + TI Projects, (ii) the Instrumental Line of Action for Human Resources and (iii)
the Instrumental Line of Action for Scientific-Technological Infrastructures.
(i) Instrumental Line of Action for R&D + TI Projects
ORDER PRE/621/2008, regulating the terms, rules on aid and the management of the
Instrumental Line of Action for R&D + TI Projects, under the National Plan for R&D + TI (2008-
2011), was published in the Official State Gazette dated March 8, 2008.
This Instrumental Line of Action includes the following National Programs; (i) Basic Research
Projects, (ii) Applied Research Projects, (iii) Experimental Development Projects and (iv) Innovation
Projects, for which each respective call for applications must be in line with the contents stipulated
in the aforesaid Order.
The main characteristics of the general rules on the aid which can be granted under this
Instrumental Line may be summarized as follows:
Table 2
TYPE OF AID
Repayable subsidies, loans and advances
• Companies (including SMEs).• Technological Centers.• Private university research and development centers. • Public R&D + TI centers.• Private non-profit research and development centers. • Other private non-profit entities. • Other public law entities. • The following groupings or associations: (i) joint ventures, (ii) economic interest groupings formed by companies or by
companies and other entities, (iii) industry-wide non-profit business associations, (iv) innovative business groupings recognized by the Ministry of Industry, Tourism and Trade.
WHO CAN APPLY FOR AID
Certain calls for applications published for 2010 under the Instrumental Line of Action for R&D + TI
Projects.
This include most notably the joint Resolution dated December 30, 2009 of the Office of the
Secretary of State for Research of the Department of Science and Innovation, calling for
applications for research projects and supplementary actions under the National Plan for R&D +
TI, published in the Official State Gazette on December 31, 2009.
This call includes the following three sub-programs of the National Program for Basic Research
Projects: (i) sub-program on general basic research projects, (ii) sub-program on actions
supplementary to general basic research projects and (iii) sub-program on basic research projects
aimed at agricultural resources and technologies in coordination with the Autonomous
Communities and on supplementary actions.
The forms of aid foreseen for the three sub-programs are repayable subsidies and advances.
Nonetheless, the possible beneficiaries of the aid are indicated individually for each of the sub-
programs included in the call for applications.
Each sub-program is also subject to specific submission deadlines.
(ii)Instrumental Line of Action for Human Resources
ORDER ECI/266/2008, stipulating the regulations for the grant of public subsidies under the
Instrumental Line of Action for Human Resources was published in the Official State Gazette dated
February 9, 2008.
Table 2 (Cont.)
TYPE OF AID
• Basic research projects.• Applied research projects. • Experimental development projects.• Technical viability studies. • Supplementary actions (e.g., actions targeted at society in general and at academic and business sectors in particular,
to disclose of the findings of scientific research and technological development activities).• Organization of congresses, seminars and conferences.
ELIGIBLE PROJECTS AND ACTIONS
• Individual projects or action.• Coordinated project or action. • Project or action based on cooperation.• Project or action carried out by entities located in Scientific and Technological Parks.
FORMS OF PARTICIPATION
Guide to business in SpainInvestment aid and incentives in Spain19
Table 3
TYPE OF AID
Repayable subsidies and advances (where expressly provided for in the specific call for applications)
• Individuals.• Public universities. • Public research bodies.• R&D + TI centers with their own differentiated legal personality connected with or dependent on the national
government.• R&D + TI centers connected with or dependent on territorial public authorities.• Private universities.• Public and private non-profit entities.• Companies whose main activity consists of the production of goods and services for the market.• Industry-wide non-profit business associations. • Developers of a scientific and technological park which have the legal form of a non-profit entity. • Other legal entities with purposes similar to those of the foregoing.
WHO CAN APPLY FOR AID
The purpose of the aid depends on the specific National Program in which it is included:
• National Program for Human Resources Training: to guarantee an increase in the offer of Human Resources
dedicated to research and development and innovation in Spain, as well as the improvement of training and
competition levels, including the regulated, non-regulated and ongoing human resources training needed by the
knowledge society.
• National Program of Human Resources Mobility: to favor the geographical and inter-institutional mobility of
personnel associated to R&D + TI activities, covering not only the mobility of foreign researchers toward Spain, but
also that of Spanish researchers toward other international or national centers.
• National Program of Human Resources Hiring and Incorporation: to favor the professional career of researchers and
technological specialists, as well as to provide incentives for the hiring of doctors and technological specialists by
research companies and bodies and to promote the best practices of stable hiring.
PURPOSE OF THE AID
The specific projects eligible for aid are listed in each approved call for applications.
ELIGIBLE PROJECTS
This Instrumental Line of Action includes the following National Programs: (i) Human Resources
Training: (ii) Human Resources Mobility; and (iii) Human Resources Hiring and Incorporation, for
which each respective call for applications must be in line with the contents stipulated in the
aforesaid Order.
The main characteristics of the general rules on the aid which can be granted under this
Instrumental Line may be summarized as follows:
Guide to business in SpainInvestment aid and incentives in Spain20
Each year a Working Program is published under the National Plan for R&D + TI, indicating the dates
set for all calls for applications under the Plan for the related year. This Program is expected to be
published at the end of January 2010 , according to information furnished by the Ministry of Industry,
Tourism and Trade and the Ministry of Science and Innovation.
(iii)Instrumental Line of Action for Scientific-Technological Infrastructures
The Official State Gazette dated July 11, 2009 published ORDER CIN/1862/2009, stipulating the
terms of reference for the grant of public aid for science and technology under the Instrumental
Line of Action for Scientific-Technological Infrastructures under the National Scientific Research,
Technological Development and Innovation Plan 2008-2011 and issuing the call for aid
applications for 2009 for some of its lines of action.
This Order containing terms of reference regulates the grant of aid in the following subprograms: (i)
subprogram for design, viability, access and improvement of Singular Scientific and Technological
Facilities; (ii) subprogram for scientific and technological actions in scientific and technological
parks; (iii) subprogram for the creation and consolidation of technological centers; (iv) subprogram
for the acquisition of scientific-technical infrastructures in agro-food R&D and TI centers of the
National Agriculture and Food Research Institute; (v) subprogram for scientific-technological
infrastructure projects financed jointly with the European Regional Development Fund.
Guide to business in SpainInvestment aid and incentives in Spain21
Table 4
TYPE OF AID
Repayable subsidies, loans and advances
• Enterprises (including SMEs).• Technological centers and technological innovation support centers.• Private university research and development centers.• Public R&D and TI centers.• Private non-profit research and development centers.• Other private non-profit entities.• Groupings of individuals or legal entities, both public and private, joint property entities or any other type of economic
unit or separate assets which, even if lacking legal personality, is able to carry out projects, activities or conducts orwhich are in a position to merit the grant of the subsidy.
WHO CAN APPLY FOR AID
• Actions relating to the improvement of Singular Scientific and Technical Facilities (Instalaciones Científicas y Técnicas
Singulares or ICTS).
• Actions to promote access to ICTS.
• Preparation of viability studies.
ELIGIBLE PROJECTS AND ACTIONS
3.1.2 INGENIO 2010 Program
In an attempt to bolster investment in R&D by enterprises, the Spanish Government approved the
INGENIO 2010 Program, aimed at increasing both public and private investment in R&D. In line with
what was agreed by the European Council of Lisbon (2000), its objectives run from (i) increasing the
rate of investment in R&D over the GDP so as to attain an R&D investment equal to 2% GDP in 2010;
(ii) 55% private investment in R&D in 2010; (iii) 0.9% public investment in R&D as a percentage of
GDP in 2010.
The INGENIO 2010 Program is implemented through the following sub-programs:
�• CONSOLIDER SUB-PROGRAM
This strategic funding aims to achieve excellence in research by increasing cooperation between
researchers and encouraging large research groups. It offers 5-year strategic financing to teams
formed by groups of high-level researchers who present a Research Activity Plan to be carried out
jointly.
Guide to business in SpainInvestment aid and incentives in Spain22
• Individual projects or action.
• Coordinated project or action.
• Project or action based on cooperation.
FORMS OF PARTICIPATION
Table 4 (Cont.)
TYPE OF AID
• Supplementary actions (organization of conferences, seminars or lectures; creation and maintenance of national
thematic networks of scientific-technical infrastructures; actions of scientific-technological policy aimed at attending to
strategic initiatives of special interest).
• Projects to introduce or improve infrastructures able to be used for scientific and technological actions.
• Projects for the acquisition of equipment for scientific and technological infrastructures.
• Projects aimed at the creation of centers for entities which, at the time of their application, do not engage in any type
of activity.
• Consolidation projects for existing centers.
• The acquisition and installation of new scientific, technical or technological equipment as well as the improvement of
the performance of existing equipment.
• Creation and improvement of telematic networks.
ELIGIBLE PROJECTS AND ACTIONS
During the first four years of the Program’s development, training projects of leading consortiums
and the unique installations plan are expected to mobilize approximately €2 billion, of which
approximately 50% will be contributed by the State.
In the 2009 call for applications for this Program, €46 million (of which €15 million came from
the Spanish Plan for the Stimulation of the Economy and Employment (Plan E)) were earmarked
for the financing of research projects under this subprogram.
Along these lines, it is important to note the Plan for the Provision of Incentives, Incorporation and
Intensification of Research Activity (I3), which finances the hiring of researchers by universities and
public research bodies.
�• AVANZA2 PLAN SUB-PROGRAM
While it was in force, the original Avanza Plan entailed a true wager of the Spanish Government
and the Spanish society as a whole in favor of the Society of Information and Knowledge, thus
converting the Telecommunications and the Information Society (IS) industry into the strategic
industry serving as the catalyst that generates momentum for the development of other
industries.
With a view to consolidating the milestones reached under the Avanza Plan, the Avanza2 Plan was
defined in the budgetary context of 2009. One of the main objectives of the Plan is to contribute
to economic recovery in Spain thanks to the intensive and generalized use of CITs, with special
attention to projects which also combine sustainability and energy savings. In summary, following
the revitalization of supply under the former Avanza Plan, the main challenge of the Avanza2 Plan
is to boost demand and to use the momentum generated by the sector’s development to
strengthen its own CIT industry specializing in strategic sectors, with special attention to SMEs.
In 2009, the Avanza2 Plan had a provision of funds of €1.497 million. For 2010, this plan contains
five major areas of action:
— Development of the CIT Sector (with special emphasis on SMEs). The objective of this area,
which has a budget of €663 million, is to support enterprises (with special attention to SMEs)
which develop new CIT products, processes, applications, contents and services, promoting, as
basic thematic priorities, Spanish industrial participation in the construction of the Internet of
the Future and the development of digital contents.
— CIT training, which aims to incorporate citizens and enterprise into the IS on a massive basis,
placing extra priority on SMEs and their employees.
— Digital Public Services. The objective of this area is to improve the quality of the services
provided by the public authorities on-line, giving special emphasis to support for local entities
and the development of the functionalities of the electronic national identity card. This area,
which had a provision of funds of €186 million in 2009, will also support the creation of new
Guide to business in SpainInvestment aid and incentives in Spain23
platforms and contents in the areas of education and health based on the achievements of
Avanza, which have placed Spain on the cutting edge worldwide in both fields.
— Infrastructure. This area, which had a budget of €89 million in 2009, will reinforce the
momentum generated for development and the implementation of the IS in local areas,
improving the provision of electronic public services to citizens and enterprises through the use
of CIT. The objectives included in this area of action also included most notably:
– To extend the use of digital terrestrial television (DTT) with a view to completely replacing
analog television with digital television, under the National Plan for the Transition to DTT.
– To strengthen the development and application of the new legislation on common
telecommunications infrastructures (CTI) in buildings and telecommunications channels in
the public domain.
— Trust and security. With a budget of €11 million in 2009, this area has the twofold objective of
(i) strengthening the trust of citizens and enterprises in CIT by way of public policies on
information security, and (ii) fostering the accessibility of CIT services.
Notwithstanding the numerous and varied calls for loan applications made under the Avanza
Plan, the 2006 ICO-Avanza Plan, financed jointly by the Ministry of Industry, Tourism and Trade
and the European Regional Development Fund (ERDF), is particularly noteworthy, in force through
December 31, 2010 or until available funds run out.
The ICO-Avanza Plan line of financing is the product of the agreement executed in July 2006 by
the Ministry of Industry and ICO for the grant of loans with 0 interest for the acquisition of
computer equipment and Internet connectivity. The beneficiaries of the loans must have a
broadband Internet connection or must sign up for a new subscription to this service.
In connection with the amount of the provision of funds for this line, it is important to note that
on December 30, 2009 the Council of Ministers approved the third Addendum 2009 to the
cooperation agreement between the Ministry of Industry, Tourism and Trade and ICO for the ICO-
Avanza Plan line of financing so that the total amount of funds following the increase is €1,760.7
million.
In particular, this line is materialized in three different products with identical financial
characteristics in terms of interest rate and equal preliminary processes to apply for transactions
through the mediator credit institutions party to the financing agreement.
— CIT Loan for SMEs: The CIT loan currently has funds of €1,278.30 million and is aimed at
financing small- and medium-sized enterprises investing in electronic, computer and
telecommunication products, including hardware, software, applications, services and contents
for:
– Internet access, including the construction of a company website and portals.
Guide to business in SpainInvestment aid and incentives in Spain24
– The introduction of CIT into corporate processes through advanced management tools such
as CRM (customer management systems), ERP (business management systems), supply
management systems or document management systems.
– Electronic trade and electronic invoicing through applications and services which help SMEs
to carry out electronic transactions with other agents.
The maximum loan will be 100% of the investment, up to a maximum of €200,000 per final
beneficiary and calendar year, with a fixed interest rate of 0%, 3-year repayment periods and
the possibility of a 3-month grace period.
— Young People and Graduates Loan: With a provision of funds of €148 million, this measure
aims to provide financing to young people (between 18 and 35 years of age) and to students
registered at Spanish universities for the acquisition of computer equipment with an Internet
connection and, optionally, software, antivirus, peripherals and a subscription to a broadband
Internet connection. The amount of the loans can be up to €3,000 per final beneficiary and
calendar year, with a fixed interest rate of 0% and 5-year repayment periods.
— Digital Citizen Loan: This third product has a provision of funds of €334.30 million and its
objective is to provide finance to citizens in general for the acquisition of equipment able to be
connected to the Internet and, optionally, software, antivirus, peripherals and a subscription to
a broadband Internet connection. The amount of the loans can be up to €3,000, with 0%
interest, and 3-year repayment periods and the possibility of a 3-month grace period.
According to figures furnished by the Ministry itself, following an assessment of the outcome of
this line, on the whole, 297,336 loans were granted to citizens and enterprises for an overall
amount of more than €1,395 million. Specifically, 97,016 loans were granted to enterprises (CIT
Loan) for a total amount exceeding €1,151 million.
�• CENIT (National Strategic Consortiums for Technical Research) Sub-program: The aim of this
program is to increase public and private cooperation in R&D and TI by financing large integrated
strategic industrial research projects in areas of future technologies and with international
exposure.
In order to develop such large projects, a consortium or economic interest grouping needs to be
created, composed of at least two large or medium-sized enterprises, two small enterprises and
two research bodies (public research bodies, non-profit-making private R+D centers and
universities).
The projects must have a term of 4 years, with an annual budget of more than €5 million and less
than €10 million, in each year of operation.
The type of aid employed will be a non-returnable subsidy, which may amount to a maximum of
50% of the total cost of the project.
Guide to business in SpainInvestment aid and incentives in Spain25
The Center for Industrial Technological Development (Centro para el Desarrollo Tecnológico
Industrial or “CDTI”) will be responsible for implementing and executing the CENIT Program.
The CENIT Program also envisages the creation of a venture capital Fund (in turn invested in by
other mutual funds) to create and consolidate technological enterprises, which will operate
through a venture capital company with capital of approximately €200 million.
Lastly, the CENIT aims to strengthen integration between universities and enterprises by providing
incentives for the hiring of technologists by universities.
3.1.3 Center for Industrial Technological Development (CDTI)
The CDTI (public business entity under the auspices of the Ministry of Industry, Tourism and Trade)
promotes the technological innovation and development of enterprises, its main objective being to
contribute to the improvement of the technological level of enterprises through the pursuit of the
following activities:
�• Technical/economic evaluation and financing of R&D and TI projects developed by enterprises.
�• Management and promotion of Spanish participation in international technological cooperation
programs.
�• Promotion of the international transfer of business technology and support services for
technological innovation.
�• Support for the creation and consolidation of technologically based enterprises.
With a view to adapting to the EU convergence requirements imposed on the aid used to finance
R&D + TI projects, the CDTI lines of financing were recently modified as follows:
�• R&D Projects:
The R&D Projects line of the CDTI has the purpose of financing applied business projects for the
creation and significant improvement of a productive process, product or services, including both
industrial research activities and experimental development.
In particular, this line finances multi-year projects with a minimum budget in the range of
€240,000.
The instruments for financing the projects included in this line consist of partially repayable aid
(only a part of the aid granted must be repaid to the CDTI), for up to a maximum of 75% of the
total budget of the approved project.
�• Line of bank pre-financing for CDTI R&D + TI projects:
The goal of this line is to help enterprises avoid the problem of having to pre-finance the research
planned in each stage of the approved project until the CDTI, following the required certification,
Guide to business in SpainInvestment aid and incentives in Spain26
makes the relevant payment. The idea is to cooperate with financial institutions in order to boost
the revitalizing nature of the financing granted by the Center.
Under this line, beneficiaries of aid from the CDTI may receive, in advance, up to 75% of the total
aid granted to them. This advance payment is to be instrumented through a bank loan granted
on preferred conditions, which will not have to be repaid until the beneficiary receives the aid from
the CDTI.
�• Advance of aid:
With a view to making the financing targeted at corporate R&D and TI more attractive in the
current economic situation, the Ministry of Science and Innovation, through the CDTI, started up a
new measure consisting of the advance of 25% of the aid granted, with a limit of up to €300,000,
to all enterprises, regardless of size, whose projects are approved by CDTI board of directors
holding by the end of July 2009. This measure, which will not have retroactive effects, will remain
in force for as long as the current difficulties hindering access to the various lines of banking
financing continue to exist.
�• BANK-CDTI line for financing technological innovation:
Its purpose is to finance, at a reduced rate, the incorporation of innovative physical capital which
improves the enterprise’s competitive nature, provided that the technology incorporated is
emerging in the industry.
In particular, this line finances, under “minimum aid” rules, technological innovation projects
whose objectives cover some of the following cases: (i) incorporation and active adaptation of
emerging technologies in the enterprise, as well as processes for improving technologies and
adapting them to new markets and (ii) application of a new or significantly improved production
or supply method (including significant changes to techniques, equipment and/or computer
programs).
Companies incorporated under the Commercial Code and cooperatives will be eligible for the aid,
regardless of size.
Investments eligible for financing are all productive investments in new non-current assets used to
improve and modernize the technological element of the enterprise, provided that the investment
project complies with the following limits:
— The part relating to lands and buildings used in the innovation activity, if any, cannot exceed
30% of the investment project.
— The part relating to intangible investments (personnel, materials, external contractors and
other indirect costs), if any, cannot exceed 50% of the total investment project, except in
projects cataloged as Information Technologies Projects.
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— The payment date of investments eligible for financing cannot be earlier than 6 months after
the date on which the transaction is executed with the financial institution.
The financing may total up to 75% of the cost of the investment, bearing in mind that the
maximum financing per beneficiary and year will be €1,500,000, and the minimum financing per
transaction will be €100,000.
�• Technological Fund:
The Technological Fund is a special item under the EU FEDER funds dedicated to the promotion of
business R&D + TI in Spain, the CDTI having been designated as manager of most of the Fund.
In general, although access to this Fund is open to all Spanish enterprises, in its distribution
priority was given to those carrying out projects in the former Objective nº 1 regions, for which
90% of the total Fund is earmarked, all other regions obtaining the remaining 10%.
In particular, the part of the Technological Fund managed by the CDTI is directed toward
supporting projects carried out by corporate groupings. For its enforcement, the CDTI designed
three new project forms:
— Integrated projects (usually with a term of between 2 and 3 years). These are major
experimental projects whose objective is the development of new technologies.
The status of beneficiary requires the formation of an Economic Interest Grouping (EIG) or
consortium of at least three independent enterprises, of which one must be regarded as a
large enterprise (or, otherwise, two must be medium-sized enterprises) and at least one of
which must be an SME.
Projects should have a total budget exceeding €5 million.
— Technological cooperation projects between SMEs (usually with a term of between 2 and 3
years). These are experimental R&D projects aimed at using new technologies to resolve
problems common to a specific industry which could represent a significant technological and
industrial advance for the regions in which they are carried out.
The status of beneficiary requires the formation of an Economic Interest Grouping (EIG) or
consortium of at least four independent enterprises, all of which must regarded as SMEs.
The minimum amount of this type of project will be €2 million, and no partner may have a
total budget of less than €240,000.
— Projects for cooperation among national enterprises (with a term of between 1 and 3 years).
These are experimental R&D projects executed by groupings of enterprises, aimed at
developing new technologies, products or processes, and fostering a culture of cooperation
among them.
The status of beneficiary is attributed to enterprises party to a cooperation agreement, which
must be executed by at least two independent enterprises, of which one must be regarded as a
SME.
This type of cooperation project must have a total budget exceeding €500,000.
INVEST IN SPAIN also has a line of aid for foreign investors under this Technological Fund, which totals
€6 million.
The objective of this line is to boost the attraction of foreign investors with a significant R&D and TI
component, favoring investments in plants, equipment, human resources and technology.
The amount of this aid will be €500,000 per beneficiary.
�• NEOTEC Initiative:
The NEOTEC initiative has the purpose of opening the way for technological entrepreneurs, from
the conception of the business idea through its conversion into a viable idea.
In particular, this instrument is broken down into two phases: (i) the first known as “business
creation” and (ii) the second known as "venture capital".
The first includes recently created enterprises (less than two years after their formation) which
need financing and have to prove the business viability of their innovation. In such cases, the CDTI
will provide seed capital in the form of a loan, known as “Project NEOTEC”, up to a maximum
amount of €350,000 at 0 interest and without additional guarantees. The loan is to be repaid in
annual installments of up to 20% of the cash-flow of the enterprise, where this is positive.
The second phase will attempt to make available to technological enterprises the possibility of
financing through venture capital instruments. This gave rise to the design of the “NEOTEC
Venture Capital Program”, a joint initiative of the CDTI and the European Investment Fund (EIF)
which has wide experience in the venture capital industry in Europe.
The CDTI also has a number of international lines of financing, inter alia: (i) Iberoeka (an instrument
supporting business technological cooperation in Latin America), (ii) ISI (Bilateral Program with
India) and (iii) Canadeka, KSI (Bilateral Program with Korea).
The CDTI also provides information and tailored advice to enterprises and entrepreneurs on the
financing instruments that best cater to their needs and R&D&i projects. Interested enterprises can
access this service by completing an electronic form and attaching documentation on the project for
evaluation by the CDTI (for more information consult: www.cdti.es/pidi).
Lastly, please note that the CDTI also engages in general promotion and in the coordination,
evaluation and monitoring of technological innovation proposals and projects submitted by Spanish
enterprises to the EUREKA Program, an initiative that supports cooperative R&D and TI in Europe and
aims to increase the competitiveness of European enterprises by encouraging technological projects
Guide to business in SpainInvestment aid and incentives in Spain29
geared towards the development of products, processes or services with clear commercial interest on
the international market and based on innovative technologies.
The most notable programs in which Spain actively participates are the “Umbrella” Projects
(including EUREKATOURISM; EUREKABUILD; EULASNETII; FACTORY; EUROENVIRON) and the “Clusters”
Projects: CELTIC; EURIPIDES; ITEA2 and MEDEA +.
3.2 Renewable Energy
In compliance with the 1997 Electricity Industry Law, on December 30, 1999, the Council of Ministers
approved the Plan for the Promotion of Renewable Energies (Plan de Fomento de las Energías
Renovables or PFER) (2000-2010) which defined the strategy to be followed in the energy area to
foster the growth of renewable energies.
The PFER was replaced by the Renewable Energies Plan (Plan de Energías Renovables or PER) 2005-
2010 which, taking advantage of the experience gained under the former plan, instruments a
different distribution of resources by strategic area, in order to fulfill the commitment to have
renewable energy sources cover 12.1% of total energy consumption in 2010.
The PER 2005-2010 covers the granting of incentives to investments in technological innovation
made by enterprises in the area of renewable energies, as well as the creation of public aid programs
with an investment of approximately €23,598.641 million.
The purpose of this Plan is to bolster the priority aims of the Government’s energy policy, which are
to guarantee and secure the supply of electricity and to respect the environment, while undertaking
to fulfill Spain’s commitments at international level (Kyoto Protocol, National Allotment Plan) and
those arising from Spain’s membership in the European Union.
Additionally, PER (2005-2010) attempts to incorporate the following objectives, imposed by EU
legislation: (i) that 30.3% of national electricity consumption be generated by renewable energies;
and (ii) that 5.83% of petrol and diesel sold for transportation purposes be obtained from biofuels.
In line with this support of business investments in renewable energies, the Council of Ministers
approved the Action Plan 2008-2010 on the Energy Saving and Efficiency Strategy in Spain (PAE 4+)
through which it plans to strengthen Spain’s position on the cutting edge of energy savings and
efficiency.
In this respect, the Institute for Energy Diversification and Saving (IDAE) has set up certain specific
aid programs for the renewable energy industry, in compliance with its objectives to foster the use of
renewable energies and improve energy efficiency including, most notably, the following:
�• IDAE Credit line to finance investment in solar thermal, stand-alone photovoltaic and domestic
biomass projects, and cogeneration facilities, initially funded with a total budget of approximately
€30 million.
Guide to business in SpainInvestment aid and incentives in Spain30
Guide to business in SpainInvestment aid and incentives in Spain31
The beneficiaries of these loans can be individuals, SMEs, community associations, municipal
councils and other public bodies, institutions dependent on them, and other legal forms,
excluding large companies.
Financing is provided for new asset investment in installations and equipment of the following
kind:
— Stand-alone photovoltaic solar energy generation systems.
— Solar thermal energy installations with capacity equal to or more than 20kw.
— Cogeneration systems, as applicable, cold generation systems, fueled by natural gas, diesel,
biogas, biomass, synthesis gas, lean gas or high-temperature effluent.
— Installations for the production of thermal energy, for domestic use or in buildings, fueled by
biomass, up to 3 MW(t).
The loans granted may finance up to 100% of the project cost, up to a maximum of €1.5 million
(excluding VAT). The repayment period is 11 years, with the first year being a grace period and the
remaining 10 for actual repayment. The applicable interest rate is Euribor plus 0.30%, with an
arrangement fee of 0.30% of the cost of the project.
The IDAE line became operational on June 1, 2006 and will remain open until all allocated funds
have been exhausted.
It should be noted that loan applications under this line must be made via the internet, through
the IDAE website, www.idae.es.
According to the information available, this line has been closed since September 30, 2009, and
we are not aware when it is planned to be reopened.
�• Line of Project Financing and Lease of Services, fundamentally aimed at investment projects in
energy savings, efficiency and renewable energies, which have a preliminary analysis of
technical/economic viability.
Under this line the IDAE not only provides advisory and coordination services in all phases of
execution and operation of the projects, but also finances them. For this reason the IDAE’s
participation in a specific project under this line requires the execution of two different
agreements: (i) a framework agreement for cooperation and services and (ii) a project financing
agreement.
�• Guarantee Line: set up under an agreement between the IDAE and five financial institutions, this
line has the purpose of guaranteeing the payment obligations of beneficiaries of the IDAE credit
line.
According to the information available, this line has been closed since September 30, 2009, and
we are not aware when it is planned to be reopened.
Guide to business in SpainInvestment aid and incentives in Spain32
�• IDAE aid programs for strategic projects: an IDAE line supporting the financing of energy saving
and efficiency projects, which aims to supplement and reinforce the efforts being made by the
various public authorities to encourage companies to carry out multi-year investment projects in
energy saving and efficiency technologies. In particular, this line aims to cover a certain type of
project which does not have sufficient support from existing mechanisms, with a vision of ongoing
(multi-year), open (direct and indirect beneficiaries) and diverse (industrial, tertiary and service
sectors) support.
�• Third-party financing: with this type of financing, materialized in various types of contractual
formulas, the IDAE participates in the definition of energy projects and finances investments in
such projects in whole or in part. It is therefore not an IDAE loan to the industrial entrepreneur,
since the equipment is owned by the IDAE until it recovers the investment. The investment,
including the profit, is recovered through the energy saved or the energy generated. After the
IDAE has recovered the investment, the facility becomes the property of the customer and, as
from that time, the end user benefits from the total energy savings or from the energy generated
by the facilities.
�• Biomcasa Program: under the Renewable Energy Plan in Spain (2005-2010), the Decision dated
March 13, 2009 of the Presidency of the Institute for Energy Diversification and Savings was
published in the Official State Gazette, to establish the call for aid applications and terms of
reference for the enabling of collaborating enterprises in the Program of Voluntary Agreements
with enterprises in the industry of thermal biomass in buildings.
This Program aims to bolster the configuration of an energy supply based on the use of biomass, a
supply in line with the needs of potential users of hot water and air conditioning in buildings,
founded on a secure fuel supply and on the realization of facilities with advanced operating
features.
With a view to financing projects submitted by public or private enterprises active in this industry,
duly approved according to their capacity and technical-economic solvency, the IDAE has made
available a specific budget of €5,000,000.
�• Other financial participation of the IDAE in energy projects: normally this entails the IDAE’s
participation in various corporate forms or forms of association (joint ventures, economic interest
groupings, etc.).
Furthermore, in order for the objectives of the Plan for the Development of Renewable Energies to be
fully achieved, certain R&D and TI actions will also have to be taken, which has led to the
involvement of the energy industry in the various R&D and TI programs currently being
implemented at EU and national level.
Particularly to be noted is that, in the area of action known as “Strategic Action”, the National Plan
for R&D and TI (2008-2011) includes an initiative focused on Energy and the Climatic Change.
Guide to business in SpainInvestment aid and incentives in Spain33
The general objectives of this strategic action are (i) bolstering innovation in the private sector; (ii)
grouping and coordinating the various programs into a common strategy; (iii) improving the transfer
of knowledge and scientific excellence; and (iv) improving coordination with European programs and
with Autonomous Community programs.
The related terms of reference and call for aid applications under the Strategic Action on Energy and
Climatic Change is expected to be published at the beginning of 2008. This aid is foreseeably to be
instrumented through subsidies and repayable advances.
In this connection, it is important to note that Order PRE/968/2008 stipulated the terms regulating
the grant of public aid for research, development and innovation in energy and climatic change
under the National Plan for R&D + TI 2008-2011.
3.3 Tourism industry
Against the backdrop of monetary union and economic and social convergence, and in a competitive
environment characterized by the globalization of supply and demand and the internationalization of
tourism companies, the Spanish tourism industry has to base its position of leadership on quality.
In this context in 2008 the new Spanish Tourism Plan Horizon 2020 came into force and began to be
applied under the Spanish Tourism Plan 2008-2012.
The objectives of the Spanish Tourism Plan Horizon 2020 are, inter alia, (i) to increase the social and
economic benefits of tourism; (ii) to achieve a social/territorial rebalance boosting the tourist
business at new destinations; and (iii) to improve the quality of the national and cultural
environment by reducing the potential negative impact of the tourist business.
The Ministry of Industry, Tourism and Trade and ICO have executed a cooperation agreement to
implement the Plan Futur-E aimed giving continuity to the “Plan Renove Turismo” started up in
January 2009.
Plan Futur-E, with a provision of funds of €500 million and registered under Plan E, is created with
the objective of financing up to 90% of the net financial investment and is to be used to finance
investments which entail an improvement in the energy efficiency of tourist facilities, energy and
water savings, the implementation of new technologies and quality systems.
Enterprises may avail themselves of this new line of credit where they carry out projects aimed at the
following:
• The implementation of systems to encourage energy and water savings and the preservation and
improvement of the environment.
• Facilitating accessibility and the elimination of architectural barriers to physically or sensorial
disabled persons.
Guide to business in SpainInvestment aid and incentives in Spain34
• Investments aimed at the implementation of quality systems (Q de Calidad Turística Española; ISO
9000, etc).
• Reform and modernization aimed at the implementation of new technologies in the process or in
the product and organizational systems relating to the improvement of direct management and
marketing systems.
• Investments aimed at the specialization and differentiation of the establishment’s offer to tourists
with a view to attaining a specific niche or market segment.
Those eligible for the aid are not only enterprises that run hotels, tourist apartments and rural
accommodations but also restaurants, enterprises with a supplementary tourist offer or travel
agencies.
The maximum amount of the financing per customer was set at €2 million and it may be granted as
a loan or financial lease.
The customer may chose among various repayment periods:
• 5 years, without a grace period or with a 1-year grace period in connection with the principal.
• 7 years, without a grace period or with a 2-year grace period in connection with the principal.
• 10 years, without a grace period or with a 3-year grace period in connection with the principal.
• 12 years, without a grace period or with a 4-year grace period in connection with the principal.
Within the line of €500 million referred to above, €100 million will be reserved for the Canary Islands
Autonomous Community, given its status as an ultra-peripheral region.
Please also note the ICO Mediation Line –Tourism Public Tranche, aimed at providing financial support
in the form of loans for investment projects whose purpose is the integral renovation, restructuring and
modernization of mature tourist destinations, developed by an entity incorporated for such purpose by
the National Government, with another or other Public Authority/ies or with public or private entities.
The maximum financing may amount to 100% of the investment authorized by the Secretariat-General
of Tourism, up to the maximum limit of €6 million and with a minimum of €300,000, per beneficiary
and year. On an exceptional basis, and provided that the financing is for a project carried out as part of
a program for the restructuring or modernization of a mature tourist destination executed by the
National Government, with another or other Public Authority/ies or with public or private entities, the
€25 million limit may be surpassed. Loans will be granted at a fixed interest rate of 0.50% and will be
repayable within not more than 15 years, with a 5 year grace period in connection with the principal.
The deadline for submitting applications under this line of financing ended on November 15, 2009.
According to the information furnished by the ICO and by the Ministry of Industry, Tourism and Trade,
a decision has not yet been made as to whether the line will be renewed in 2010, although
expectations appear to indicate that it will be updated.
Guide to business in SpainInvestment aid and incentives in Spain35
3.4 Audiovisual industry
Cinema Law 55/2007 replaced the Law dated July 9, 2001, regulating the fostering and promotion of
film-making and the audiovisual industry. The objectives of this new Cinema Law are, inter alia, to
bolster the promotion and fostering of the production, distribution and showing of films and
audiovisual works, to establish terms favoring their creation and dissemination and to adopt
measures for the preservation of film-making and audiovisual heritage.
Apart from the tax incentives applicable to the film-making industry, the following are some of the
main incentives included in the new Cinema Law which were materialized in 2010 in Order
CUL/2834/20009, setting forth the rules for the application of Cinema Royal Decree 2062/2008
(regulatory implementation of Law 55/2007), in connection with the acknowledgement of film costs
and producer’s investments, the establishment of the terms of reference for the state aid and
structure of the Administrative Register of Cinematographic and Audiovisual Enterprises.
Nonetheless, the Order is currently being held in abeyance until the European Commission approves
the aid established therein. In any case, the Ministry of Culture foresees that a project which is final
and in force can be expected in the near future.
�• Aid for scriptwriting and project development
The subject-matter of this aid is the preparation of full-length motion picture scripts in any of the
official languages of Spain. The aid is to be granted to projects for original scripts of high quality,
with proven cinematographic viability. Regard will also be had to the recognized experience of the
scriptwriters submitting their scripts.
Aid for the development of cinematographic full-length motion picture projects will have a
maximum amount of €150,000, provided that this amount does not exceed 50% of the project’s
budget or the producer’s investment.
The catalog of eligible investments includes, inter alia, projects such as script improvement, the
search for locations, the identification of casting, economic resources management, initial sale
plans, counseling with third parties in connection with the project’s technological aspects,
acquisition of rights or research in archives, where necessary.
As emphasized in the terms of reference, aid for scriptwriting cannot be applied for by those who
received aid in the immediately preceding two calls for aid applications.
�• Aid for cultural and non-regulated training projects
This aid will be available to those submitting projects of the following types:
— Projects belonging to the theoretical field or the field of editing, inter alia, which are capable
of enriching the Spanish audiovisual panorama from a cultural standpoint.
Guide to business in SpainInvestment aid and incentives in Spain36
— Projects supporting specific non-regulated training programs: for professionals (including
creative and technical personnel) or for the general public.
The ceiling on this aid will be €50,000, provided that such amount does not exceed 50% of
the project’s budget.
• Aid for production
This aid is offered to independent producers and private individuals who have held the rights to
the works for at least three years, provided that the film has not been marketed on graphic video
support more than three months prior to its commercial opening.
The maximum budget permitted for this aid was set at €1 million, provided that such amount
does not exceed 50% of the project’s budget.
This aid for production may, nonetheless, be broken down into two specific categories:
— Aid for the production of television film and documentary projects.
This subcategory is aimed at boosting the production of television film and documentary
projects which are longer than 60 minutes and shorter than 200 minutes, and which are not
to be shown in movie theaters.
In particular, in the case of television films and documentaries, the following, inter alia, will be
required:
– The initiative for the projects must come from independent producers and there must be a
contract or statement of interest in the project from a radio or television service provider.
– The project’s budget must be equal to or greater than €700,000.
The amount of each grant will be calculated by applying the appropriate percentage, according
to different tranches, to the amount of the budget, with a stipulated annual loan of
€300,000, provided that such amount does not exceed the independent producer’s
investment or 50% of the budget.
— Aid for the production of animation series.
The requirements for obtaining this aid are very similar to those explained in the analysis of
the preceding case, with an annual loan equal to not more than €500,000 for budgets
exceeding €2,500,000, and not more than €300,000 for lower budgets. In both cases, said
amounts cannot exceed the investment of the independent producer or 60% of the budget.
�• Aid for the amortization of full-length motion pictures
Producers of full-length motion pictures will be able to receive aid for the amortization of the
production cost of the films. This aid can take the form of general aid or supplementary aid.
Guide to business in SpainInvestment aid and incentives in Spain37
The ceiling on general aid for amortization will be €800,000, and the supplementary aid cannot
exceed €1,200,000, at all times within the budget available for each year and provided that it
does not exceed 50% of the film’s cost or 75% of the producer’s investment
Given the specific characteristics of this type of aid, the final percentage applicable must be in line
with the number of spectators viewing the film during the first twelve months following its
commercial opening in Spain.
�• Aid for the production of short film projects and completed short films
Short films will be fostered by granting independent producers project aid or aid for short films
made, both of which are compatible. The ceiling on aid for short films made will be 75% of the
producer’s investment.
�• Aid for the distribution of films
The Institute for Film-making and Audiovisual Arts (Instituto de la Cinematografía y de las Artes
Audiovisuales or ICAA) may grant aid to independent distributors who meet the general eligibility
requirements for this aid, for the preparation of promotion and distribution plans in Spain for full-
length and short European or Latin American films, with a view to boosting distribution, mainly in
the original version, at movie theaters.
This ceiling on this type of aid will be €150,000 per beneficiary film or group of short films.
Distributors registered in the Film-makers Registry will be eligible for this aid, which has a provision
of €3,000,000.
• Aid for preservation
Producers or owners of cinematographic and audiovisual works may apply for this type of aid if
they undertake not to export the original medium of the work for at least ten years and to make
such duplicates as are necessary to guarantee the preservation of the work according to the
technical specifications indicated annually in the related call for aid applications.
The annual loan for preservation will have a ceiling of €75,000, and such amount cannot exceed
50% of the cost of making such duplicates as are necessary to perform the aforesaid preservation
function.
• Aid for the participation of Spanish films in festivals
Production companies may obtain aid for the participation of films in festivals and award
ceremonies of recognized prestige, provided that the film for which the aid is requested is a
Spanish film and has previously been selected or received an invitation from the festival or holder
of the award ceremony.
According to the terms of reference regard must be had, when determining the festivals and
awards mentioned above, to parameters such as significance, prestige and history of the festival
Guide to business in SpainInvestment aid and incentives in Spain38
or award, possible impact on the enhancement of the film’s national or international distribution,
special relevance to the cultural relations of Spanish film-making abroad or prestige and potential
repercussions in national and international media.
• Aid for the organization of festivals and competitions and for promotion abroad
The ICAA may grant aid for the organization and holding in Spain of film festivals or competitions
of recognized prestige and to those which place special attention on the programming and
dissemination of European and Latin American films, animated films, documentaries and short
films.
Eligibility for this aid will be determined by status as individual or legal entity whose work as the
organizer of festivals or competitions of recognized prestige in Spain has been proven. Special
attention will also be given to the programming and dissemination of Spanish, European and
Latin American films and audiovisuals.
The grant of this aid will be based on an assessment of the history and scope of action of the
festival or competition within the world of cinema and citizens, the international character of the
programming of the festival or competition, placing special value on the attention given to
European or Latin American filmmaking, the financial capabilities of the festival or competition to
attend to said programming and the possibilities of the festival or competition having an impact
on the film and audiovisual industry.
• Aid for the production of audiovisual works using new technologies
The aid established for this sector includes most notably aid targeted at the production of
audiovisual works which use new technologies in the audiovisual and cinematographic field and
are distributed using any electronic means of transmission which allows for the broadcast and
receipt of both image and sound other than as transmitted for movie theaters, television or
domestic videos.
The ceiling on this aid will be €100,000, also bearing in mind that, considered individually, it
cannot exceed 50% of the project’s budget, the producer’s investment or €100,000.
This aid will be granted on the basis of the assessment of originality and quality of the project or
script, the budget of the project and solvency of the financing plan, the rigor, credibility and
innovative nature of the plan for distributing the work, as well as the project’s capacity to bring
the audiovisual work to new audiences.
• Aid for financing
The aid for financing includes most notably the authorization of the ICAA to set up cooperation
agreements with banks and other credit institutions with a view to facilitating and extending the
financing of production, distribution and projection activities, technical industries and the video-
making sector and for the development of infrastructures or the technological innovation of those
sectors.
Guide to business in SpainInvestment aid and incentives in Spain39
This financing alternative may be broken down into various types of aid:
— Aid for reducing interest on loans granted for production.
— Aid for reducing interest on loans granted for distribution as film, video and via Internet.
— Aid for reducing interest on loans granted for film projection and technical industries.
In addition to the foregoing aid granted by the ICAA, mention should also be made of the lines of
financing arising from various cooperation agreements, institutional or financial agreements
executed by ICO with various bodies, including most notably the following:
• ICO Film Production Financing Line is provided for under the 2009 cooperation agreement
for film-making executed between ICO and the ICAA. This line may be used to finance production
projects for full-length motion pictures which have not been granted any aid under the ICAA
project.
The amount of the financing is 50% of the film’s budget with a ceiling of €1,000,000, and the
maximum accumulated amount, per final beneficiary, is €4,000,000.
The variable interest rate foreseen for the final beneficiary will be 6-month EURIBOR + 1.60%.
There will also be financial aid from the ICAA consisting of a 2.25% reduction of the interest rate
on the financial transaction.
The repayment deadline will be five years including a three-year grace period.
Although the initial term of this Financing Line has expired, in principle and according to
information from ICO, it is expected to be renewed in 2010.
• Financing Line for cinematographic display and production equipment
This line is created under the Agreement executed on March 12, 2009 between ICO and the ICAA
with a view to supporting investments of private owners of movie theaters and private owners of
dubbing and sound studios, film laboratories, and lighting and film-making enterprises.
Pursuant to the terms of the agreement of reference, the aid is available for the financial
transactions, in the form of loan and financial lease, under the 2009 ICO-SME Line, tranche I,
executed by private enterprises registered in the ICAA Companies Register and capable of
evidencing that they are (i) owners of movie theaters, (ii) owners of dubbing and sound studios,
(iii) film laboratories and lighting or film-making enterprises.
The characteristics of the credit transactions executed under the ICO-SME Line are, inter alia, (i)
investment for the creation, restructuring, remodeling and fitting out of movie theaters for
disabled access; (ii) the acquisition of equipment and media for digital or conventional film
projection, sound systems, ticket sales or the acquisition of specific equipment necessary for the
digitalization of movie theaters or (iii) the acquisition and improvement of production equipment.
Guide to business in SpainInvestment aid and incentives in Spain40
The ICAA will reduce the interest on transactions under the ICO-SME Lines by up to 2.56 percentage
points during the first five years of the term of the credit transaction.
The deadline for submitting applications was September 22, 2009, but preparations are already
underway for the update of the line for 2010.
The ICO also has a Financing Agreement for audiovisual works with RTVE and FAPAE (Federation of
Spanish Audiovisual producers), executed on February 3, 2009 to manage aid to FAPAE member
producers.
This agreement is designed to promote the funding of newly produced audiovisual works: full-length
motion pictures and cinematographic shorts, TV movies, documentaries and animation series or
newly-produced series of a particularly cultural nature, the public broadcast rights of which have
been assigned to Sociedad Mercantil Estatal Televisión Española, S.A
In order to attain the aforesaid purpose, ICO makes available to producers total funding of €75
million. The interest rate applicable to loans granted will be 6M Euribor + 0.01.
3.5 Cultural industries
The 2010 Plan to Foster Cultural Industries was approved in the General State Budgets for 2010 under
the code “Program 334C”, although it is still to be implemented by the Ministry of Culture.
To date, public financing of cultural industries had been instrumented almost exclusively as subsidies
targeted at each specific sector making up the industries (i.e., cinema, dramatic arts, painting, etc.)
Nonetheless, the 2009 Plan to Foster Cultural Industries and, with even greater provisions of funds,
the 2010 Plan, includes the implementation of other financing mechanisms (e.g., loans), in addition
to the grant of subsidies.
Thus, the Ministry of Culture, through the 2010 Plan to Foster Cultural Industries intends to integrate
all cultural industry sectors, incorporating the management of new financial programs.
The main objectives of the Plan include most notably (i) giving specific treatment to cultural
industries, with a view to increasing their employment and productivity and improving their ability to
compete; (ii) introducing greater reasonableness and a cross section view of the fostering of cultural
industries; (iii) supporting the work of cultural creators and entrepreneurs; (iv) encouraging their
creativity; (v) generating new domestic markets; (vi) rechanneling the Ministry’s system of aid toward
new financing instruments; (vii) supporting innovative SMEs; (viii) bolstering the internationalization
of cultural industries; (ix) generating momentum for the legal offer of contents via Internet.
In accordance with these objectives, the projected lines of action can be grouped as follows:
�• Encouraging creativity:
— Crearte Awards: targeted at public educational centers and arranged to encourage creativity as
an element that cuts across all aspects of education.
Guide to business in SpainInvestment aid and incentives in Spain41
— Fostering the start-up of a cultural website designed specifically for children and adolescents,
working together on its execution and technical production with the Subdirectorate-General of
Publications, Information and Documentation.
• Supporting cultural creators and entrepreneurs
— Aid for the cost of backing cultural industries, targeted at newly incorporated micro-enterprises
or independent professionals belonging to the cultural industry, the purpose of which is to bear
a part of the cost of the backing.
• Growth, strengthening and internationalization of cultural enterprises
— Aid for the investment of capital to promote the modernization, innovation and technological
adaptation of cultural industries. This aid is targeted at Spanish enterprises or professionals
who engage in the production, distribution and/or marketing of cultural goods in the area of
the cultural industry, with a view to promoting their modernization, innovation and
technological adaptation.
— Repayable aid for business projects promoting the consolidation and development of Spanish
cultural industries, targeted at Spanish enterprises or professionals who engage in the
production, distribution or marketing of cultural assets in the area of these cultural industries.
It is aimed at the arrangement of projects and strategies to finance, inter alia, the start-up of
new business projects, as well as the internationalization of this type of industry (through
agreements of an ongoing nature, access to new foreign markets, the incorporation of
permanent establishments in foreign countries).
The materialization of this aid will be subject, in all cases, to eventual cooperation agreements
executed with ICO.
— Aid to promote and increase the legal offer of contents via Internet.
To reach these goals, the 2009 Plan had various lines of action as well as the continuity of some of
the existing instruments, including most notably the ICO–Cultural Creators and Entrepreneurs credit
line:
The ICO–Cultural Creators and Entrepreneurs credit line provides for the grant of aid (in the form of a
loan with subsidized interest) targeted at the creation of new enterprises or at the initiation of new
professional activities dedicated to the production, distribution and/or marketing of cultural goods in
the following sectors: cinema, audiovisual arts, book publishing, dramatic arts, painting, sculpture,
photography, music, architecture, design, fashion, new multimedia creative genres, digital
entertainment and audiovisual industries.
The following will be eligible for this aid: (i) newly created microcompanies and (ii) professionals
initiating a new activity who are, regardless of their legal form, registered for the tax on economic
activities and either are Spanish nationals or are from an EU-Member State or a State subject to the
Agreement on the European Economic Area.
Guide to business in SpainInvestment aid and incentives in Spain42
According to the information furnished to us by ICO, the lines mentioned above are expected to be
updated in the near future, without being satisfied that any call has been made at the moment.
3.6 Other specific industries
3.6.1 Agrofood and other related industries
The National Strategic Plan for Rural Development (2007-2013), prepared by the Ministry of
Agriculture, Fisheries and Food, was published in April 2007, in line with Council Regulation (EC)
1698/2005 of 20 September. This new plan contains the strategy and the objectives of Spain in
matters of Common Agricultural Policy.
According to the contents of this plan, seventeen regional programs are to be approved (one per
Autonomous Community), which are to be completed with specific measures in line with the various
regional situations.
The set of themes and priorities are to foster equal opportunities for men and women. Please also
note that agricultural professionals and priority operations will be given preference in the granting of
aid for rural development.
Lastly, please note that in the 2007-2013 period, the management of all rural development
measures falls to the Autonomous Communities.
In 2008 the National Strategy for Sustainable Operation Programs for the Fruit and Vegetable
Sector, to apply from July 1, 2008 through December 31, 2011, was published. In connection with
the actions eligible for subsidies under the operation programs included in this National Strategy, it is
important to note that double financing is to be avoided and, accordingly, such actions will not
receive aid from other vehicles under the common agricultural policy or, in particular, rural
development aid.
The National Strategy includes most notably the following actions:
�• Measures to improve production planning.
�• Measures to maintain or improve quality.
�• Measures to improve marketing.
�• Experimental research and production measures.
�• Training measures.
�• Crisis prevention and management measures.
�• Environmental measures.
�• Other measures.
3.6.1.1 Aid for investment in industrial infrastructures
With a view to contributing to the improvement and modernization of agricultural structures and
operations, a system of incentives has been established which is aimed at financing the
implementation of plans to upgrade farms and at supporting initiatives to improve professional
agricultural qualifications. In short, the objective is to assist young farmers who are setting up for the
first time.
In general, aid may take the form of capital subsidies, interest relief, and subsidies covering part of
the annual repayments of the principal, or assistance in defraying the cost of guarantees, or a
combination thereof.
Capital subsidies of up to 15% of the projected investment, reaching up to 20% in especially
disadvantaged areas are available.
A further five percent may be added to the applicable percentage according to the foregoing for
improvement plans aiming to obtain ecological products, if these conform to the legislation for
ecological farm production and their indication in farm and food products.
The interest relief may be up to 8.5 percentage points annually, in such a way that the interest rate
for the borrower must not be less than 1.5%, depending on the circumstances. The loans may cover
up to 90% of the difference between the cost of the approved investment and the subsidy.
In any event, the maximum amount of the grant may not exceed 50% of the investment in the
disadvantaged areas included in the lists approved at Community level, and may not exceed 40% in
other areas.
The subsidies are granted on a 50-50 basis by the Ministry of the Environment and of Rural and
Marine Areas and the relevant Autonomous Community governments, and may be channeled
through public and private banks. Applications must be filed with the competent body of the
Autonomous Community where the investment is to be located. More information on these grants
can be obtained from, among other agencies, the General Secretariat of Agriculture and Food, which
reports to the above-mentioned Ministry.
In the Autonomous Community of the Canary Islands, these subsidies are subject to a special system.
In agricultural operations that do not exceed 20 European Dimension Units, the maximum total
amount of the subsidy is 75% of the amount of the investment eligible for subsidy - in the case of
investments made, particularly, to promote diversification, restructuring or reorientation towards a
sustainable agriculture. Specifically, capital subsidies will be of up to 40% of the investment forecast
in the improvement plan.
3.6.1.2 Fostering of activities of rural interest
The initiatives to foster the diversification of rural life consist of incentives for investments,
employment and other related activities:
Guide to business in SpainInvestment aid and incentives in Spain43
�• The investment aid consists of interest relief on loans obtained to finance investments of up to
€72,121 for each full-time job created and maintained during the year, provided that the value of
such aid does not exceed 90% of the investments. These benefits are granted by the Ministry of
the Environment and of Rural and Marine Areas.
�• The employment aid takes the form of direct subsidies of up to 50% of the labor cost of the job
created during the first year of activity (subject to a ceiling of €3,606). These subsidies are
approved and paid by the relevant Autonomous Community governments.
�• Lastly, other types of aid are envisaged for related activities (business studies, business training
and retraining, technical assistance for company management, etc.) up to a maximum of
between 50% and 90% of the costs incurred in carrying out the activity (with maximum limits that
vary depending on the type of activity subsidized). This aid is paid by the Autonomous Community
Governments.
The incentives described above are incompatible with any other aid provided by the Central
Government, in which the beneficiaries, objectives or investments coincide.
Additionally, the incentives granted to foster economic activity and job creation in rural communities
will be subject to the ceilings envisaged for incentives granted for regional investment projects.
Finally, entities, companies and professionals related to production and marketing in the agricultural
industry (specifically, farmers) that provide statistical and agricultural pricing data to the Ministry of
the Environment and of Rural and Marine Areas, may obtain an annual subsidy that cannot exceed
€3,000 per recipient and year, which amount will be proportional to the volume and complexity of
the data to be furnished and in line with a number of distribution criteria set forth in the call for
applications for the aid. The above figures are the amount of aid granted in 2009, since no data are
yet available on the amount of aid forecast for 2010.
3.6.1.3 Measures for promoting and fostering new technologies
With a view to fostering the use of new technologies in the agricultural area, an incentive is provided
for the acquisition of new machines and equipment that involve technological innovation.
The incentive consists of a subsidy (the amount of which varies) which cannot exceed €50,000 per
beneficiary and year, which will depend on the investment made by that beneficiary and which is
granted provided that the investment in the new machinery is made within a year and the machines
or equipment acquired are not sold within five years.
3.6.2 Mining
In the area of mining, the Directorate-General for Energy and Mining traditionally grants incentives
for prospecting, geological-mining research and non-energy mining activities. These incentives,
consisting mainly of subsidies of a variable amount, according to whether or not the regions in which
the projects are performed may avail themselves of the exceptions expressly contemplated in article
Guide to business in SpainInvestment aid and incentives in Spain44
87.3 of the EC Treaty, are usually earmarked in for geological and mining research and prospecting
projects and for environmental projects.
On June 28, 2009 Order ITC/1637/2009, regulating the terms of reference for granting this type of
aid, was published in the Official State Gazette.
According to information furnished by the Ministry of Industry, Tourism and Trade, a new call for aid
applications is foreseen for May 2010.
The maximum amount of aid for a project subject to this Order can in no case exceed €500,000 or
be less than €6,000.
Beneficiaries of this aid may be public or private enterprises, business groupings and nonprofit
institutions. In this connection, please note that said groupings and institutions must hold the title to
the mining domain covered in the project.
Additionally, certain aid deriving from the Mining Safety Plan is granted annually with a view to
promoting mining safety and eradicating, insofar as possible, the accident rate of the mining activity
in Spain. These subsidies are granted to publicly- or privately-owned companies (except for those
engaging in coal extraction), groupings of said companies and nonprofit institutions.
Aid is also available to finance projects aimed at reducing the industry’s production capacity and
initiatives aimed at promoting the alternative development of mining areas.
The incentives to promote alternative development in mining areas generally consist of
nonrefundable subsidies, although the Institute for the Reorganization of Coal Mining and
Alternative Development of Mining Regions may propose other alternative aid within the framework
of both regional reactivation and mining reorganization, which may consist of: (i) aid for the
development of business infrastructures and projects; (ii) aid to the coal mining industry; (iii) aid for
resignation encouraged by incentives and closures of production units; (iv) aid for the storage and
transportation of coal; (v) aid for discontinuation, abandonment and rehabilitation work; and (vi)
aid for early retirement.
Table 5 details the application of the various programs managed by the Institute for the
Reorganization of Coal Mining and Alternative Development of Mining Regions, according to the
Autonomous Communities where it is intended to perform the qualifying action:
In respect of the regions able to opt for subsidies granted by the Institute for the Reorganization of
Coal Mining and Alternative Development of Mining Regions, Table 6 shows the areas in which
municipalities may have access to subsidies:
In connection with Table 6, please note that all groups mentioned are subject to the maximum
intensity limits stipulated on the map of regional aid for Spain for the 2007-2013 period.
Guide to business in SpainInvestment aid and incentives in Spain45
Guide to business in SpainInvestment aid and incentives in Spain46
Operation and
reduction of activityStorage Transport
Restructuring of
technical costs
Restructuring of
labor costs
Alternative
development
Andalucía Yes Yes No (1) Yes Yes Yes
Aragón Yes Yes Some areas Yes Yes Yes
Castilla y León Yes Yes Some areas Yes Yes Yes
Castilla-la Mancha Yes Yes No (1) Yes Yes Yes
Cataluña Yes Yes Some areas Yes Yes Yes
Galicia No (2) No (2) No (2) No (2) Yes Yes
Asturias Yes Yes No (1) Yes Yes Yes
(1) Thermal power stations consume coal from their own basin.
(2) Does not produce CECA coal.
Table 6
ACCESSIBLE SUBSIDIES, BY MUNICIPALITY
Infrastructures Employment creators Training
1. Mining municipalities very affected by the coal mining restructuring (Group 1).
√ √ √
2. Mining municipalities affected by the coal mining restructuring and bordering those included in Group 1.
√ √ √
3. All other municipalities somehow affected by the coal mining restructuring but not included in either of the foregoing groups.
√ √
Lastly, in 2006 the Council of Ministers approved the “National Strategic Coal Reserve Plan and new
Model for Integral and Sustainable Development of Mining Communities 2006-2012”, the priorities
of which include environmental protection, promotion of R&D and TI, improved quality of life and
the creation of jobs for young people in mining communities.
Table 5
APPLICATION OF PROGRAMS OF THE INSTITUTE FOR REORGANIZATION OF COAL MINING
Guide to business in SpainInvestment aid and incentives in Spain47
One of the most noteworthy aspects of the Plan is the creation of a new line of aid, with the
collaboration of the unions that were signatories to the Plan, which envisages different aid possibilities
for financing small-scale projects which, to date, were not eligible for the aid regime in force.
Under the aforesaid Plan, Order ITC/3666/2007, establishing the terms regulating aid to the mining
industry during the period running between January 1, 2008 and December 31, 2010 was published
in the Official State Gazette on December 15, 2007.
The Community Regulation regulating and authorizing state aid in the coal industry expires on
December 31, 2010. This would therefore be the last date of reference for the aid. Nonetheless,
according to information furnished by the Ministry of Industry, Tourism and Commerce, it will be
necessary to await the approval of a new Regulation to replace the current Regulation as from 2010.
This aid is to cover, in whole or in part, the losses of current native coal production used in the
generation of electricity.
Beneficiaries of this aid may be coal mining companies which were beneficiaries in the preceding
year and continue to operate production units, through underground mining or through open pit
mining, in which power plant coal is produced, provided that they evidence the meeting of certain
requirements to the Institute for the Restructuring of Coal Mining and the Alternative Development of
Mining Districts.
3.6.3 Reindustrialization
The process of adapting certain traditional industrial sectors to new forms of production, against a
backdrop of processes to rationalize and modernize the business segment, has caused severe losses
in the productive fabric and a significant elimination of jobs.
In an effort to mitigate and, to the greatest extent possible, avoid such noxious effects on the
industrial fabric as a whole and, in particular, on the areas most affected by the aforesaid adaptation
process, the Ministry of Industry, Tourism and Trade has been launching support initiatives since 1997
with a view to promoting, regenerating or creating the industrial fabric.
In this context, Order ITC/3098/2006 stipulated the terms regulating the grant of aid to
reindustrialization initiatives during the 2007-2013 period.
The purpose of this aid is to provide incentives for initiatives aimed at promoting, regenerating or
creating the industrial fabric, and which, in turn, have a positive effect on the socio-economic
variables of the geographical area affected in each case.
The reindustrialization initiatives must be located in depressed areas in which there is an industrial
fabric significantly composed of sectors subjected to change or adaptation and in which there has
been significant loss of production capacity and jobs and which, at the same time, are eligible for
Guide to business in SpainInvestment aid and incentives in Spain48
regional aid pursuant to letters a) or c) of Article 87.3 of the TCE, according to the regional aid map
of Spain. Areas with low population density are also included.
The aid will take the form of subsidies and loans able to be granted on a multi-year basis.
Initiatives eligible for financing are divided into the following two topical areas:
(i) Infrastructure
In this area initiatives falling under either of the following two sub-areas will be eligible for
financing: (i) basic infrastructure: investments in technical and industrial infrastructures of
common or shared use, such as technological parks, industrial land, access to transportation and
telecommunication networks, etc.; (ii) services infrastructure: projects which provide the
industrial sector with services of technological diagnosis and solutions for SME groups in
connection with investment projects aimed at improving productivity.
Please note that, in any case, the initiatives included in this area must be related to those
considered in the area of industry.
(ii) Industry
In this area financing will be available for industrial initiatives which create jobs and which act as a
catalyst for the development of the business production sector.
In the case of aid relating to Infrastructure, subsidies may equal a maximum of 50% of the initiative’s
eligible budget. In turn, repayable loans without interest may be granted up to a maximum amount
of 75% of the initiative’s eligible budget. They will have an annual interest rate of 0% and a
maximum term of 15 years, of which 10 will be for repayment and 5 will be a grace period.
In connection with aid relating to Industry, subject to the aid intensity limits on the regional aid map,
repayable loans may be granted up to a maximum amount of 50% of the initiative’s eligible budget.
They will have an annual interest rate of 0% and a maximum term of 15 years. In any case, the
beneficiary must support the financing of at least 25% of the eligible investment.
The Resolution dated October 22, 2009 of the Secretariat-General of Industry issued the general call
for grant applications for reindustrialization initiatives for 2010.
The ceiling on total aid for reindustrialization under this call for applications is €128,721,460, of
which €2,921,460 relate to subsidies and €125,800,000 to repayable loans. Nonetheless, these
amounts may be increased up to a maximum of €1,000,000 for subsidies and €90,000,000 for
repayable loans, according to the availability of funds in the budget or from other calls under the
2009 aid program for reindustrialization initiatives.
In the last quarter of 2009 a number of specific calls for applications for reindustrialization aid were
published for various regions such as,Soria, Teruel and Jaén; Campo de Gibraltar; Margen izquierdo
del Nervión Garoña; Almadén; Canary Islands; etc. The Ministry of Industry, Tourism and Trade has
posted the specific characteristics of the specific calls for aid applications referring to each of these
regions on its website: (http://www.mityc.es/PortalAyudas/Reindus).
3.6.4 Extension of Plan 2000E to support the renewal of the fleet of vehicles
With a view to providing incentives for the acquisition of vehicles, the maintenance of employment in
the auto industry and the replacement of old vehicles with others causing less pollution, on May 2,
2009 the Ministry of Industry, Tourism and Trade approved the “Plan 2000E to support the renewal
of the fleet of vehicles”, under which subsidies were granted for the acquisition of a maximum of
200,000 vehicles with a provision of funds equal to €100 million.
As a result of the complex situation still being undergone by the auto market, and given the
enthusiastic acceptance and stimulating effect of the Plan 2000E, as well as its positive impact on
the environment and safety, on December 20, 2009 an extension of the Plan 2000E through 2010
was approved.
Subsidies are granted by direct concession for the acquisition of category M1 vehicles (motor vehicles
with at least four wheels designed and manufactured for carrying passenger) and category N1
vehicles (vehicles whose maximum mass does not exceed 3.5 tons, designed and manufactured for
carrying goods), provided that acquisitions are registered between January 1, 2010 and September
30, 2010 or until the maximum number of vehicles financed, in both categories, reaches 200,000.
The aid consists of a subsidy equal to €500 per vehicle for the acquisition of category M1 vehicles and
category N1 vehicles, contributions to the auto manufacturer or importer sector and, additionally,
any Autonomous Communities voluntarily deciding to join the Plan may formalize their contributions
under the related agreements.
The following are eligible for the aid (i) individuals; (ii) independent professionals registered for the
tax on economic activities; (iii) micro-enterprises with fewer than 10 workers and whose annual net
turnover does not exceed €2 million; and (iv) SMEs.
The aid under the Plan 2000E is compatible with other subsidies or aid for the same purpose
granted by other Public Authorities or public or private entities, whether national, European or
international.
Guide to business in SpainInvestment aid and incentives in Spain49
Guide to business in SpainInvestment aid and incentives in Spain50
4. Incentives for investment in certain regions
4. INCENTIVES FOR INVESTMENT IN CERTAIN REGIONS
4.1 Granted by the State
Regional incentives are financial subsidies granted by the State to productive investment to promote
business activity in previously-determined areas, thus helping to alleviate territorial imbalances and
to reinforce each region’s endogenous potential for development.
The State grants such aid in accordance with the demarcation of eligible areas and maximum aid
intensities stipulated by the European Commission. The functions relating to regional incentives are
attributed to the Directorate-General of Community Funds, under the Secretariat-General of Budgets
and Expenses of the Office of the Secretary of State for Finance and Budgets of the Ministry of
Economy and Finance.
These incentives are aimed at promoting business activity and directing its location toward previously
determined areas, and they consist of financial aid for the financing of investment projects to be
executed in areas with the lowest level of development, or in those whose special circumstances so
recommend.
The main objective of this regional policy is to achieve economic equilibrium between the different
Spanish regions (measured in terms of per capita GNP). In practice, this policy involves the
promotion of start-ups, expansions or modernization of enterprises located in the less developed
geographical regions and in areas experiencing particular economic difficulties.
The main objective of this regional policy is to achieve economic equilibrium between the different
Spanish regions (measured in terms of per capita GNP). In practice, this policy involves the
promotion of start-ups, expansions or modernization of enterprises located in the less developed
geographical regions and in areas experiencing particular economic difficulties.
The incentives available for grant are, in general, (i) non-returnable subsidies; (ii) subsidies for the
interest on loans obtained by the beneficiary from financial institutions; (iii) subsidies for the
repayment of those loans; (iv) a combination of the foregoing; (v) reductions in the employer’s
social security contribution for common contingencies, etc.
They are granted for investment projects that must be located in one of Spain's eligible areas.
The geographic demarcation of the eligible areas and the specific definition of the maximum
financing limits, and of the specific industry requirements, eligible investments and conditions, are
regulated in the respective Royal Decrees demarcating economic development areas.
The aforementioned Royal Decrees were prepared on the basis of the contents of the “Guidelines on
National Regional Aid for 2007-2013” approved by the European Commission.
In turn, within the framework of the Guidelines, the European Commission establishes an aid map
for each Member State, stipulating the maximum limit of financial aid or subsidies that can be
received by each region under regional incentives during the reference period.
In connection with the preparation of the aforesaid map, please note that as a result of (i) the so-
called “statistical effect”, due to the incorporation of new EU Member States and (ii) Spanish
economic development in recent years, some regions which were deemed eligible for subsidies in the
2000-2006 period have either exceeded the income threshold established for qualifying regions, or
seen a reduction in the total incentives that can be granted for projects investing in the region.
In order to mitigate the adverse effects of this situation, in the Regional Aid Map for Spain (2007-
2013), the European Commission provided for two three-year periods (2007-2010 and 2011-2013),
with the first period being allocated higher aid limits than the second for ‘statistical effect’ regions.
Per the Map, the Spanish regions in which greater incentives are envisaged, up to 40% of the net eligible
investment, are the Autonomous Communities of Extremadura, the Canary Islands and Andalucía
(nonetheless, for Andalucía the percentage is to be reduced to 30% of the investment in the period
running between January 1, 2011 and December 31, 2013). The Autonomous Communities of Castilla-La
Mancha and Galicia also deserve special mention, since aid of up to 30% of investment is permitted.
Having regard to the foregoing, in the context created by the “Guidelines on National Regional Aid for
2007-2013” and by the new Regulations dated July 6, 2007 implementing the Regional Incentives Law, the
Royal Decrees regulating the Economic Development Areas (geographical areas of the State with a lower
level of development) were modified during the last half of 2007 with a view to bringing them into line
with the new limits set in Community legislation, the main characteristics of which are set forth below.
Guide to business in SpainInvestment aid and incentives in Spain51
Map 1
MAXIMUN REGIONAL INCENTIVES, 2007-2013 (%)
2007-10 2011-13
25 15
25 10
15 15
10 10
10 (2007-2008)
Excluded areas
Source: European Comission
2007-10 2011-13
40 40
40 30
30 30
30 30/20
30 20
30 15
27 15
4.1.1 Eligible economic sectors
These are stipulated in each Royal Decree demarcating the respective geographical area.
Traditionally, the main eligible sectors, notwithstanding what is established in the definition under
each Royal Decree of demarcation, are as follows:
�• Extractive and processing industries, particularly those which apply advanced technology or use
renewable energies.
�• Agrofood and aquaculture industries, and the processing and preservation of fish products.
�• Industrial support services and those which significantly enhance trade networks.
�• Specific tourist facilities with an impact on development in the area.
4.1.2 Types of eligible investments
The types of investment eligible for incentives are new or first-time use tangible fixed assets, referring
to the following investment items:
�• Civil engineering.
�• Capital equipment, excluding external transportation items.
�• Prior viability studies.
�• Other concepts, exceptionally.
The Regulations implementing the Regional Incentives Law in line with the Regional Guidelines
(2007-2013) eliminate the possibility of including lands as an eligible fixed asset.
4.1.3 Eligible projects
�• Definition
— Projects for the creation of new establishments that give rise to the commencement of a
business activity and also generate new jobs, which must be maintained for at least two years
after the end of the term set in the Individual Resolution granting the aid.
— Project for the expansion of existing activities with an increase in production capacity or start-
up of new activities in the same establishment which entails the creation of new jobs and the
maintenance of existing jobs during the same period stipulated in the preceding paragraph.
— Project for the modernization of the business which meet the following requirements:
– the investment must be an important part of the tangible fixed assets of the establishment
being modernized and must entail the acquisition of technologically advanced machinery
which produces a notable increase in productivity.
Guide to business in SpainInvestment aid and incentives in Spain52
– the investment must give rise to the diversification of an establishment’s production in order
to attend to new and additional product markets or must entail a fundamental
transformation of the overall production process of an existing establishment;
– existing jobs must be maintained during the aforesaid periods.
�• Requirements
— The project must relate to an eligible sector and activity and be located in one of the
designated areas.
— It must be technically, economically, and financially viable.
— Generally, at least 25% of the investment must be equity-financed. However, depending on the
features of the project, a higher rate might be required in the Royal Decrees of demarcation.
— The application for regional incentives must be submitted before the investment in question
begins to be made.
— In particular, the investment cannot be initiated before receiving written confirmation from the
relevant body of the appropriate Autonomous Community that the project is “at first glance”
capable of being deemed eligible.
— Investments in fixed assets must be made in new or first-use fixed assets.
4.1.4 Types of incentive
The regional incentives available for grant consist of:
a) Non-returnable subsidies for the approved investment.
b) Subsidies for the interest on loans obtained by the beneficiary from financial institutions.
c) Subsidies for the repayment of those loans.
d) Any combination of the foregoing.
e) Reductions in the employer’s social security contribution for common contingencies during a
maximum number of years, to be determined by regulation, subject to the provisions of the
legislation on incentives for hiring and for fostering employment.
In the cases under letters b), c) and d) above, there is also a possibility of regional incentives being
converted into a percentage of the subsidy on the approved investment.
4.1.5 Project assessment
Projects must be evaluated using the methods stipulated in each Royal Decree of demarcation, which
will thus determine the percentage of subsidy to be granted for each project. Notwithstanding the
Guide to business in SpainInvestment aid and incentives in Spain53
specific provisions of each Royal Decree, the main parameters to date considered by the relevant
bodies are as follows:
�• Total amount of the eligible investment.
�• Number of jobs created.
�• Contribution to the area’s economic development and the use of its factors of production.
�• Value added of the project (if a start-up) or increase in productivity in other cases.
�• Use of advanced technology.
�• Location.
4.1.6 Compatibility of different incentives
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 Royal Decrees 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 Royal Decree of demarcation and EU rules do
not preclude it (incompatibilities between Structural Funds).
4.1.7 Application procedure
�• Documentation
— Standardized application form addressed to the Ministry of Economy and Finance.
— Documentary evidence of the applicant’s personal information or, in the case of an
incorporated company, its registration data. If the company is in the process of being
incorporated, the draft bylaws and information about any promoter acting in his name
— Standardized investment project memorandum, together with documentation evidencing
compliance with all environmental requirements.
— Formal declaration of other aid applied for or obtained by the applicant for the same project.
— Evidence, as of the date in question, of compliance by the company with its tax and social
security obligations or, as the case may be, authorization from the Directorate-General of
Community Funds for the obtainment of the certificates to be issued both by the State Tax
Agency and by the Social Security General Treasury. In the case of a company being
incorporated, the obligation will be deemed to refer to the developer.
�• Where to submit
The competent body of the Autonomous Community was the project is intended to be carried out.
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�• Granting agency
The Government Delegate Committee for Economic Affairs if the eligible investment exceeds
€6,010,121. In all other cases the Ministry of Economy and Finance (in particular, through the
Subdirectorate-General of Regional Incentives, under the Directorate-General of Community
Funds).
�• Time period for decision
The maximum deadline for resolving on applications and serving notice thereof is 6 months from
the date on which the application was received at the Registry of the Ministry of Economy and
Finance (although this deadline may be extended).
If the initial term and, as the case may be, any extended term ends without a resolution have
been issued, the grant application may be deemed to have been rejected.
• Acceptance of the grant of aid
Express notice of acceptance of the aid must be served by applicants on the relevant agency of the
Autonomous Community , within the first 15 days after the date on which notice of the resolution
granting the aid is received.
If no notice is served by the end of such period, the grant of aid will be rendered null and void and
the dossier will be shelved.
�• Submission of resolutions at the Mercantile Registry
If notice of acceptance is served, the beneficiary must file the resolution granting the aid with the
Mercantile Registry within one month from the date of acceptance.
All resolutions subsequent to the grant of incentives (extensions, amendments, etc.) must also be
filed by the same deadline.
In general, compliance with this requirement must be evidenced to the relevant Autonomous
Community agency within four months after acceptance of the related resolution. If evidence is
not submitted by the deadline, the Directorate-General of Community Funds will render the grant
of aid null and void, deeming it not to have been filed with the Mercantile Registry.
4.1.8 Project implementation and subsequent modifications
Investments may be initiated without having to wait for the final decision to be adopted, provided
that applicants can prove that such investments were not initiated before the relevant Autonomous
Community agency had confirmed in writing that the project was “at first glance” capable of being
deemed eligible.
There is also a possibility for associated investment and subsidy calendars to be stipulated with the
relevant agencies for applications in which the amount of the subsidy exceeds €5 million.
Guide to business in SpainInvestment aid and incentives in Spain55
In general, subsequent incidents in the project (i.e., alteration of the initial project, change in the
locating of the project, etc.) will be resolved by the Directorate-General of Community Funds.
Applications for alteration of the projects must be submitted to the relevant Autonomous Community
agency and addressed to the Ministry of Economy and Finance. The deadline for resolving on
applications and serving notice thereof will be six months following its receipt by the Directorate-
General of Community Funds.
4.1.9 Payment procedure
Following issue of a report confirming the degree of compliance with the requirements imposed by
the relevant agency on the project in question, the beneficiary must file a request for payment of the
subsidy at the relevant Autonomous Community agency.
4.1.10 Methods of payment
Payment of the subsidy may be made in any of the following ways:
�• Final payment: after the end of the term, the beneficiary may only request total payment of the
subsidy granted or to which he is entitled if there have been cases of breach.
�• Payment in full: during the term, the beneficiary may only request a single payment of the total
subsidy after the entire investment has been made and subject to the submission of the related
bank guarantee. This payment may only be requested subsequent to the dates of compliance and
verification of each and every one of the conditions imposed on the holder and prior to the end of
the term.
�• Payment in part: during within the term, the beneficiary may request partial payments of the
subsidy as he justifies the partial making of the investment, provided that this is authorized in the
judicial decision in which the subsidy is granted.
4.2 Aid granted by Autonomous Community and Municipal governments and Local Councils
All the Spanish Autonomous Community governments provide similar incentives, on a smaller scale,
for investments made in their regions. Only some of them are compatible with the EU and State
regional incentives. Specifically, if State regional incentives have been applied for a given project, the
limits established in each Royal Decree of demarcation must be taken into account.
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.
Most Autonomous Community incentives are granted on an annual basis, and the general conditions
of the incentives usually do not change from year to year.
In view of the impossibility of including here a detailed description of the aid available in each
Autonomous Community, we summarize below their main and traditional features (which are
Guide to business in SpainInvestment aid and incentives in Spain56
generally very similar to those of the regional State incentives), notwithstanding the necessary
adaptation to the new framework created following the approval of the “Regional Aid Map for Spain
(2007-2013)”.
4.2.1 Types of project
Opening of new establishments, expansion of activities, modernization and technological
innovation. The creation of new jobs is normally required.
4.2.2 Main sectors
In general, agriculture and forestry, craftwork, fishing, industrial support services, processing
industries, tourism, culture, industrial design, electronics and computing, renewable and
environmental energies.
4.2.3 Project requirements
Mainly the same as those which apply at the State level.
4.2.4 Types of incentive
The main incentives are:
�• Nonrefundable subsidies.
�• Special loan and credit terms and conditions.
�• Technical counseling and training courses.
�• Tax incentives.
�• Guarantees.
�• Social security deductions.
4.2.5 Expenses and eligible investments
Generally, the main expenses and eligible investments are:
�• R&D and TI and training expenses, promotion of apprenticeship and trainee contracts.
�• Capital equipment and other fixed assets.
�• Planning, modernization, management enhancement, and design projects.
�• Instrumentation, material, installations and equipment expenses.
�• Advice and similar services.
�• Acquisition of the real estate necessary to implement the projects.
Guide to business in SpainInvestment aid and incentives in Spain57
4.2.6 Procedure
The documentation required is very similar to that described for regional State incentives and
normally has to be filed with the relevant Autonomous Community agency. Most Autonomous
Communities have agencies that provide information and advice on requesting aid. Many of them
also provide access to websites with updated databases of the subsidies available.
4.2.7 Cooperation agreements with the Spanish Central Government
In addition to the aid offered by each Autonomous Community Government, in recent years there
has been an increase in cooperation agreements between the Autonomous Community Government
and the Central Government. The main objective of these programs is the joint implementation of
projects in the following areas:
�• Technological modernization and the promotion of innovation.
�• Aid for independent trade and development of business cooperation.
�• Development of SMEs in general.
�• Singular actions: agreements with local councils.
4.3 Special reference to investments in the Canary Islands
The Canary Islands Autonomous Community has traditionally enjoyed a regime of commercial
freedom involving less indirect tax pressure and exclusion from the sphere of certain State
monopolies.
These conditions have given rise to an economic and tax system which is different from that which
exists in the rest of Spain. An attempt has been made to reconcile as far as possible these special
circumstances with the requirements of Spanish membership of the European Union.
In this regard, the Central Government has been very flexible in its application of the regulations in
granting regional incentives and locating investments in the Canary Islands, and imposes only those
limitations stipulated in EU legislation. Investments in the peripheral islands are given preferential
treatment by means of requiring a minimum level of investment lower than that established for the
rest of Spain.
These efforts led the European Commission to authorize the creation of the Canary Islands Special
Zone (“Zona Especial Canaria” or “ZEC”) in January 2000, which is aimed at attracting international
capital and companies to the Canary Islands. Use of the benefits of the ZEC is currently in force
through December 31, 2019, and may be extended when authorized by the European Commission
(please also see Chapter 3 and www.zec.org).
Lastly, incentives aimed at upgrading and modernizing the banana and tomato growing and fishing-
related industries are also available. Furthermore, under an EU initiative it is planned to make
subsidies available to facilitate the restructuring of the fishing industry.
Guide to business in SpainInvestment aid and incentives in Spain58
5. SME incentives
5. SME INCENTIVES
5.1 “InnoEmpresa” Program to Support Innovation at Small- and Medium-sizedEnterprises (2007-2013)
In recent years the Spanish Government and the Autonomous Community Governments have shown
special interest in promoting and developing SMEs, in view of their proven ability to create jobs and
make a determined contribution to the growth of the economy.
In this connection, the Directorate-General for SME Policy of the Office of the Secretary General of the
Ministry for Industry, Tourism and Trade, promotes the granting of certain incentives and aid schemes
designed especially for SMEs, which are grouped together under the “Plan for the Consolidation and
Competitiveness of the Small and Medium-Sized Enterprise” for 2000-2006.
As a replacement for the Plan, the Council of Ministers approved Royal Decree 1579/2006,
establishing the rules on aid and the management system for the Program supporting innovation at
small- and medium-sized enterprises during the 2007-2013 period, known as “InnoEmpresa”, which
continues in the same vein. This Program ensures compliance with the commitment assumed under
the Business Promotion Plan approved by the Spanish Government on January 27, 2006.
This Program which takes advantage of the experience acquired under the Plan 2000-2006, aims to
incorporate significant improvements, the most noteworthy of which include the prioritization of aid
lines directly related to improving the innovative capacity of businesses (in a broad sense, not purely
technological innovation), the opening of all envisaged aid lines at the direct request of the SMEs, an
increase in the maximum aid for investment in tangible or intangible assets, a specific focus on
projects to be implemented by different companies and agencies under a collaboration or
consortium arrangement, etc.
With a budget of €500 million for the 2007-2013 period, the InnoEmpresa Program also receives co-
funding from the ERDF of approximately €105 million, and further financing from the Autonomous
Community Governments that so desire, within the framework of the SME Sectoral Conference. The
2010 budget projected by the Ministry of Industry, Tourism and Trade, through the Directorate-
General of SME Policy, is approximately €58 million.
SMEs belonging to the following sectors: (i) industry, including agrofood; (ii) construction; (iii)
tourism; (iv) businesses; and (iv) services, are eligible for the aid granted under the “InnoEmpresa”
Program.
Also eligible for the aid are intermediary bodies pursuing activities which support SMEs in the
foregoing sectors.
The aid lines envisaged in the InnoEmpresa Program are classed in three groups:
�• Organizational Innovation and Advanced Management.
�• Technology and Quality Innovation.
Guide to business in SpainInvestment aid and incentives in Spain59
�• Innovation projects under collaboration or consortium arrangements.
Potential beneficiaries include:
�• Small- and medium-sized enterprises that have one or more employees, with special emphasis on
entities with growth potential and the capacity to create innovation.
�• Intermediary bodies (i.e., public and private not-for-profit organizations which habitually provide
services to support innovation at SMEs and which have sufficient human and material resources).
If the beneficiaries are intermediary bodies, the following may be treated as eligible expenses:
a) Tangible or intangible investments, excluding the acquisition and fitting out of real estate,
investment expenses, means of transportation and office equipment (other than computer-related
items).
Subsidies for the investment cannot, in this case, exceed €55,000 except in the case of
Supraregional projects.
b) Expenses of technical personnel directly related to the project.
c) External services such as technical assistance, external advisory services, tutoring and project-
related services.
d) Inter-city travel and accommodations necessary for the performance of the project, for which
acceptable maximum amounts must be set.
e) VAT or equivalent tax borne by the beneficiary where it entails an actual cost.
f) General expenses, which cannot exceed 10% of the eligible budget.
If beneficiaries are SMEs, the expenses listed under paragraphs a) and c) above may be financed, as
well as those listed under paragraph b) in the case of the projects indicated in section 2.2. of the
Annex to Royal Decree 1579/2006: performance of applied technical development projects.
Nonetheless, the maximum amount relating to the first section cannot exceed €18,000. Ineligible in
this case are services provides to SMEs which constitute an ongoing or periodic activity and are
related to the company’s normal operating expenses.
The maximum limits on the subsidy must be adjusted to the regional limits stipulated by the
European Commission on the basis of the regional aid map approved for Spain and, in summary, set
forth on the following table:
Guide to business in SpainInvestment aid and incentives in Spain60
With respect to the management system, please note that it is the Autonomous Community
Governments, working closely in conjunction with Central Government, which manage regional
projects, while supraregional projects are managed directly by the Directorate-General for SME Policy
of the Ministry for Industry, Tourism, and Trade.
Under this Program, Order ITC/786/2009 was published in the Official State Gazette on March 31,
2009 and contained the 2009 call for aid applications under the national program for innovation
projects, of the instrumental line of action of R&D + TI projects, under the 2008-2011 National R&D
+ TI Plan, which contains the subprogram to support innovation in small- and medium-sized
enterprises (InnoEmpresa) for supraregional projects. Although the deadline for submitting
applications has passed, a new call for aid applications is expected to be published for 2010.
Throughout 2009 the Autonomous Communities published various calls for aid applications for SMEs
under the “InnoEmpresa” Program (i.e., Principality of Asturias, Official Gazette of the Principality of
Asturias dated June 12, 2009; Extremadura, Official Gazette of Extremadura dated January 30,
2009; etc.), which are expected to be reproduced in 2010 (i.e., Cantabria, Official Gazette of
Cantabria dated December 31, 2009; Aragón, Official Gazette of Aragón dated December 16, 2009,
etc.).
5.2 SME incentives granted by Autonomous Community Governments
Throughout 2009 the Autonomous Communities issued the terms regulating subsidies within their
geographical area and held the related calls for grant applications for SME incentives.
They are also responsible for controlling and monitoring the projects approved, without prejudice to
the control to be exercised by the European Union and the relevant bodies of the Central Government
with respect to the projects financed with EU funds.
Guide to business in SpainInvestment aid and incentives in Spain61
Table 7
THE MAXIMUN LIMITS ON THE SUBSIDY
Type of initiative or project
Non-assisted regionsArt. 87.3 a) of the Treaty
establishing the EC
Art. 87.3 c) of the Treaty
establishing the EC
Maximum aid intensity (gross)
Investment in tangible and intangible
assets, with the exceptions stipulated in
Article 5.1.a) 1:
Maximum regional aid
+ 15 percentage points.
Maximum regional aid
+ 10 percentage points.
Small enterprises
Soft aid (study and counseling)
Medium-sized enterprises
15.00%
7.50%
Up to 50% Up to 50% Up to 50%
5.3 Preferred financing for SMEs
In addition to the program outlined above, SMEs have access to another series of aid instruments
developed by the public sector. Noteworthy in this connection are the main lines of financing offered
by the Official Credit Institute (Instituto de Crédito Oficial or “ICO”) detailed below (www.ico.es) and
the “FONPYME” (Fund for SME foreign investment operations) managed by COFIDES (Compañía
Española de Financiación del Desarrollo), the official Spanish agency for development finance, which
is explained in detail in section VI, “Internationalization incentives.”
In particular, on December 21, 2009 ICO and financial entities executed a cooperation agreement for
the start-up of the 2010 Support Plan, which is aimed at financing the needs of independent
professionals and SMEs, as well as major projects relating to “Sustainable Economy” during 2010.
With the execution of this agreement, ICO started up the five main lines of financing for 2010: (i)
National Investment (grouping the former ICO-SME Line and the ICO-Corporate Growth Line), (ii)
International Investment, (iii) Entrepreneurs; (iv) Liquidity and (v) Housing.
The main new features of the National Investment, International Investment, Entrepreneur and
Liquidity Lines are:
�• The possibility of financing VAT.
• The fact that second-hand assets are included as assets eligible for financing, and restrictions by
accounting groups are eliminated.
• The possibility of financing vehicles up to €24,000 plus VAT.
• The financing of the acquisition of enterprises.
• An increase in the repayment period of up to 12 years.
• Enterprises are broken down into two tranches according to number of employees, with two
maximum financing limits:
— Tranche I. independent professionals, micro- and small-sized enterprises of up to 49
employees; eligible for loans of up to € 2 million.
— Tranche II. Medium-sized and all other enterprises; eligible for loans of up to 10 million.
The agreement executed on December 12, 2009 also provides for the start-up of the Sustainable
Economy Fund, initially provided with funds of €20,000 for the 2010-2011 period, of which €10,000
million are to be contributed by ICO and the remainder by the financial institutions party to the
agreement.
In the same vein as this line of aid for SMEs, and because it has become more difficult to access the
credit market, the Government started up a Spanish Plan for the Stimulation of the Economy and
Employment (Plan E), previously commented, to create new way to support enterprises and families.
Guide to business in SpainInvestment aid and incentives in Spain62
In particular, SMEs are given greater support in the form of tax measures permitting the release of
resources to enterprises for a total amount of €17 billion and, secondly, the available financial
instruments will be increased to €29 billion, with a view to facilitating an enterprise’s access to credit.
Thus, the ICO lines will, for the first time, finance the working capital of enterprises.
The following are notable examples:
�• The “Línea ICO-Inversión Nacional 2010” (2010 ICO National Investment Line) groups the ICO
Corporate Growth Line and the ICO SME Line, (which provided preferential access to the official
credit and has financed a large number of investments since its creation in 1993).
The creation of this new line of aid, in force through December 20, 2010 or until the funds are
used up, is aimed as supporting and financing, on preferential conditions, the investment projects
of SMEs (as has been done since 2000) and of independent professionals and other enterprises
making investments in national territory.
Investments eligible for financing are: (i) fixed assets used in production, (ii) the acquisition of
cars whose price (including VAT) is less than €24,000, (iii) the acquisition of enterprises and (iv)
value added tax or the Canary Islands general indirect tax.
Financing of up to 100% of the investment project may be obtained, provided that the investment
to be financed was not made prior to January 1, 2009, and the investment must be made within
not more than 12 months after the date of execution of the financing
Maximum financing is up to €2 million for independent professionals, micro- and small-sized
enterprises, and up to €10 million for medium-sized and all other enterprises, regardless of the
number of transactions.
Entrepreneurs may choose their repayment period from the following options:
— a range of 3 years without a grace period for the financing of the principal.
— 5 years with no grace period or a 1-year grace period for the financing of the principal.
— 7 years with no grace period or a 2-year grace period for the financing of the principal.
— 10 years with no grace period or a 3-year grace period for the financing of the principal.
— 12 years, with no grace period or a 3-year grace period for the financing of the principal.
On the other hand, for the financing, the entrepreneur may opt for a fixed interest rate, according
to the two-week listing reported by ICO, plus up to 2%, or a variable interest rate: 6 month
EURIBOR plus a margin, according to the two-week listing reported by ICO, plus up to 2%.
Financing under this Line cannot be combined with the obtainment of financing under the 2010
ICO-Entrepreneurs Line.
Guide to business in SpainInvestment aid and incentives in Spain63
• The “Línea ICO-Emprendedores” (ICO Entrepreneurs Line): aimed not only at micro-enterprises
incorporated after January 1, 2009, but also at independent professionals who meet the
requirements of micro-enterprises (i.e., who employed between 1 and 9 employees as of
December 31, 2009 and whose turnover and/or general balance sheet as of December 31, 2009
was less than €2 million and which, furthermore, were registered for the tax on economic
activities as of January 1, 2009), with a view to using preferential loans to support the
incorporation of new enterprises or the creation of new professional activities.
Maximum financing is €300,000, regardless of the number of transactions, and up to 100% of
the project may be financed.
Eligible for financing: new and second-hand fixed assets used in production; the acquisition of
cars whose total price is less than €24,000; expenses inherent in the incorporation of the
enterprise, up to a limit of 10% of the total project; the acquisition of enterprises; and VAT or the
Canary Island general indirect tax.
Repayment periods range between 3 and 12 years, without a grace period or with grace periods
from 0 to 3 years for the repayment of principal.
ICO is considering a reduction relating to 1.5% of the interest rate on the transaction, applied as a
net adjusted value to be used for the early repayment of the capital. The amount subject to the
reduction is equal to €65 per €1,000 of financing.
• The “Línea ICO-Liquidez” (ICO Liquidity Line): aimed at independent professionals and solvent and
viable enterprises, with a view to meeting their financing needs in connection with working
capital, in force through December 20, 2010 or until the funds are used up.
The maximum amount of financing is up to €2 million for independent professionals and
enterprises with less than 50 employees or up to €50 million for enterprises with 50 or more than
50 employees, with repayment periods of 1, 3 and 5 years, including a 1-year grace period in
connection with the principal.
On the different operations may be noted that:
— The interest rate applicable to financed transactions where the risk is shared between ICO and the
credit institution is the average fixed rate of the following two rates: for the 50% of the funds
contributed by ICO: fixed assignment rate plus up to the stipulated margin (2%, 2.50%, 3%, 3.50%)
and for the 50% of the funds contributed by the credit institution: fixed assignment rate plus up to
the stipulated margin (2%, 2.50%, 3%, 3.50%), plus another margin which cannot exceed 1.50%.
The credit institution will analyze the risk of the transactions and will apply one of the four margins to
each transaction having regard to the findings of the risk analysis. The mediation margin applied by
ICO will be identical to that which the credit institution applies to its customers.
— Where all of the financing is contributed by ICO and the full risk is borne by the credit
institution, the interest rate applied will be the fixed assignment rate plus up to 3.5%.
Guide to business in SpainInvestment aid and incentives in Spain64
• The “Línea ICO-Vivienda” (ICO Housing Line): aimed at enterprises and companies with registered
office and tax-resident status in Spain which are the owners of real estate investments, aimed at
boosting the rental market in Spain.
Eligible projects under this line are residences located in Spain which have been completed (i.e.,
which are certified as habitable) and are to be rented as a habitual residence, also permitting
rental with a purchase option.
The financing granted will be used to pay off all or part of the loan executed between the
developer and the credit institution. The maximum amount to be financed is 80% of the
developer’s loan, up to the limit of 80% of the initial value of the development to be rented.
For each customer, the maximum amount of financing is €50 million, for all transactions, except
in the case of holding companies or structures owned by the Autonomous Communities, for which
the aforesaid amount may be increased, subject to authorization from ICO.
The projected term is 7 years, to be repaid all at once upon maturity. If the property is transferred
or the purchase option exercised during the term of the transaction, the financing must be repaid.
Lastly, another of the main features for 2010 is the creation of the “financial enabler” whose main
objective is to channel credit applications filed by independent professionals and SMEs with financing
needs in connection with investments and/or working capital not exceeding €2 million and which
were initially rejected by the financial institutions.
The creation of the financial enabler is aimed at helping certain viable, profitable and solvent
projects which have been affected by the difficulties currently undergone by the financial market to
overcome the barriers keeping them from accessing financing.
The following are the main functions of the financial enabler:
• To improve communication between the enterprise and the financial industry.
• To advise the enterprise on loan processing.
• To review loan applications which have been turned down.
Financial enablers only work with credit institutions which have executed a cooperation agreement
with ICO.
The services of the financial enabler may be accessed either via Internet, on the official website of
ICO (www.ico.es), or by telephone, using the free customer service number (900 567 777), where the
questions of applicants will be dealt with.
ICO will also make available to SMEs and independent professionals a territorial network of financial
advisors who will analyze loan applications, advise applicants and mediate between applicants and
financial institutions with a view to having the latter review or re-channel each case. These advisors
will be physically located at the facilities of authorized institutions throughout the country.
Guide to business in SpainInvestment aid and incentives in Spain65
6. Internationalization incentives
6. INTERNATIONALIZATION INCENTIVES
Although it is not the aim of this publication to address incentives for Spanish investment abroad,
this section is included in view of the obvious interest that Spanish investment abroad has sparked in
foreign investors as a platform for international expansion.
In this connection, it should be noted that the official financial instruments approved by the Spanish
government to support the internationalization of business are:
�• PROINVEX (major foreign investment program).
�• FIEX (Foreign Investment Fund, managed by COFIDES).
�• FONPYME (SME Foreign Investment Operations Fund, managed by COFIDES).
�• Agreements for the conversion of debt into investment.
�• The Internationalization Line of the ICO and of the Ministry of Economy and Finance.
The most noteworthy for these purposes are FIEX and FONPYME, as well as the new “Línea ICO-
Inversión Internacional 2010” (2010 ICO-International Investment Line).
�• The purpose of FIEX is to foster the internationalization and business activities of Spanish
companies and, in general, the Spanish economy, through short-term, minority interests in the
equity of companies located outside Spain or through other financial investment vehicles. The
Fund’s purpose is to complement the investments made by the corresponding Spanish company.
COFIDES, as the Fund manager, may not take part in the operational management of the investee
company. Only in exceptional circumstances may the Ministry of Industry, Tourism and Trade
authorize the manager to acquire a majority holding or to take over the operational management
of the foreign company.
The initial fund provision, established in Law 66/1997, was €60 million. This provision was
subsequently increased on successive occasions, reaching an accumulated provision of €772
million in 2009. The maximum amount of the transactions that can be approved by the Executive
Committee of these funds was set at €25 million for 2010.
�• FONPYME, in turn, is intended to foster, through short-term minority interests in companies
located abroad or through other financial investment vehicles, the internationalization and
foreign investments of Spanish SMEs and, in general, the Spanish economy.
The Fund therefore makes the investment in the foreign company on a joint basis with the SME
concerned. COFIDES cannot, except in exceptional cases, take part in the operational
management of the foreign company in which the Fund has an ownership interest, or acquire a
majority holding in it.
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Guide to business in SpainInvestment aid and incentives in Spain67
The initial fund provision was €3 million. For 2009, the provision of funds was €45 million, with
the possibility of approving transactions of up to a maximum of €4 million in 2010.
• “Línea ICO-Inversión Internacional 2010” (2010 ICO International Investment Line), aimed at
Spanish independent professionals and enterprises (not only those with registered office in Spain
but also those in which, despite having their registered office abroad, the majority of the capital
stock is Spanish) which carry out investment projects abroad, whose main objective is to support
investments made by Spanish companies abroad, in force though December 20, 2010 or until the
funds are used up, whichever comes first.
This line contains two tranches of financing: Tranche I for independent professionals and SMEs
and Tranche II for medium-sized enterprises and all other enterprises.
The limit on financing for Tranche I enterprises is up to €2 million per customer and year,
regardless of the number of transactions, while the limit for Tranche II enterprises is up to €10
million, per customer and year, regardless of the number of transactions.
Notwithstanding the foregoing, medium-sized enterprises may combine both Tranches of
financing, provided that the total amount applied for does not exceed €10 million, and with a
limit of €2 million in Tranche I.
100% of the investment project can be financed.
The following investments are eligible for financing: (i) fixed assets used in production, whether
new or second-hand; (ii) the acquisition of cars whose total price is less than €24,000; (iii) the
acquisition of shares in companies resident abroad; (iv) VAT or the Canary Islands general indirect
tax, only in the case of assets acquired in Spain; (v) the incorporation of enterprises abroad, to
financed with the working capital linked to the investment project, where such working capital
does not exceed 20% of the project’s total.
As limitations on the financing, the investment (i) must not have been made prior to January 1,
2009 and (ii) must be made within not more than 12 months from the execution of the financing.
Repayment periods range from 3 years, without a grace period for the repayment of principal, and
between 5 and 12 years, with grace periods of from 0 to 3 years in connection with the principal.
This type of financing may be combined with other aid granted by the Autonomous Communities
and other public institutions, provided that the maximum limits on the accumulation of public aid
stipulated by the European Union are complied with.
7. EU aid and incentives
7. EU AID AND INCENTIVES
EU aid focuses on depressed regions, normally in underdeveloped rural areas with low levels of
income and high unemployment rates, and on regions suffering processes of industrial
delocalization.
Most of the EU incentives (specifically loans and subsidies) supplement development plans financed
by the Spanish Government. Such aid is routed through Spanish official institutions and finance
entities, which act as intermediaries. Accordingly, the related applications for subsidies must be
addressed to such entities.
The broad range of instruments at the EU’s disposal includes, most notably the following:
7.1 European Investment Bank (EIB)
Projects eligible for EIB support are basically those which promote the development of less favored
regions and those of common interest to several Member States or benefiting the EU as a whole,
such as environmental protection, improved use of energy resources, improved industrial
competitiveness in the EU, the development of SMEs and improved European transport and
telecommunications infrastructure. Additionally, projects aiming at extending and modernizing
infrastructure in the health and education sectors may also qualify for EIB support.
At the Lisbon European Council in March 2000, the European Union established the strategic
objective of creating, prior to 2010, a competitive economy based on knowledge, capable of
sustained economic growth with more and better jobs and greater social cohesion.
With this aim, the EU program ”2010 Innovation Initiative” was created, under which the governing
bodies of the EIB have approved a number of measures to facilitate the financing of projects in the
following four strategic areas:
�• Research, development and innovation.
�• Human capital training.
�• Dissemination of technologies and development of information and communication technology.
�• Fostering of the business spirit.
The EIB offers two types of loans:
7.1.1 Global loans
Global loans are similar to credit lines granted to financial institutions, which lend the proceeds for
small or medium-scale investment projects meeting the EIB’s criteria. This is the main type of support
offered to SMEs by the EIB. It is provided by granting loans to intermediary banks, which in turn,
provide funding for small and medium-scale business initiatives.
Guide to business in SpainInvestment aid and incentives in Spain68
The loans are granted by the EIB to banks in all the Member States, which act as intermediaries.
These financial intermediaries conduct an analysis of the investment, and of the economic, technical
and financial viability of each of the projects. They are responsible for granting the loans for small
and medium-scale investments and for the administration of such loans.
Specifically in Spain, global loans are routed mainly through Instituto de Crédito Oficial (ICO), Banco
Bilbao-Vizcaya Argentaria, (BBVA), Banco Español de Crédito, Santander Central Hispano (SCH) and
Banco Popular. There are many different types of loans and credits, with varying maturities, amounts
and interest rates, but their general terms can be summarized as follows:
�• Coverage of up to 50% of the overall investment costs.
�• Grace period: up to three years.
�• Repayment period: to be determined by the financial institution acting as intermediary and the
EIB, although it tends to fluctuate between 5 and 12 years.
�• Beneficiaries: local authorities or SMEs (for these purposes, SMEs are deemed to be companies
that have less than 250 workers, annual revenues of under €50 million, and an annual total
balance sheet of less than €43 million).
�• The amount awarded under a global loan may not exceed €12.5 million.
�• Free of fees and other charges, except for minor administrative expenses.
They must be applied for through an intermediary financial institution.
7.1.2 Individual loans
The European Investment Bank grants individual loans directly to investors or through financial
intermediaries for projects of over €25 million.
The main characteristics of these loans are as follows:
�• Coverage of up to 50% of the total investment costs.
�• Public or private-sector projects carried out mainly in infrastructure and the industrial sector for a
minimum amount of €25 million.
�• Long-term loans, with repayment periods of between 5 and 12 years for industrial projects, and
between 15 and 20 years for infrastructure projects, although the repayment period may be
extended in special cases.
�• Grace period: depends on the nature of the project, usually up to five years.
�• In granting these loans, the EIB requires first-class security.
Applications must be filed directly with the EIB.
Guide to business in SpainInvestment aid and incentives in Spain69
Once finance has been provided for the project, its progress is monitored regularly in order to ensure
compliance with the aims of the EIB’s financing decision.
The EIB does not directly grant interest relief, although this may be financed by third-party
institutions.
EIB loans are compatible with aid from other EU agencies, up to a limit of 90% of the investment.
7.2 European Investment Fund (EIF)
The EIF is an EU body which specializes in providing guarantee and venture capital instruments to
SMEs. It ensures the continuity required in the management of EU programs and has accumulated
extensive experience in this area.
The EIF was created for the dual purpose of fostering the development of trans-European networks in
the transport, telecommunications and energy industries and of promoting the development of
SMEs.
The Fund operates by providing guarantees for loans of all kinds, and by temporarily acquiring and
managing minority holdings in companies involved in deploying Trans-European networks.
The EIF finances, among others, the following mechanisms:
�• The SME Guarantee Mechanism, aiming at creating jobs through the granting of loans and
financial support to innovative SMEs.
�• The European Technology Mechanism aiming at fostering employment for the establishment and
growth of innovative SMEs through short-term investments in venture capital funds operating in
the EU.
�• Program for business initiative and innovation.
This program which, in turn, is a subprogram forming part of the Competitiveness and Innovation
Framework Programme (2007-2013) groups together activities that were formerly included in the
Multiannual program for enterprises and entrepreneurship, which expired on December 31, 2006.
Its main priority is to support innovative companies by facilitating access to financing using a
series of EU financial instruments, managed by the EIF, aimed at sharing the risks and benefits
with private investors, and to provide counter or co-guarantees for national guarantee regimes.
7.3 Structural Funds
Structural Funds constitute the principal instrument of EU economic and social cohesion policy and
are used to finance initiatives (either public or private) to achieve structural improvements in the
Member States and thus narrow the gap between the most prosperous and the poorest regions in
the current EU.
Guide to business in SpainInvestment aid and incentives in Spain70
Table 8
PRIORITY OBJECTIVES
Objectives Funds Objectives Funds and Financial Instruments
Objective 1
ERDF (URBAN)
ESF
EAGGF- Guarantee
EAGGF- Guidance (LEADER)
Convergence
ERDF
ESF
Cohesion Fund
Objective 2 ERDF (URBAN -
INTERREG)
ESF
Regional Competitiveness and
Employment
EAFRD
Objective 3 FSE (EQUAL)
Regional Level RDF
National level: EES ESF
European Territorial Cooperation ERDF (EGCC)
2000 - 2006 2007 - 2013
The expansion of the EU to twenty-five Member States represented an unprecedented challenge to its
competitiveness and cohesion, since the proportion of the population with a GDP lower than 75% of
the EU average has increased from 19% (in the EU-15) to 27% (EU-25).
This program was also redefined by the recent incorporation of two new EU-Member States (Bulgaria
and Romania).
The European Commission therefore intends to reinforce EU economic, social and territorial cohesion
policy for the 2007-2013 programming period.
In this connection, and with the entry into force of the new Multiannual Financial Framework, the
regulation and scope of the Structural Funds underwent a thorough transformation and, as from
January 1, 2007, only two Funds are deemed to be Structural Funds: the European Regional
Development Fund and the European Social Fund.
The Structural Funds continue to support programs in the Member States of the enlarged EU but
most of the programs focus on the regions which need the most aid.
In order to increase the economic and social cohesion of the EU, the European Council has
established three new priority objectives for the structural funds, which are funded by the ERDF, the
ESF, the Cohesion Fund, the European Investment Bank, and other existing EU financial instruments
(as appropriate in each case):
Guide to business in SpainInvestment aid and incentives in Spain71
• The Convergence Objective (similar to the old Objective 1) covers the regions and Member States
whose development is lagging behind and aims to accelerate convergence of these regions and
Member States in order to improve growth and employment. This objective is considered
essential, particularly in new Member States which face development disparities on a scale that is
unprecedented in the EU.
The Objective is funded by the ERDF, the ESF and the Cohesion Fund.
The Spanish regions included under the Convergence Objective are: Galicia, Castilla-La Mancha,
Extremadura and Andalucía, given that their degree of development continues to be lower than
75% of the Community average. Murcia, Asturias, Ceuta and Melilla (“phasing-out” regions) may
also receive funding from the Structural Funds, albeit on a temporary and specific basis. Such
regions are expected to be removed from the Convergence Objective in the near future, although
the possibility of receiving funding under the Objective will be phased out gradually.
�• The Regional Competitiveness and Employment Objective (similar to the old Objective 2) aims to
boost the competitiveness, employment and attraction of regions other than the less-favored
regions. This Objective was established for the purpose of preventing new imbalances from arising
to the detriment of regions which would otherwise suffer the repercussions of adverse socio-
economic factors without the sufficient public aid.
The European Commission finances this objective through the ERDF and the ESF.
All regions not included in the Convergence Objective can benefit from funding under the
Competitiveness Objective. Additionally, those regions included in the old Objective 1, which are
no longer eligible as from 2007, receive specific and temporary aid under the Competitiveness
Objective in order to consolidate their recovery (phasing-in), and such aid will be progressively
reduced until 2013.
In this respect, the Spanish regions that can receive financing under this Objective are: Castilla y
León, Valencia and the Canary Islands (phasing-in regions), as well as the Basque Country,
Navarra, Cataluña, Madrid, Aragón, the Balearic Islands, Cantabria and La Rioja.
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Guide to business in SpainInvestment aid and incentives in Spain73
�• The European Territorial Cooperation Objective (which is not comparable to the old Objective 3)
aims to strengthen territorial cooperation at three levels: (a) cross-border cooperation through
joint initiatives; (b) transnational cooperation; and (c) networks for exchanging experiences
within the EU. This Objective is funded by the ERDF.
In terms of cross-border cooperation, the following Spanish regions and areas can receive ERDF
funding under the European Territorial Cooperation Objective: Ourense, Pontevedra, Guipúzcoa,
Navarra, Huesca, Salamanca, Zamora, Badajoz, Cáceres, Girona, Lleida, Cádiz, Huelva and Ceuta.
With respect to transnational cooperation, the Spanish regions and areas that can receive ERDF
funding are: Galicia, Asturias, Cantabria, Basque Country, Navarra, La Rioja, Aragón, Madrid,
Castilla y León, Castilla-La Mancha, Extremadura, Cataluña, Valencia, the Balearic Islands,
Andalucía, Murcia, Ceuta and Melilla.
The available resources for the funds for the 2007-2013 period are approximately €347,041,000
million, which represent 35.7% of the EU budget, the breakdown by objective being as follows:
� • Convergence Objective: 81.54% (€282,977,231.4).
� • Regional Competitiveness and Employment Objective: 15.95% (€55,353,039.5).
� • European Territorial Cooperation Objective: 2.52% (€8,745,433.2).
Phasing-inRegions
Phasing-outRegions
ConvergenceRegions
Competitivenessand EmploymentRegions
Map 2
SPANISH REGIONS INCLUDED IN THE OBJECTIVES OF THE EU STRUCTURAL FUNDS
Guide to business in SpainInvestment aid and incentives in Spain74
Funds cannot be transferred from one objective to another in the 2007-2013 period.
�• The Community Initiatives selected for promotion during the period 2000-2006 (EQUAL, URBAN,
LEADER+, etc.) were eliminated in the 2007-2013 period and were integrated horizontally into the
corresponding Operational Programs.
The contribution of the European Funds to projects located in Spain are subject to the following
limits:
�• Convergence Objective:
— Up to 75% of the public expenses co-financed by the ERDF or the ESF. This limit may be
increased to 80% for regions located in a Member State covered by the Cohesion Fund, and to
85% for the outermost regions.
— Up to 85% of the public expenses co-financed by the Cohesion Fund.
— Up to 50% of the public expenses co-financed in the outermost regions (new extra ERDF
allocation to offset the additional cost).
�• Regional Competitiveness and Employment Objective :
— Up to 50% of the public expenses, and may be increased up to 85% for the outermost regions.
�• European Territorial Cooperation Objective:
— Up to 75% of the public expenses.
In the 2007-2013 period, detailed management of programs co-financed by the Structural Funds
remains the responsibility of each Member State. Member States designate a “management
authority” for each program (at national, regional or other level) which, among other functions, is in
charge of informing possible beneficiaries, selecting projects, and monitoring correct execution of the
projects.
CHART 1
COHESION POLICY 2007-13BREAKDOWN BY OBJECTIVES (347BILLION EUR)
Source: European Comision
(http://ec.europa.eu/regional_policy/policy/
fonds/index_es.htm)
4%
8.72
54.96
283
European territorial cooperation
Convergence (70% to cohesion fund)
Regional competitiveness and employment
Guide to business in SpainInvestment aid and incentives in Spain75
In this connection, on May 7, 2007 the European Commission approved the National Strategic
Reference Framework for Spain for the 2007-2013 period. This document contains the development
strategy in Spain and the related allocation of community funds by region and according to the
strategic guidelines of the European Union (more information under www.dgfc.sgpg.meh.es).
The EU Structural Funds for the 2007-2013 period, for which practically all of Spain qualifies, are the
following:
7.3.1 European Social Fund (ESF)
The ESF aims to strengthen social and economic cohesion by supporting national policies geared
towards achieving full employment, improving quality and productivity at work, promoting social
inclusion and reducing regional disparities with respect to employment.
The European Commission expects the ESF to focus on three main areas: (i) to foster the ability in
enterprises and amongst workers to adapt; (ii) to facilitate the obtainment of employment and
participation in the job market, as well as promote social integration; and (iii) encourage the
creation of associations for employment reform.
Such actions fall within the framework of the objectives of Convergence and Regional
Competitiveness and Employment.
In general, ESF funding concentrates on: (i) innovation; (ii) cooperation between regions and across
borders; (iii) equality between men and women; and (iv) consolidation of the social integration and
employment of immigrants and minorities.
Although decisions regarding eligibility must be adopted at national level, in the 2007-2013 period,
the following expenditures are not deemed to qualify for ESF funding:
• Recoverable direct taxes.
• Personal income taxes.
• Interest owed.
• Interest, surcharges and administrative and criminal penalties.
• Purchases of new or second-hand furniture, equipment, vehicles, infrastructures, real estate and
land.
• Expenses incurred on court proceedings.
Notwithstanding national legislation, the following expenditure is eligible:
• Allowances or salaries paid by a third party whenever these constitute national public matching
funds.
• Indirect costs incurred by an activity, at a fixed maximum rate of 20% of the declared direct costs.
Guide to business in SpainInvestment aid and incentives in Spain76
The ESF helps to defray eligible expenses, whether in the form of individual or block grants, loans,
interest rate subsidies, micro loans, guarantee funds or the purchase of goods and services.
The ESF finances up to 75% of public spending in areas covered by the "Convergence" objective and
50% in those covered by "Regional competitiveness and employment”. Notwithstanding, aid granted
by the ESF cannot exceed the financial aid granted to the same project by the public authorities of
the Member State, whether at State, regional or local level.
The ESF supports policies of Member States focused on growth and employment, in line with the
General Guidelines on Economic Policy, the European Strategy for Employment and the guidelines on
employment.
The ESF does not provide credit directly to companies, but rather funds official agencies and not for
profit entities that draw up plans in accordance with their objectives.
Applications must be made to the relevant agencies of the Autonomous Communities or to the
Ministry of Labor and Social Affairs (specifically to the European Social Fund Administrative Unit).
7.3.2 European Regional Development Fund (ERDF)
In the 2007-2013 period, the ERDF has the objective of funding aid geared towards strengthening
economic and social cohesion through the correction of the principal regional imbalances by (1)
supporting the development and structural adjustment of regional economies, (2) regenerating
industrial regions in decline and regions lagging behind, and (3) encouraging cross-border,
transnational and interregional cooperation.
The measures co-financed by the ERDF must fall within the three new EU regional policy objectives,
namely, Convergence, Regional Competitiveness and Employment and European Territorial
Cooperation.
Specifically, the ERDF funds:
�• Productive investment to create and safeguard sustainable jobs, mainly through direct investment
aid, particularly at small-and medium-sized enterprises (SMEs).
• Investment in infrastructure.
• Development of the endogenous potential by measures which support local and regional
development. Such measures include aid to enterprises, especially SMEs, and provision of services
to them, the creation and development of financing instruments, such as venture capital, loan
and guarantee funds, local development funds, interest rate subsidies, networking, cooperation
and exchange of experience between regions, cities and the pertinent social, economic and
environmental players.
• Technical assistance, namely, the preparation, monitoring, administrative assistance,
management, follow-up, assessment, audit and inspection measures necessary to apply and use
the Funds through the corresponding instruments and programs.
Guide to business in SpainInvestment aid and incentives in Spain77
Notwithstanding the provisions of national legislation, the following expenditure does not qualify for
ERDF funding:
• Interest owed.
• Land purchases accounting for more than 10% of total eligible expenditure of the transaction in
question. In exceptional cases, a higher percentage may be permitted for transactions related to
environmental protection.
• Decommissioning of nuclear power stations.
• Recoverable VAT.
As regards rural areas and areas dependent on the fishing industry, the ERDF aims to ensure projects
complement and are consistent with the work of the two new Funds, European Agricultural Fund for
Rural Development (EAFRD) and the European Fisheries Fund (EFF).
For geographically disadvantaged areas, the ERDF helps finance investment promoting accessibility,
economic activities linked to local culture, the sustainable use of resources and the tourism sector.
Lastly, the ERDF also helps finance the extra costs of the outermost regions, subsidizing the transport
of goods and start-up assistance for transport services and providing financial support to offset the
additional costs generated by storage constraints, the maintenance of production tools and the lack
of human capital on the local labor market.
7.4 Cohesion Fund
Since its establishment, one of the main objectives of the European Union has been the promotion
of the economic and social cohesion of its citizens, bolstering socio-economic progress and gradually
eliminating the differences between the various standards of living of its regions.
The Cohesion Fund, created to help boost social and economic cohesion in the EU with a view to
encouraging sustainable development, finances projects relating to the environment and Trans-
European transport networks, in particular, priority projects of European interest, in Member States
whose per capita Gross National Income (GNI) is below 90% of the EU average, namely Bulgaria, the
Czech Republic, Estonia, Slovakia, Slovenia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland,
Romania, Greece, Portugal and, on a transitional basis, Spain.
In fact, during the 2007-2013 period, Spain can continue to receive temporary and specific funding from
the Cohesion Fund since it is one of the Member States that would have been able to continue receiving
Cohesion Fund aid if the threshold had remained at 90% of the average GNI of the EU-15, but are now
no longer eligible as their nominal per capita GNI exceeds 90% of the average GNI of the EU-25.
Some of the essential characteristics of the previous Cohesion Fund regulations are also maintained
(such as Member State beneficiary requirements, 85% limit on aid, etc.), although its management
has been modified by integrating its work into operational program.
Guide to business in SpainInvestment aid and incentives in Spain78
Furthermore, the funding not only covers major transport and environmental protection
infrastructures, but also projects in the fields of energy efficiency, renewable energy and intermodal,
urban or collective transport.
In this period, the Fund contributes alongside the ERDF to operating programs, rather than being
subject to individual project approval by the Commission.
For the 2007-2013 period, the total funding assigned to the Cohesion Fund is approximately €63
billion, of which Spain would receive approximately €3.25 billion, on the terms set forth above.
In any event, the grant of the amounts allocated to each eligible Member State, and the financing of
new projects with such amounts, are subject to the fulfillment by said Member State of certain
requisites regarding the containment of public spending.
The EU Regulation governing the Cohesion Fund for the period 2007-2013 includes the possibility of
the Commission informing the Council if a Member State does not meet the obligations relating to
budget deficit arising from the program for stability and convergence.
7.5 Financing of the Common Agricultural Policy
For the 2007-2013 period, the Commission created two new Funds under the general EU budget: the
Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development
(EAFRD), which replace the Guidance and Guarantee sections, respectively, of the EAGGF, in force in
the 2000-2006 programming period.
Both Funds have a similar operating system but specific individual characteristics.
7.5.1 Agricultural Guarantee Fund (EAGF)
As regards expenditure managed jointly by the Member States and the Commission, in general the
EAGF finances the following:
• Refunds for exporting farm produce to non-EU countries.
• Intervention measures to regulate agricultural markets.
• Direct payments to farmers under the CAP.
• Certain informational and promotional measures for farm produce implemented by Member
States both on the internal EU market and outside.
• Expenses incurred on measures to restructure the sugar industry.
As regards expenditure managed centrally by the Commission, EAGF financing covers the following:
�• The EU’s financial contribution for specific veterinary measures, veterinary inspections and
inspections of foodstuffs and animal feed.
�• Animal disease eradication and control programs and plant health measures.
Guide to business in SpainInvestment aid and incentives in Spain79
�• Promotion of farm produce, either directly by the Commission or via international organizations.
�• Measures required by Community legislation to conserve, characterize, collect and use genetic
resources in farming.
�• Setting up and running farm accounting information systems and farm survey systems.
�• Expenses relating to fishing markets.
The monies to cover expenditure financed by the EAGF are paid by the Commission to the Member
States in the form of monthly reimbursements.
7.5.2 European Agricultural Fund for Rural Development (EAFRD)
The EAFRD constitutes a single instrument for the financing European rural development policy.
The Fund contributes to the four priority headings aimed at encouraging rural development:
�• Improving the competitiveness of agriculture and forestry by means of support for restructuring.
In this area, inter alia, the EAFRD grants aid for measures relating to (i) information and
vocational training schemes for workers in the agriculture, food and forestry industries; (ii) the
establishment of young farmers; (iii) the modernization of agricultural holdings; (iv) the increased
added value of agricultural and forestry products; (v) support for farmers participating in food
quality programs, etc.
�• Improving the environment and the countryside by means of support for land management.
In this area, support may also be given to mountain regions with natural handicaps and other
disadvantaged areas (defined by the Member States on the basis of common objective criteria)
and for agri-environmental payments, which should however only cover commitments that go
beyond the corresponding obligatory standards. Assistance also covers support for investments
without commercial return needed to comply with environmental commitments.
�• Improving the quality of life in rural areas and encouraging diversification of economic activities.
This area includes aid for vocational training of economic operators, the renovation and
development of villages, the preservation and optimization of rural heritage, support for the
establishment and development of micro-businesses and the diversification into non-agricultural
activities.
�• The LEADER approach.
The LEADER approach consists, in general, of the implementation of cooperation projects between
regions and networking by local partnerships.
Taking into account the political priorities set at EU level, the Council establishes strategic guidelines
for rural development to implement the above-mentioned priority headings. Each Member State
Guide to business in SpainInvestment aid and incentives in Spain80
then produces a national strategic plan that includes, among other items, its own priorities for action
and those of the Fund, and sets out the specific objectives and the corresponding level of support
from the Fund and, where applicable, other financial resources.
In the case of Spain, the Ministry of Agriculture, Fisheries and Food approved its National Strategic
Plan for Rural Development (2007-2010) on April 2, 2007.
The implementation of this type of plan is carried out, in general, through rural development
programs containing a package of measures grouped according to the above headings.
EAFRD funding of rural development expenditure is specifically determined for each project.
It should also be noted that projects financed under a rural development program cannot receive any
other funding under the EU budget.
There is a limit on the total aid granted by the EAFRD. In this way, a maximum eligible amount is set
for each type of aid.
7.6 New European Fisheries Fund (EFF)
Through the new European Fisheries Fund, which replaces the Financial Instrument for Fisheries
Guidance (FIFG), the European Commission provides co-financing for support measures aimed,
among other objectives, at: (i) ensuring the long-term future of fishing activities and the sustainable
exploitation of fishery resources; (ii) reducing pressure on stocks by matching Community fleet
capacity to available fishery resources; (iii) fostering the protection of the environment and fishery
resources; (iv) boosting the development of economically viable enterprises in the fisheries sector;
and (v) making operating structures more competitive.
The Fund has a fund provision of €3.849 billion, of which Spain is to receive €1.113 billion, 29% of the
total provision. In general terms, of the €3.849 billion, around €2.908 billion is allocated to regions
included under the Convergence objective, that is, regions whose income falls below 75% of EU GDP,
while €941 million is allocated to regions whose income exceeds such threshold.
As with the EAFRD, the grant of the aid provided for under the EFF requires each Member State to
produce a national strategic plan and an operating program, establishing its priorities, objectives,
the necessary public funding, and the expected schedule for application of the Plan. In the case of
Spain, the Secretary-General of Deep Sea Fishing approved its National Strategic Plan under the
European Fisheries Fund in Jun 2007.
Eligible investments are grouped into the following five priority headings, according to the objective
pursed:
�• Measures to adjust the Community's fishing fleet.
Under this heading, the EFF provides assistance to fishermen or organizations affected by
measures adopted to combat overfishing, aid for the temporary laying up of fishing vessels, etc.
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�• Aquaculture, inland fishing, processing and marketing of fisheries and aquaculture products.
Projects eligible under this heading include, among others, those aimed at improving aquaculture
production, encouraging aquaculture production methods which help protect and improve the
environment and preserve nature, the eradication of aquaculture disease, etc.
�• Collective measures.
Investments qualifying for EFF funding under this heading are, among others, those relating to
collective actions, projects aimed at protecting and developing aquatic fauna and flora, and the
conservation and modernization of fishing ports, landing sites and shelters, etc.
�• Sustainable development of coastal areas dedicated to fishing.
This heading includes the funding of measures aimed at strengthening the competitiveness of
fisheries areas, restructuring and redirecting economic activities, particularly by promoting eco-
tourism, diversifying activities through the promotion of multiple employment, etc.
�• Technical assistance.
Lastly, subject to a ceiling of 8,0 % of its annual allocation, the EFF may finance the preparatory,
monitoring, administrative and technical support, evaluation and audit measures necessary for
implementing this Regulation.
The maximum amount of EFF aid that can be granted is limited according to the type of initiative
under which it is used, as well as the European region in which the eligible project is to be developed.
The maximum aid ceilings are granted to regions included under the Convergence Objective and the
outermost regions (Guadalupe, Guiana, Martinique, Reunión, as well as the Azores, Madeira and the
Canary Islands).
7.7 Research and Development Programs
The European Union has been establishing multi-year programs which contain the lines of action of
the Community policy on research and development and assigning considerable resources to their
execution.
The program in force and operating since January 1, 2007, is the Seventh Framework Programme for
Research and Technological Development (FP7), the purpose of which is to encourage all research
activities deemed necessary, with particular emphasis on enterprise (including SMEs), research
centers and universities in their technological development and research activities. This Program
constitutes the European Union’s chief instrument for funding research in Europe over the 2007-2013
period.
FP7 is made up of 4 main blocks of activities forming 4 specific program plus a fifth specific program
on nuclear research:
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�• “Cooperation” Program (budget: €32.413 billion).
This program is to support all types of research activities carried out by different research bodies in
transnational cooperation projects which help to gain or consolidate knowledge and technological
advances in ten thematic areas corresponding to ten scientific and research fields. The different
areas are as follows:
The objectives of the Cooperation Program in the above ten areas are pursued through
collaboration instruments such as, for example, Technological Platforms, Joint Technology
Initiatives and due coordination and cooperation between EU Member State R&D programs.
�• Ideas Program (budget: €7.541 billion). This Program covers all activities to be implemented by
the European Research Council (ERC), and attempts to boost competitiveness in Europe by
attracting and retaining the most talented scientists, supporting innovative and ground-breaking
research, and promoting world-class scientific research in new and emerging fields.
�• People Program (budget: €4.75 billion). Building on the positive experiences of the “Marie Curie”
Actions, this Program aims to quantitatively and qualitatively boost human potential in research
and technology in Europe by (i) encouraging people to choose a career in research, (ii)
encouraging European researchers to stay in Europe, and (iii) attracting researchers from all over
the world to Europe.
�• Capacities Program (budget: €4,097 million). This program aims to increase research and
innovation capacities in Europe by ensuring optimum use, operating in seven areas:
Table 9
THEMATIC PRIORITIES COOPERATION
Themes Cooperation Budget (€ billion)
Health
Food, Agriculture and Fisheries,Biotechnology
Information and CommunicationTechnologies
Nanosciences, nanotechnologies,materials & new productiontechnologies
Energy
6.1
1.935
9.05
3.475
2.35
Themes Cooperation Budget (€ billion)
Environment (including ClimateChange)
Transport (including aeronautics)
Socio-economic Sciences and theHumanities
Space
Security
1.89
4.16
0.623
1.43
1.4
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�• EURATOM Program (budget: €2.751 billion). The European Atomic Energy Community (EURATOM)
adopts a separate Framework Programme for nuclear resource management and research
activities. Although initially intended to run over a five-year period, it may be extended to seven
years.
The principal research areas are:
— Fusion energy research.
— Nuclear fission and radiation protection.
Participation in the Seventh Framework Programme must be through the calls for proposals
published by the European Commission, with the following terms:
�• General terms:
— Undertakings, universities, research centers and any other legal entities established in a
Member State, associated country or third country can participate.
— At least three legal entities must take part, each of the three being established in different a
Member State or associated country.
— The three legal entities must be independent among themselves.
— Both legal and natural persons can take part. In the case of natural persons, the habitual place
of residence will be taken into account.
�• Specific terms:
— For coordination and support actions, and actions in favor of training and career development
of researchers, at least one legal entity must participate.
Table 10
THEMATIC PRIORITIES CAPACITIES
Theme capacities Budget (€ billion)
Research for the benefit of SMEs
Research infrastructure
Research potential ofConvergence Regions
Regions of knowledge
1.336
1.715
0.340
0.126
Theme capacities Budget (€ billion)
Science in society
Specific international co-operation activities
Coherent development ofresearch policies
0.330
0.180
0.700
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— For basic/fundamental research projects, at least one legal entity established in a Member
State or associated country must participate.
The total budget for the Seventh Framework Programme is over €50.5 billion.
The following maximum limits are established, according to the type of action:
�• Technological and research activities: 50% of eligible costs, except for:
— Public non-profit entities: 75%.
— Secondary and higher education establishments: 75%.
— Research organizations: 75%.
— SMEs: 75%.
�• Demonstration activities: 50% of eligible costs.
�• Management and other activities (e.g., coordination, network creation and dissemination): 100%
of eligible costs.
�• Coordination and support actions: 100% of eligible costs.
�• Researcher training and career development activities: 100% of eligible costs.
Some of the calls currently open whose deadline for applications close in the next few months are
indicated below (more information at http://cordis.europa.eu/fp7/dc/index.cfm):
�• Call: Cooperation: “Information and Communication Technologies” (€61 million) (Deadline: May
24, 2011).
�• Call: “Persons: Marie Curie Reintegration scholarships” (€32 million) (Deadline: September 7,
2010).
�• Call: Capacities: “Science in Society” (€300 thousand) (Deadline: April 29, 2010).
• Call: Cooperation: “Information and Communication Technologies” (€286 million)
(Deadline: April 13, 2010).
• Call: Euratom: Nuclear Fission and Radiation Protection” (approximately €49 million)
(Deadline: April 8, 2010).
• Call: “Ideas: Advanced ERC scholarship ” (€590 million) (Deadline: April 7, 2010).
• Call: “Ideas: Advanced ERC scholarship” (€590 million) (Deadline: March 17, 2010).
• Call: Cooperation “Energy” (€126.4 million) (Deadline: March 4, 2010).
• Call: “Persons: “Marie Curie Joint Financing of Regional, National and International
Programs” (€75 million) (Deadline: February 18, 2010).
Guide to business in SpainInvestment aid and incentives in Spain85
7.8 EU initiatives to favor business financing
The European Commission Directorate-General for Enterprise & Industry coordinates the Gate2Growth
initiative, a one-stop shop for innovative entrepreneurs seeking financing. It also offers investors,
intermediaries and innovation service-providers, a community for sharing knowledge and good practice.
The initiative incorporates all knowledge acquired through the implementation of previous pilot
programs, some of the most noteworthy of which are the I-TEC project, the LIFT project and the FIT
project.
One of the most notable characteristics of this initiative is that it acts as a meeting point for
innovative entrepreneurs, innovation professionals and potential investors, and it offers the following
tools and services, among others:
�• For innovative entrepreneurs:
— Business plan preparation tool package.
— Business plan diagnostic.
— Discussion forums.
— News and events.
— Investor identification and matching tool.
— Seminars and workshops.
— Entrepreneur clubs.
— Access to a network of local intermediaries.
�• For innovation professionals and potential investors:
— Exchange of good practices.
— Career development opportunities.
— A library of good practices.
— Half-yearly workshops on various issues.
— Professional development through exchange of personnel, access to experts, training days,
etc.
Lastly, various exchange and collaboration networks have been created within the framework of the
Gate2Growth initiative, aimed at improving compliance with the initiative’s objectives. Some of the
most noteworthy networks are: I-TecNet (for venture capital investors), the G2G Incubator Forum (for
technological development), the G2G Finance Academia (for academics studying innovation, and
entrepreneurship trainers), etc.
Guide to business in SpainInvestment aid and incentives in Spain86
8. Compatibility
8. COMPATIBILITY
As a general rule, the compatibility of these different incentives depends on the specific regulationsgoverning each of them, some of which identify certain incompatibilities (either absolute or up tocertain limits), whereas others make no reference to this point and, therefore, it is assumed thattheoretically there is no incompatibility.
In general and without limitation, notwithstanding the legislation applicable in each specific case, thegeneral situation in relation to compatibility is as follows:
8.1 General State incentives
8.1.1 Training
In principle, there are no incompatibilities with other types of aid.
8.1.2 Employment
In principle, there are no incompatibilities with other types of aid. However, taken in conjunction withother incentives, they cannot exceed 60% of the social security cost of each contract created under theseprograms.
8.2 State incentives for specific industries
These incentives are compatible with the other types of aid, but they cannot exceed (in terms of net
subsidy) the limits set by the EU for incentives in certain areas.
8.3 Incentives for investments in certain regions
8.3.1 Granted by the State (ZPE-ZED)
In principle, no investment project will be able to receive additional financial or industry subsidies (ofany nature or from any granting agency) if the maximum percentages stated in each Royal Decree ofdemarcation are exceeded, since both types of aid are combined with the regional aid received for theproject when computing the related ceilings. If these internal limits are exceeded under an EUregulation, the related EU ceilings established thereunder must be respected at all times.
8.3.2 Granted by the Autonomous Community and Municipal Governments and Local Councils
The general limit applicable to regional and industry financial aid also covers these incentives.
8.4 EU aid and incentives
These are, in principle, compatible with other types of aid, with the specific limitations described above.
In fact, EU funds habitually finance many of the incentives (industrial and regional) described in previoussections.
Guide to business in SpainInvestment aid and incentives in Spain87
Table 11
SUMMARY TABLE: GRANTS AND INCENTIVES TO INVESTMENT
Level of grant Where to apply When to apply How to apply On-line information
EU
EIB EIB, Spanishintermediary entities.
No specificrules.
Askintermediaries.
http://www.eib.org/
EIF EIB, Spanishintermediary entities.
No specificrules.
Askintermediaries.
http://europa.eu/legislation_summaries/institutional_affairs/institutions_bodies_and_agencies/o10007_es.htm
ERDF 2007-2013
AutonomousCommunityGovernments. Ministryof Economy andTreasury GeneralDirectorate of RegionalIncentives. Othergranting agencies.
Depends onnational Rules.
Depends onnational Rules.
http://europa.eu/legislation_summaries/agriculture/general_framework/g24234_es.htm
ESF 2007-2013
Provincial Offices of theMinistry of Labor.Government of theAutonomousCommunity in whichinvestment will belocated.
Depends oneach program.
See Regulation1081/2006.
http://europa.eu/legislation_summaries/agriculture/general_framework/g24232_es.htm
http://www.mtas.es/uafse/es
EAGF andEAFRD(financingthe CommonAgriculturalPolicy)
Government of theAutonomousCommunity in whichinvestment will belocated.
Depends oneach program.
See Regulation1290/2005.
http://europa.eu/legislation_summaries/agriculture/general_framework/l11096_es.htm
http://europa.eu/legislation_summaries/agriculture/general_framework/l60032_es.htm
EFF AutonomousCommunitiesGovernments Ministry ofAgriculture, Fisheriesand Food.
Depends onnational Rules.
See Regulation1198/2006.
http://europa.eu/pol/fish/index_es.htm
http://europa.eu/legislation_summaries/maritime_affairs_and_fisheries/fisheries_sector_organisation_and_financing/l66004_es.htm
R&D and TIPROGRAMS
European CommissionGeneral Directorate ofScience, Research andDevelopment.
See regulationsfor eachprogram.
See regulationsfor eachprogram.
http://cordis.europa.eu/fp7/home_es.htm
Level of grant Where to apply When to apply How to apply On-line information
STATE
REGIONAL AutonomousCommunitiesGovernments (ManagingOffice).
No specificrules.
Application+memorandum +supportingdocumentation.
http://www.pap.meh.es/
LABORINCENTIVES
National EmploymentService. GeneralDirectorate of Labor.Tripartite Foundation forOngoing Training.
No specificrules.
Depends on type ofaid.
https://www.redtrabaja.es/es/portaltrabaja/resources/contenidos/home/intermedia.htmlhttp://www.mtas.es
RURALDEVELOPMENTANDAGRICULTURE
AutonomousCommunitiesGovernments.
No specificrules.
Depends on specificrules.
http://www.marm.es
SMEs AID onPROGRAM
AutonomousCommunitiesGovernments. Instituto deCrédito Oficial (ICO).Compañía Española Parala Financiación delDesarrollo (COFIDES).
No specificrules.
Depends on specificrules.
http://www.ipyme.orghttp://www.ico.eshttp://www.cofides.es/
MINING Ministry of Industry,Tourism and Trade.
No specific rules. Depends on specificrules.
http://www.mityc.es
REINDUSTRIALIZATION
Ministry of Industry,Tourism and TradeInstitute for therestructuring of coalmining and thedevelopment ofalternative miningcounties.
No specificrules.
Depends on specificrules.
http://www.mityc.eshttp://www.irmc.es
ENERGY Institute for EnergyDiversification and Saving(IDAE). ICOMinistry of Science andInnovation.
Depends oncalls.
Depends on calls. http://www.idae.eshttp://www.ico.eshttp://www.micinn.es
Guide to business in SpainInvestment aid and incentives in Spain88
Table 11 (Cont.)
SUMMARY TABLE: GRANTS AND INCENTIVES TO INVESTMENT
Guide to business in SpainInvestment aid and incentives in Spain89
Level of grant Where to apply When to apply How to apply On-line information
STATE
R&D Ministry of Science andInnovation. Ministry ofIndustry, Tourism andTrade/CTDI/ICO.
Depends oncalls.
Depends on calls. http://www.ico.eshttp://www.cdti.eshttp://www.micinn.eshttp://www.ingenio2010.es
AUDIOVISUALINDUSTRY
ICAA / ICO. Depends oncalls.
Depends on calls. http://www.mcu.eshttp://www.ico.es
OTHER General Directorates ofthe different Ministries.
Normally, nospecific rules.
Depends on type ofaid
http://www.mpr.es/index.html
Guide to business in SpainInvestment aid and incentives in Spain89
Table 11 (Cont.)
SUMMARY TABLE: GRANTS AND INCENTIVES TO INVESTMENT
AUTONOMOUS COMMUNITY AND, MUNICIPAL GOVERNMENTS AND LOCAL COUNCILS
REGIONAL,INDUSTRYAND LABOR
Departments of theAutonomousCommunityGovernmentsDepartments of LocalCouncils.
Depends onspecific rules.
Depends on specificrules; however, verysimilar to Stateincentives: application+ memorandum +supportingdocumentation.
http://www.mpr.es/index.html
Main types of aid Maximum limits for subsidies and
loans
Effective amounts granted More information from On-line information
Loans withlow interestand longmaturitiesand graceperiods.
Up to 50% of the projectcost (75% for Trans-European networks).Available as cofinancingwith national funds.
Varies greatlydepending onproject.
Bank of Local Credit.EIB.
http://www.eib.org/
Guarantees,venturecapital.
See comments in thecorrespondingparagraphs.
See commentsin thecorrespondingparagraphs.
EIB. http://www.eib.org/
Guide to business in SpainInvestment aid and incentives in Spain90
Table 11 (Cont.)
SUMMARY TABLE: GRANTS AND INCENTIVES TO INVESTMENT
Subsidies,preferentialaccess to officialcredit.
See comments in thecorrespondingparagraphs.
Depends onnational rules.
Ministry of theEnvironment and of Ruraland Marine Areas.General Directorate ofAgriculture of EU.
http://www.marm.eshttp://europa.eu/
Subsidies. Up to 100% of theproject cost. Availableas cofinancing withnational funds.
50% of projectcost.
General Directorate ofScience, Research andDevelopment of the EUCommission. Centre forthe Development ofIndustrial Technology(CDTI).
http://www.cdti.es/http://europa.eu.int
Subsidies. Up to 40% of the costof the project.
Normallybetween 30%and 40% of themaximum limit.
Autonomous CommunityGovernments. Ministry ofEconomy. GeneralSubdirectorate ofRegional Incentives.
http://www.mpr.es/index.htmlhttp://www.meh.es/
Main types of aid Maximum limits for subsidies and
loans
Effective amounts granted More information from On-line information
Subsidies,preferentialaccess toofficial credit,tax benefits.
Up to 80% of the projectcost. Available ascofinancing withnational funds.
Between 15%and 30% ofproject cost.
Ministry of Economy. EUCommission, DG XVI.
http://www.meh.es/http://europa.eu
Subsidies. Up to 80% of the projectcost. Available ascofinancing withnational funds.
50% of projectcost.
Ministry of Labor andImmigration.
http://www.mtas.es/
Subsidies. Up to 50% of the projectcost. Available ascofinancing withnational funds.
Between 25%and 50% ofproject cost.
Ministry of theEnvironment and ofRural and MarineAreas. GeneralDirectorate ofAgriculture of EUCommission.
http://www.marm.eshttp://europa.eu/
Guide to business in SpainInvestment aid and incentives in Spain91
Table 11 (Cont.)
SUMMARY TABLE: GRANTS AND INCENTIVES TO INVESTMENT
Subsidies. Up to 60% of theproject cost.
Up to 20% ofthe project cost.
Office of Secretary ofState for Economy, Energyand SMEs.
http://www.meh.es/
Subsidies. €210 and €300 perm2 of installedcollection area.
Depends ontype of facility.
Institute for EnergyDiversification and Saving(IDAE).
http://www.idae.es/
Refundableloans,subsidies or acombinationof the two.
In the case ofrefundable advances,it may not exceed 75%of the project cost.
Depends ontype.
Ministry of Science andInnovation.
http://www.micinn.es
Subsidies andloans.
Depends on type. Depends ontype.
ICAA. http://www.mcu.es
Main types of aid Maximum limits for subsidies and
loans
Effective amounts granted More information from On-line information
AUTONOMOUS COMMUNITY AND, MUNICIPAL GOVERNMENTS AND LOCAL COUNCILS
Reduction ofsocial securitycosts,assistance toand trainingof employees.
Depend on type ofsubsidy.
The maximumamount.
State EmploymentService/”Consejerías”(Departments) of theAutonomous CommunityGovernments GeneralDirectorate of Labor.
https://www.redtrabaja.es/es/portaltrabaja/resources/contenidos/home/intermedia.html http://www.mpr.es/index.htmlhttp://www.mtas.es/
Low interestloans.
Up to 90% of theproject cost.
Between 30%and 50%.
Banco de CréditoAgrícola. Ministry of theEnvironment and of Ruraland Marine Areas,General-Secretariat ofRural Development andConservation of Nature.
http://www.marm.es
Subsidies andlow- interestloans.
Depends on type. Depends ontype.
Directorate-General ofSME Policy.
http://www.ipyme.org
Guide to business in SpainInvestment aid and incentives in Spain92
Main types of aid Maximum limits for subsidies and
loans
Effective amounts granted More information from On-line information
AUTONOMOUS COMMUNITY AND, MUNICIPAL GOVERNMENTS AND LOCAL COUNCILS
Table 11 (Cont.)
SUMMARY TABLE: GRANTS AND INCENTIVES TO INVESTMENT
Subsidies andlow- interestloans.
Depends on type. Depends ontype.
General Directoratesof the differentMinistries.
http://www.mpr.es/index.html
Subsidies,specialconditions forloans andcredits andtechnicalcounseling andtrainingcourses.
Depends on specificrules.
Depends onspecific rules.
AutonomousCommunity and,MunicipalGovernments andLocal Councils.
http://www.mpr.es/index.html
Sociedad Estatal para la Promoción y Atracción de las
Inversiones Exteriores, S.A.U. RM: Tomo 21818, libro 0, folio
15, sección 8, hoja M-388683,
Inscripción 1. NIF: A-84479013. Depósito legal: M-3674-2007.
Published 2010
This guide was researched and written by Garrigues on behalf
of INVEST IN SPAIN.
This guide is correct to the best of our knowledge and belief at
the time indicated below. It is, however, written as a general
guide so it is necesary that specific professional advice be
sought before any action is taken.
Madrid, January 2010
Prepared by:
5Guide to business in Spain
Labor and SocialSecurity regulations
*The Spanish labor market is characterized bythe small number of labor disputes due to thepossibility of negotiating collective laboragreements. In the last decade, employingworkers has become much more flexible andnew incentives have been introduced whichpromote the hiring of people from certain socialgroups.
With this aim, Royal Decree-Law 5/2006 andLaw 43/2006 were published, introducingmeasures in order to promote the stability andquality of employment, boosting productivityand competitiveness among enterprises.
Recently, taking into account the currenteconomic circumstances, Royal Decree-Law2/2009 and Law 2/2009, envisaging measuresto maintain and promote employment andprotect unemployed people, have beenapproved.
Currently being updated owing
to a change in legislation
Guide to business in SpainLabor and Social Security regulations2
53
5
6
12
16
17
Guide to business in Spain
Labor and SocialSecurity regulations
* 1. Introduction
2. General rules
3. Contracts
4. Termination of employment contracts
5. Senior executive contracts
6. Contracts with temporary employment
agencies
7. Employee representation
8. Acquisition of a Spanish business
9. Relocation of workers under a cross-border
working arrangement
10. Visas and work and residence authorizations
11. Social security system
12. Prevention of occupational risks
19
21
22
23
28
33
Galicia
Asturias Cantabria PaísVasco
La Rioja
Navarra
Castilla y León
Extremadura
Andalucía
Castilla - La Mancha
Comunidad de Madrid
Aragón
Cataluña
Murcia
ComunidadValenciana
Canarias
Baleares
FRANCE
PORTUGAL
MORROCO
La Coruña
Santiago de Compostela Lugo
Orense
OviedoSantander
León
Palencia
Valladolid
Segovia
Ávila
Soria
Logroño
Vitoria
Pamplona
Huesca
Zaragoza
Lérida
Tarragona
Castellón de la Plana
Valencia
Alicante
Murcia
Albacete
Cuenca
Madrid
Toledo
Cáceres
Mérida
Córdoba
Sevilla
Huelva
Cádiz
Ceuta
Málaga
Granada
Jaén
Almería
Melilla
BadajozCiudad Real
Guadalajara
Palma De Mallorca
Barcelona
Gerona
Teruel
BilbaoSan Sebastián
Salamanca
Burgos
Zamora
Pontevedra
Las Palmas de Gran Canaria
Santa Cruz de Tenerife
Guide to business in SpainLabor and Social Security regulations3
1. Introduction
1. INTRODUCTION
The basic law in the field of labor law is the Workers’ Statute (Legislative Royal Decree 1/1995), which
defines the respective rights of employees and employers, general terms of labor employment
contracts, procedures for dismissal and collective bargaining rules, among other aspects.
In addition, there are specific regulations for different industries and certain groups of employees
such as commercial representatives and senior management personnel.
Another important source of labor law is collective labor agreements, which may be negotiated at
the company level (or more reduced scope) or by industries at the state level (or more reduced
territorial scope).
Individual employment contracts also contain numerous mandatory provisions which govern labor
relationships.
There are also detailed regulations affecting working hours and occupational health and safety in
specific industries.
As a measure of the understanding between the Government and social partners (employers
associations and labor unions) in Spain, 2006 saw the signing of the Agreement to Improve Growth
and Employment, the legal instrument for which is Royal Decree-Law 5/2006, of June 9, 2006, and
Law 43/2006, of December 29, 2006.
The reform focuses on promoting the stability and quality of employment as the starting point for
boosting productivity and competitiveness among enterprises, and makes further progress in
reducing the cost to employers of making indefinite-term employment contracts.
Guide to business in SpainLabor and Social Security regulations4
The most relevant measures in the reform can be summarized in 5 points:
�• Reduction in employer social security contributions for unemployment, but solely in the case of
indefinite-term employment contracts, by 0.25 points as from July 1, 2006, and by a further 0.25
points as from July 1, 2008, (i.e., a total reduction of 0.5 points).
�• Halving of employer social security contributions to the Wage Guarantee Fund (FOGASA) from
0.40 points to 0.20 points.
�• Increase in use of contracts to promote hiring for an indefinite period for converting temporary
contracts into indefinite-term contracts (33 days’ severance for objective dismissal adjudged to be
unjustified instead of 45 days), provided that the temporary contracts are entered into prior to
December 31, 2007.
�• Measures are introduced with the aim of limiting the successive use of temporary contracts and to
introduce transparency into the subcontracting of work and services between enterprises where
they share a work place.
�• Adoption of measures intended to boost the efficiency of jobseeker initiatives and the scope of
action of the National Employment System, as well as the improved protection for workers given
the lack of employment.
It is also worth referring to the latest regulations approved recently in order to ease the current
economic circumstances. In concrete, it is worth noting the following: (a) Royal Decree 1975/2008
on urgent economic, tax, employment and housing measures, since it amends the aforementioned
Law 43/2006 by introducing a reduction of €1,500/year in employer social security contributions for
employers who hire on an indefinite-term, full-time basis, between December 3, 2008 and
December 31, 2010, unemployed workers with family responsibilities (for further information, see the
section on Contracts) and (b) Royal Decree-Law 2/2009, March 6, and Law 27/2009, December 30,
on urgent matters for the maintenance and employment promotion and the protection of
unemployed whose main measures are three: (i) measures directed to the maintaining employment,
(ii) modifications aimed at improving the social protection of workers, and (iii) provisions to
encourage the employment of persons in situation of unemployment.
Although not strictly related to employment, brief mention should be made of Law 20/2007, of July
11, 2007, on the Self-Employed Work Statute (implemented by Royal Decree 197/2009, February 23),
which introduces the new legal concept of the Economically Dependent Self-Employed Worker. This
concept defines self-employed workers who engage in an economic or professional activity for gain
habitually, personally, directly and predominantly for one individual or legal entity known as the
“client,” on which they are economically dependent since they receive from that client at least 75% of
their income from economic or professional activities. It also establishes certain requirements that
must simultaneously be met in order for such workers to be deemed economically dependent self-
employed workers. The Law establishes specific regulations governing the provision of services by
such workers to their clients.
2. GENERAL RULES
The main general rules of Spanish labor law are summarized below:
2.1 Non-discrimination
The Spanish Workers’ Statute generally prohibits discrimination in hiring or in the workplace based
on sex, marital status, age, race, social status, religion or political ideology, joining a labor union or
otherwise or on the basis of the different official languages in Spain. This protection is also expressly
extended to foreigners (i.e., those other than Spanish or EU nationals) under Organic Law 4/2000,
recently amended by Organic Law 2/2009, December 11, and also by Organic Law 14/2003 on the
Rights and Freedoms of Foreigners in Spain and their Social Integration.
It also prohibits discrimination because of physical or mental handicap if the candidate is otherwise
suitable for the job in question.
Organic Law 3/2007, of March 22, 2007, for Effective Equality between Women and Men transposed
into Spanish Law two EU Directives concerning equal treatment: Directive 2002/73/EC of the
European Parliament and of the Council of September 23, 2002, amending Council Directive
76/207/EEC on the implementation of the principle of equal treatment for men and women as
regards access to employment, vocational training and promotion, and working conditions; and
Council Directive 2004/113/EC of December 13, 2004 implementing the principle of equal treatment
between men and women in the access to and supply of goods and services.
The purpose of the Organic Law is to enforce the principle of equal treatment and opportunities for
men and women, particularly through the elimination of discrimination against women. With this in
mind, having defined the principle of equal treatment and what constitutes direct and indirect
discrimination, the Law establishes a series of policies aimed at achieving equality between men and
women in various areas, including labor and employment.
2.2 Minimum age
Persons under the age of 16 cannot work. There are also certain protective measures for persons
under the age of 18, such as the prohibition against such persons working overtime or at night, or in
certain hazardous or unhealthy activities or jobs.
2.3 Form of contract
In general the contract may be made verbally or in writing. However, in certain cases the contract
should necessarily be made in writing (for example, part-time and temporary contracts and training
contracts with a duration of more than four weeks).
If this requirement is not met, the contract is understood to be permanent and full time, unless
otherwise evidenced.
2. General rules
Guide to business in SpainLabor and Social Security regulations5
1 www.sepe.eswww.mtin.es
3. Contracts
3. CONTRACTS1
3.1 Types of contract
According to the duration of employment, employment contracts may be made for an indefiniteterm or for a specific duration. In general, contracts are made for an indefinite term and their unfairtermination entitles the worker to receive the severance established by law.
Temporary contracts are therefore generally "circumstance-driven"; i.e., except in certain specificcases, there must be circumstances justifying such temporary hiring. If the type of temporary contractdoes not conform to a cause established by law the contract is deemed to be permanent.
Outlined below are the main types of contracts and their principal features. Contracts for a specificduration should be differentiated from training contracts.
3.1.1 Contracts for a specific duration
The first group, according to the cause established by law, includes contracts for a specific project orservice, casual contracts due to production overload or backlog and contracts to substituteemployees entitled to return to their job. All these contracts should be made in writing and the causefor their temporary nature should be placed on record. Otherwise, the contract will be deemed to bemade for an indefinite term, unless evidence of its temporary nature is provided.
If the employment contract is made for a term of more than one year, the party intending toterminate the contract should serve notice at least fifteen days in advance or, as the case may be,give the advance notice established in the applicable Collective Labor Agreement.
Guide to business in SpainLabor and Social Security regulations6
TYPE CAUSE TERM OBSERVATIONS
Contract for aspecific project orservice
Performance of aspecific independentand self-containedservice or project withinthe company’sbusiness.
In principle uncertain. Itwill depend on the timeof performance of thespecific service orproject.
It should mention the work and projectclearly and precisely.
Its termination entitles the employee to receiveseverance equal to 8 days’ salary per year worked.
Workers who have been hired for longer than24 months within a 30-month period, on acontinuous or interrupted basis, for the sameposition at the same company by means of twoor more temporary contracts, whether hireddirectly or assigned through a temporaryemployment agency, under the same ordifferent forms of contract for a specificduration, will become permanent employees.
Table 1
TYPES OF TEMPORARY CONTRACTS
Guide to business in SpainLabor and Social Security regulations7
Casual contract dueto productionoverload or backlog
To meet market needs,production overload orbacklog.
Maximum of 6 monthswithin a period of 12months (this periodmay be extended by anindustry-wide collectivelabor agreement for 18months but it maynever exceed 3/4 ofthat period, or themaximum term of 12months).
It should mention the work and projectclearly and precisely.
Its termination entitles the employee toreceive severance equal to 8 days’ salary peryear worked.
Workers who have been hired for longerthan 24 months within a 30-month period,on a continuous or interrupted basis, for thesame position at the same company bymeans of two or more temporary contracts,whether hired directly or assigned through atemporary employment agency, under thesame or different forms of contract for aspecific duration, will become permanentemployees.
Contract tosubstituteemployees entitledto return to theirjob
To substitute workersentitled to return totheir job by provision oflaw, of a collective laboragreement or of anindividual contract.
From the beginning ofthe period until thereturn of the replacedworker or expiry of theterm established for thesubstitution.
One of the formalities is that it shouldcontemplate the name of the replacedworker and the cause for his substitution.
Table 1 (Cont.)
TYPES OF TEMPORARY CONTRACTS
TYPE CAUSE TERM OBSERVATIONS
Guide to business in SpainLabor and Social Security regulations8
3.1.3 Contract to promote hiring for an indefinite period
In relation to permanent employment, there is a type of contract to promote hiring for an indefinite
period. It applies to the following groups:
a) Unemployed workers from any of the following groups:
— Young people aged 16 through 30.
— Unemployed women, if hired for jobs or occupations in industries with a lower proportion of
female employees.
— The unemployed aged over 45.
3.1.2 Training contracts
Also set forth below are the main features of training contracts.
CONTRACT PURPOSE DURATION TO BE NOTED
Work experiencecontract
Contracts with personswith a university degreeor high or middle-levelprofessionalqualifications or anofficially recognizedequivalent degreequalifying them toperform theirprofession.
Minimum of 6 monthsand maximum of 2 years.It may be extended twice,but always subject to thetwo-year limit.
Once the term hasexpired, the same personmay not be hired againunder the same type ofcontract by the same orby another company.
As a general rule, not more than 4 yearsmay elapse from the completion of therespective studies.
The minimum salary to be paid will bebetween 60% and 75% of the salaryestablished in the collective laboragreement for a worker holding the sameor an equivalent post (first and second yearof the contract).
Trainee contract To acquire thenecessary theoreticaland practical trainingnecessary for a certainpost of work.
Minimum of 6 monthsand maximum of 2 years(it may be extended upto 3 years under acollective laboragreement).
Once the term hasexpired, the same personmay not be hired againunder the same type ofcontract by the same oranother company.
Made with workers from 16 to 21 of age whodo not have the qualifications necessary toobtain a work experience contract.
According to the workforce, a maximumnumber of trainee contracts is established.
The employer undertakes to providetheoretical training that will never be less than15% of the maximum working hours. Thecontract will be deemed ordinary if thetheoretical training obligations are breached.
Table 2
TRAINING CONTRACTS
Guide to business in SpainLabor and Social Security regulations9
— Unemployed workers who have been registered as job seekers for at least six months.
— The disabled.
b) Workers who, on the date of signing a new contract to promote hiring for an indefinite period,
were employed at the same company under a temporary contract, including training contracts,
arranged before December 31, 2007.
If a contract of this type is terminated on objective grounds and its termination is then adjudged to
be unjustified, the worker will be entitled to severance equal to 33 days’ pay per year worked, with
periods of less than one year being prorated by month, and up to a maximum of 24 months’ pay.
Social Security discounts and rebates are envisaged in Royal Decree 1917/2008, November 21, Royal
Decree 1975/2008, November 28, in Royal Decree-Law 2/2009, March 6, and in the Law 27/2009,
December 30. These latter regulations are applicable to unemployed who perceive Social Security
unemployment benefit.
Additionally, special provision for unemployed persons are envisaged in Law 43/2006, of December
29, 2006, for improved growth and employment which provides reductions in employer social
security contributions to companies that employ on a permanent basis unemployed workers from
among any of the groups contemplated therein.
The groups at which these incentives and reductions are aimed are as follows:
— Women in general, and women when they are hired in the 24 months following childbirth, or
after 5 years of unemployment if, prior to their withdrawal from work, they had worked for at
least 3 years.
— People aged over 45.
— Young people aged 16 through 30.
— Groups in special circumstances: unemployed workers who have been registered as job seekers
for at least six months, socially-excluded workers, and victims of gender violence.
— People with disabilities, and people with severe disabilities, from labor enclaves.
— Workers registered at the State Employment Service with family responsibilities, hired under
indefinite-term contracts.
The benefits established in the Law are summarized in its accompanying Schedule. (For further
information, see section 2 on State Incentives for Training and Employment in Chapter 4).
3.1.4 Part-time contracts
Employment contracts may be made full-time or part-time. Following the enactment of Law 12/2001
on Urgent Measures Reforming the Job Market in order to Increase and Improve the Quality of
Employment, “part-time contract” is defined as a contract in which a number of hours of work has
been agreed with the worker per week, month or year, less than the working hours of a “comparable
full-time worker” (this term means a full-time worker of the same company and workplace who
performs identical or similar work).
Part-time workers have the same rights as full-time workers considering the existence of rights
recognized proportionally, according to the time worked.
3.2 Trial period
Employers can verify a worker’s abilities through the possibility of agreeing on a trial period during
which the employer or the worker can freely terminate the contract without having to allege or prove
any cause, without prior notice and with no right to any indemnity in favor of the worker or the
employer.
In any event, where a trial period is agreed (provided that the worker has not performed the same
functions before at the company under any type of employment contract, in which case the trial
period would be null and void), it must be put in writing. Collective labor agreements may establish
time limits for trial periods, which, as a general rule and in the absence of any provision in the
collective labor agreement, cannot exceed:
�• Six months for graduate specialists.
�• Two months for other employees. At companies with fewer than twenty-five employees, the trial
period for non-graduate specialists cannot exceed three months.
Training contracts and special employment contracts (domestic workers, senior executives, among
others) have their own specific trial periods.
3.3 Working hours
�• Working hours are as specified in collective labor agreements or individual employment contracts.
• The maximum statutory working week is 40 hours of time actually worked, calculated on an
annualized average basis. The irregular distribution of the working hours throughout the year may
be agreed on by collective labor agreement, or by agreement between the company and the
workers’ representatives.
�• Overtime refers to hours worked above the maximum duration of an ordinary working hours.
Other than in exceptional cases, overtime (i.e., hours worked in excess of the maximum statutory
or agreed working hours) is voluntary and, if paid, cannot exceed 80 hours per year.
��• Overtime can be compensated as time off within four months from the date on which the
overtime was worked. If payment for overtime is agreed upon in the collective labor agreement or
individual contract, the hourly overtime rate cannot be less than the normal hourly rate.
�• Overtime compensated with time off does not count towards the 80-hour annual ceiling.
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Guide to business in SpainLabor and Social Security regulations11
�• A minimum one and a half days off per week is mandatory (usually Saturday afternoon and all
day Sunday, or all day Sunday and Monday morning) which may be accumulated for periods of up
to fourteen days. Workers under 18 are entitled to two uninterrupted days off per week.
�• Central Government, autonomous community authorities and the respective municipal authorities
cannot designate more than 14 public holidays a year. The Government can move national
holidays falling on a weekday to the following Monday and all public holidays that fall on a
Sunday will be moved to the following Monday.
�• An annual paid vacation which may not under any circumstances be less than 30 calendar days is
obligatory. The worker should know the corresponding dates at least two months in advance.
�• Employees are entitled to paid leave of absence in certain circumstances such as marriage (15
days), union duties, unavoidable public and personal duties, breastfeeding, childbirth, moving
home, serious illness, hospitalization or death of relatives to the second degree of consanguinity,
and so on.
�• Directive 2003/88/EC of the European Parliament and the Council, of November 4, 2003, relating
to certain aspects of working time, establishes safeguard provisions on working hours, particularly
shiftwork and working at night (this Directive came into force on August 2, 2004). All the articles
of the directive are governed by the general principle of conformance of the work to the worker.
�• This Directive establishes, as a new feature, the obligation of the Member States to adopt the
measures necessary for employers who regularly use night workers to report this to the competent
authorities.
3.4 Wages and salaries
The official minimum wage is established by the Government each year, and is €633.30 per month
or €8,866.20 per year for persons over 18 years of age (including 12 monthly and 2 extra payroll
payments) for 2010.
However, the minimum wages for each job category are usually regulated in collective labor
agreements.
Salaries cannot be paid at intervals of more than one month.
At least two extra payroll payments must be paid each year: one at Christmas and the other on the
date stipulated in the relevant collective labor agreement (generally before the summer vacation
period). Thus, an employee’s gross annual salary is usually apportioned in 14 payroll payments;
however, payment in 12 monthly installments can be agreed on in a collective agreement.
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4. TERMINATION OF EMPLOYMENT CONTRACTS2
4.1 Dismissals
An employment contract may be terminated for certain reasons which normally do not give rise to a
dispute, such as mutual agreement, expiration of the contract term, death or retirement of the
employee or of the employer, and so on.
In addition, the law regulates three principal grounds for dismissal of an employee:
�• Collective layoff.
�• Objective causes.
�• Disciplinary action.
The following table shows the causes and main features of the various types of dismissal:
4. Termination of employment contracts
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DISMISSAL LEGAL CAUSES OBSERVATIONS
Collectivelayoff
Economic, technical, organization or productioncauses, whenever these affect, in a 90-dayperiod, at least:
• The entire payroll, if the number of workersaffected is more than 5 and the business ofthe company ceases entirely.
• At least 10 workers in companies with lessthan 100 employees.
• 10% of the employees in companies withfrom 100 to 300 workers.
• More than 30 workers, in companies with300 or more employees.
• The termination is performed through anadministrative procedure. Dismissals will only bepossible if the Labor Authorities approve them by anadministrative ruling.
• The procedure includes the obligation of granting aperiod of consultations with the workers’representatives and, if none, with the employeesdirectly.
• The consultations are intended to reach an agreementfor the termination of the contracts. Nevertheless, theLabor Authorities may approve the dismissals even if noagreement is reached.
• The statutory severance consists of 20 days’ salary peryear worked, up to a maximum of 12 months’ salary ormore if so agreed.
Table 3
CAUSES OF DISMISSAL
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DISMISSAL LEGAL CAUSES OBSERVATIONS
Objectivecauses
• Ineptitude of the worker supervened or known afterbeing hired by the company.
• Inability of the worker to adapt to the changes in hisjob.
• Objectively evidenced need to cancel posts of workdue to economic, technical, organization orproduction reasons.
• Justified by intermittent absences from work,reaching certain percentages of working days.
• In indefinite-term contracts arranged directly bypublic authorities or by not-for-profit entities toimplement certain public plans and programs forwant of the appropriate allocation to enable themto continue.
• The employer should serve at least 30 days’advance notice in writing.
• The advance notice may be replaced bypayment of the salaries for said period.
• The severance (20 days’ salary per yearworked, up to a maximum of 12 months’salary) should be made available to theworker simultaneously with the writtennotice of dismissal.
• It may be appealed as if it were a disciplinarydismissal.
DisciplinaryAction
Serious and willful breach of contract by the worker:
• Repeated and unjustified absenteeism.
• Insubordination or disobedience.
• Physical or verbal abuse towards the employer.
• Breach of contractual good faith or abuse of trust.
• Willful diminution in the ordinary job productivity.
• Habitual drug or alcohol abuse which adverselyaffects job performance.
• Harassment by reason of race or ethnic origin,religion or beliefs, disability, age or sexualorientation, and sexual or gender harassmenttowards the employer or the persons working at theenterprise.
• The employee must be given written noticeof dismissal, stating the causes and effectivedate of dismissal.
• If a workers’ representative or labor uniondelegate is dismissed, an adversaryprocedure should be instituted. If the workeris a labor union member, the uniondelegates should be granted a hearing.These safeguards may be increased byCollective Agreement.
• If these formalities are not met, a furtherdismissal may be performed in a term oftwenty days by paying the employee thesalaries that accrue in the meanwhile, witheffects as of the date of the new notice.
Table 3 (Cont.)
CAUSES OF DISMISSAL
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4.2 Classification of the dismissal
A worker dismissed for any objective cause or disciplinary action may appeal the decision made by
the employer before the Labor Courts, although a conciliation hearing must first be held between the
worker and the employer to attempt to reach an agreement. This conciliation hearing is held before
an administrative body of conciliation and arbitration.
The dismissal will be classified in one of the three categories set forth below:
CLASSIFICATION EVENTS EFFECTS
Justified Conforming to law. Disciplinary dismissal. Validation of thedismissal, the worker is not entitled toseverance pay.
Objective dismissal: Payment of 20 days’salary per year worked, up to a limit of 12months’ salary.
Table 4
CATEGORIES OF DISMISSAL
Unjustified No legal cause exists for the dismissal or theprocedure adopted is incorrect.
The employer may either:
• reinstate the worker,
• or terminate his contract, paying severanceof 45 days’ salary per year worked, up to amaximum of 42 months’ salary.
If the dismissed worker is a workers’representative, the choice will rest with him.
Guide to business in SpainLabor and Social Security regulations15
Where a dismissal is declared to be unjustified, the employer must choose between reinstating the
employee or paying him or her statutory severance. In any event, the employer must pay the salaries
that accrue during the proceeding, which consist of the salaries that the employee ceases to receive
from the date of dismissal until (i) notification of the judgment, (ii) until the worker finds other
employment before a judgment is handed down, or (iii) until the date of deposit of the statutory
severance (and salaries during the proceeding) at the relevant Labor Court if the dismissal is
acknowledged to be unjustified and provided that the dismissed worker is informed of the deposit of
both the severance pay and the salaries accrued during the proceeding.
However if the unjustified nature is recognized and the deposit is made at Court within 48 hours
after the dismissal, no salaries will accrue during the proceeding.
If the worker has received unemployment benefits, the employer must deduct the benefits paid to
the worker by the management entity, from the salaries accrued during the proceeding, and refund
such amount to the management entity.
CLASSIFICATION EVENTS EFFECTS
Null • Its cause is a form of discrimination.
• It implies a violation of fundamental rights.
• It affects, situations related to combination oflabor and proffessional life, among others:pregnant workers, during the period of suspensionof the contract due to maternity or paternity, riskduring pregnancy, adoption or fostering,reduction of working hours to care for children orhandicapped persons or reduction forbreastfeeding, and in certain circumstancesfemale workers who have been the victims ofgender violence. It also affects workers that haveresumed their work once the period of suspensionof the contract due to maternity, adoption orfostering, or paternity has ended, provided thatno more than nine months have elapsed since thedate of birth, adoption or fostering of the child.
• Failure to comply with the formalities for objectivedismissals (unless no advance notice is served).
• Immediate reinstatement of the worker.
• Payment of the unpaid salaries.
Table 4 (Cont.)
CATEGORIES OF DISMISSAL
5. Senior executive contracts
5. SENIOR EXECUTIVE CONTRACTS3
As mentioned earlier, special rules apply to certain categories of employee, including most notably
senior executives and their special labor relationships, which are governed by Royal Decree
1382/1985, of August 1, 1985.
A senior executive is an employee who has broad management authority in relation to the
company’s general objectives and exercises that authority independently and with full responsibility,
reporting only to the company’s supreme governing and managing body.
The terms of employment for such executives are subject to fewer constraints than those for ordinary
employees.
As a general rule, the parties (employer and senior executive) have a wide margin of maneuver in
defining their relationship by contract.
Senior executives’ contracts can be terminated without cause (i.e., contractual withdrawal by
employer), serving notice at least 3 months in advance, in which case they are entitled to severance
pay of seven days’ pay per year worked, up to a maximum of six months’ pay, or such other
severance as may have been agreed on.
The senior executive may freely cancel his contract by serving at least three months’ advance notice.
In addition, the Law establishes certain grounds on which the senior executive can terminate his or
her contract and receive the agreed-upon severance pay and, in the absence thereof, the severance
pay established for cases where the employer withdraws from the contract.
Alternatively, a senior executive can be dismissed on any of the grounds stipulated in general labor
legislation (objective causes, disciplinary reasons).
If the dismissal is adjudged to be unjustified, the senior executive is entitled to 20 days’ pay per year
worked, up to a maximum of 12 months’ pay, unless different terms of severance have been agreed
on.
It should be noted that the statutory severance for senior executives is lower than that for ordinary
employees. However, in practice senior executive contracts usually provide for severance payments
that are higher than the statutory minimum.
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6. CONTRACTS WITH TEMPORARY EMPLOYMENT AGENCIES4
In line with the general guidelines established by the European Union, Law 14/1994 regulated for the
first time in Spain the activities of temporary employment agencies, which involve supplying
manpower to their client companies to cover their temporary needs. This special situation of the
client company with respect to the worker employed by the temporary employment agency is also
regulated in Law 31/1995, of November 8, 1995, on the Prevention of Occupational Risks, which
defines the liability of the client company with respect to workplace conditions.
The reform of the Law on Temporary Employment Agencies by Law 29/1999 provides greater legal
certainty to the workers of companies of this kind, in their labor relationships with client companies
and encourages job security and improves their pay. Accordingly, the Spanish Parliament has placed
workers from temporary employment agencies on the same footing as employees of client companies
in terms of minimum pay. Disclosure obligations to employee representatives are also extended.
Pursuant to Law 29/1999, a manpower supply contract (statutorily defined as a contract between a
temporary employment agency and a client company under which workers are supplied to provide
services at the latter) can be concluded in the same circumstances, subject to the same conditions
and requirements, and for the same term as those relating to a temporary contract entered into by
the client company pursuant to the Workers’ Statute.
The latest reform introduced by Law 12/2001 in the area of contracts with temporary employment
agencies permits a temporary employment agency to enter into an employment contract with a
worker to cover successive manpower supply contracts with different client companies so long as the
manpower supply contracts are fully stipulated when the employment contract is signed and, in all
cases, they address one of the situations justifying the hiring of casual labor under Article 15.1.b) of
the Workers’ Statute (i.e., market circumstances, the accumulation of tasks or excess orders), with
each supply of manpower having to be formalized in the employment contract.
The Temporary Employment Agency Law establishes various events in which companies are unable to
enter into manpower supply contracts:
�• To replace workers on strike at the user company.
�• To perform activities and work subject to regulations because of their particular hazard to health
or safety.
�• When the company has cancelled the job positions that it intends to fill by unjustified dismissal or
for the causes contemplated for termination of the contract unilaterally by the worker, collective
dismissal or dismissal for economic causes in the twelve months immediately preceding the date
of the manpower supply contract.
�• To lend workers to other temporary employment agencies.
6. Contracts with temporary employment agencies
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Guide to business in SpainLabor and Social Security regulations18
Since the entry into force of Royal Decree-Law 5/2006, workers who have been hired for longer than
24 months within a 30-month period, on a continuous or interrupted basis, for the same position at
the same company by means of two or more temporary contracts, whether hired directly or assigned
through a temporary employment agency, under the same or different forms of contract for a specific
duration, will become permanent employees.
Lastly, also of note is the approval of Directive 2008/104/EC (OJEU of December 5, 2008) whereby
the European Union establishes the minimum requirements regarding temporary agency work.
Specifically, the Directives aims to ensure the protection of temporary agency workers and improve
the quality of temporary agency work by ensuring that the principle of equal treatment, while at the
same time contributing to the creation of jobs and to the development of flexible forms of working.
The Directive applies to temporary agency workers who are assigned to user undertakings, and the
Members States are under the obligation to adopt and publish the laws, regulations and
administrative provisions necessary to comply with the Directive by December 5, 2011 (pursuant to
Additional Provision Forth of Law 27/2009, December 30, Government will make the necessary steps
in order to implement the referred Directive to Spanish Law in a period of time of no longer than four
months).
The main minimum requirements established by the Directive relate to: a) The review of prohibitions
or restrictions on the use of temporary agency work, and b) Working and employment conditions
relating to (i) the principle of equal treatment; (ii) access to employment, collective facilities and
vocational training; (iii) representation of temporary agency workers; and (iv) information of
workers’ representatives.
7. Employee representation
7. EMPLOYEE REPRESENTATION5
Labor unions collectively represent workers’ interests territorially (nationwide and so on) and by
industry. Various employers’ associations also exist whether nationally or otherwise.
At company level, personnel are represented by personnel delegates or works committees
(depending on the number of employees at the company or the workplace) that may, or may not,
belong to a labor union. At companies with more than ten workers, there is an automatic right to
choose such representatives (although it is not obligatory for there to be representatives). The right
to elect personnel delegates at companies that have between six and ten employees can be
exercised if all the employees unanimously choose to be represented.
Furthermore, employees of Community-scale enterprises or Community-scale groups of enterprises
are entitled, following a prior request, to establish a European works committee or a procedure to
inform and consult workers. This right is recognized under Law 10/1997 (amended in some respects
by Law 44/1999), on the Rights to Inform or Consult Workers at Community-scale Enterprises and
Community-scale Groups of Enterprises. Recent Directive 2009/38 (OJEU of May 16, 2009) modifies
EU legislation regarding European work council constitution and procedures of information and
consultation in the companies.
7.1 Functions of works committees and personnel delegates
The functions of works committees and personnel delegates are the same and include, following the
latest amendment by Law 38/2007, the following:
�• To receive information, among others, on the performance of the economic sector to which the
enterprise belongs; on the economic situation of the enterprise, the recent and likely evolution of
its activities, and on compliance with equality obligations and other matters that may affect
employment.
�• To issue a report on certain labor issues, such as redundancy procedures and professional training
plans at the company, before the employer implements its decision in this connection.
�• To issue reports on mergers, absorptions or changes in the legal form of the company, if they
affect a certain number of jobs.
�• To monitor compliance with labor regulations.
There are also certain statutory safeguards established regarding the dismissal of, or imposition of
penalties on, employee representatives.
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7.2 Collective labor agreements
Collective labor agreements may be defined as agreements executed between the workers’
representatives and the employers’ representatives in order to regulate the terms of employment
and working conditions and, as such, are mandatorily binding on the parties. Collective labor
agreements may have a Company scope (or a smaller scope, such as a specific work place), or a
Sectoral scope (governing a certain industry), which may in turn apply at State, autonomous
community or provincial level. Collective bargaining has become a decisive factor in the reform of
Spanish labor legislation.
Such agreements are generally entered into for one or two years, although they can be extended for
longer periods.
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8. ACQUISITION OF A SPANISH BUSINESS
Certain labor law provisions are particularly relevant when acquiring or selling a going concern in
Spain. For example, if a business is transferred, both the seller and the buyer are jointly and severally
liable for a period of three years after the transfer, for any labor claims which arose prior to the
transfer.
When a business is transferred, the new employer subrogates to the former employer’s labor and
social security rights and obligations, including pension commitments, as provided in the legislation
specific thereto and, in general, to as many employee welfare and supplementary obligations as the
former employer may have entered into.
The seller and buyer must previously inform their respective employees of certain aspects of the
future transfer.
Specifically, the information must comprise at least the following:
�• Proposed date of transfer.
�• Reasons for the transfer.
�• Legal, economic and social consequences of the transfer for the employees.
�• Measures envisaged for the employees.
If there are no elected representatives at the affected companies, the information must be supplied
directly to the employees affected by the transfer.
There is also an obligation (applicable to both the seller and the buyer) to arrange for a period of
consultations with elected employee representatives where, as a result of the transfer, labor
measures are adopted for the personnel affected.
The consultation period will address the measures envisaged and their consequences for the
employees and must be arranged sufficiently in advance of the date on which such measures are to
be taken.
If the change in ownership results in significant changes in business activities, philosophy or
management, senior management personnel may be entitled to terminate their employment within
three months following the occurrence of these changes and to receive severance equal to seven
days’ pay per year worked, up to a maximum of six months’ pay, or such severance as may have
been agreed on.
8. Acquisition of a Spanish business
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9. RELOCATION OF WORKERS UNDER A CROSS-BORDER WORKING ARRANGEMENT
Law 45/1999, of November 29, 1999 introduced several measures to monitor and provide protectionfor relocations of workers under cross-border working arrangements.
There are a number of minimum terms of employment that employers in the European Union, andin the European Economic Area (the EU plus Norway, Switzerland, Iceland and Liechtenstein) mustguarantee to their employees relocated temporarily to Spain, except for merchant navy firms inrespect of their sailing personnel, irrespective of the law applicable to their employment contracts.Nevertheless, Additional Provision No. 4 of Law 45/1999 provides for the possibility of extending itsscope to third countries by virtue of international agreements.
This Law applies to relocations for a limited time period in the following cases:
�• Within the same company or within a group of companies.
�• Under international services contracts.
�• When the workers of a temporary employment agency are posted to a client company in anotherEU Member State.
The only exceptions to the above are in the case of employee relocations during training periods andthose relocations that last less than eight days, unless they involve workers employed by temporaryemployment agencies.
The minimum terms of employment to be guaranteed by employers in the above countries inaccordance with Spanish labor legislation are: (i) working time, (ii) pay (which must be at least thatprovided for the same post under the relevant legal provision, regulation or collective laboragreement), (iii) equality of treatment, (iv) the rules on underage work, (v) prevention ofoccupational risks, (vi) nondiscrimination against temporary and part-time workers, (vii) respect forprivacy, for dignity rights, and the freedom to join a union and (viii) rights of strike and assembly.However, if employees relocated to Spain enjoy more favorable terms in their country of origin, thoseterms apply.
The employers in such cases are also required to perform certain obligations and disclose certaininformation to the competent labor authorities for monitoring and coordination purposes.
Specifically, they should report the relocation to the Spanish Labor Authorities before the workerstarts to work and regardless of the duration of the relocation.
The legislation on labor infringements and penalties classifies a series of events in this respect.Formal defects in the reporting of worker relocations to Spain constitute a minor infringement, whilethe reporting of the relocation after it has taken place is a serious infringement. Failure to report therelocation and misrepresentation or concealment of the data contained in the report are consideredto be gross infringements.
Failures to meet the minimum working conditions mentioned above, which are classified accordingto the penalties applicable to Spanish employers, are considered to be administrative infringements.
9. Relocation of workers under a cross-border working arrangement
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10. VISAS AND WORK AND RESIDENCE AUTHORIZATIONS6 7
Organic Law 8/2000 (of December 22, 2000) on the Rights and Freedoms of Foreigners in Spain
and their Social Integration, together with the Organic Law 14/2003, on the same matter, clarified
and even amended certain of the provisions introduced by the previous Organic Law 4/2000 (of
January 11, 2000), in an attempt to provide greater guarantees for a policy to ensure the integration
of nationals from third countries who reside legally on Spanish soil, and encouraging
nondiscrimination of this group in Spanish economic, social and cultural life. This Organic Law is
currently implemented by Royal Decree 2393/2004 (modified by Royal Decree 1162/2009, July 10).
Organic Laws 8/2000 and 14/2003, introduced the following main new features: (i) they clarify the
definition of “foreigner” (non-Spanish national or non-Community national); (ii) they extend to
foreign nationals the constitutional safeguards in Article 13 of the Spanish Constitution on civil
liberties; (iii) they introduce enforcement measures to combat illegal immigration, as well as
measures to combat human trafficking, and enable certain activities linked to this traffic to be
monitored.
Currently, the Organic Law 4/2000 has been amended by the Organic Law 2/2009, of 11 December,
and has introduced important amendments in the regulation, including:
�• New regulation of the rights of foreigners reunion, manifestation, association, unionism, strike,education and free legal assistance, in order to adapt it to the constitutional doctrine.
10. Visas and work and residence authorizations
Guide to business in SpainLabor and Social Security regulations23
6 www.mtin.eswww.mir.eswww.mae.es7 The procedures to be followed to obtain a taxpayer identificationnumber (NIF) for directors not resident in Spain are as follows: (a) if the director is a legal entity, the procedure, which is free of charge,consists of filing a specific form along with certain documentation withthe competent authorities, which will allocate a provisional numberautomatically. Once the company has been registered at the MercantileRegistry, a definitive taxpayer identification number should be obtainedwithin a maximum of six months from obtainment of the provisionalnumber; or (b) if the director is an individual, he/she must apply for an alienidentification number (NIE), which will also be his/her taxpayeridentification number, in one of the following two ways: - In Spain. At the Directorate-General of Police. A special or general powerof attorney will be required for each of the directors and must be dulynotarized, certified by apostille or legalized, as appropriate, if they cannotappear in person.- Abroad. A NIE can be applied for at Spanish Diplomatic Missions orConsular Offices. In order to obtain a taxpayer identification number for the company’sshareholder(s) beforehand, the specific form must be filed with thecompetent authorities (where the shareholder is a legal entity) or anapplication made for an alien identification number (where theshareholder is an individual).Throughout the process, the represented shareholder(s) and/or directorsmust grant sufficient powers of attorney in order to take the above steps.(For further information, see section 3 on Tax Identification Number (NIF)and Foreigners’ Identity Number (NIE)).
�• Extension of the right to family reunification for not married couples.
�• Creating a record to control entrance and departures of foreigners.
�• Protection of foreign women victims of gender violence.
�• New regulation of the national employment situation in the catalogue difficult covering
occupations, limiting the initial authorizations to a concrete occupation and territory.
�• Amendments of the sanctioning regime.
�• Regulation of a special regime of researchers and highly qualified professionals.
�• Introduction to the Spanish legislation of the European Union blue card (regulated by Directive
2009/50, of OJEU June 18, 2009).
�• It also establishes the new possibility of taking into account periods of prior and continuous
residence in other EU countries as holder of the card blue in order to obtain a long-term residence
authorization.
Foreigners included in the Community system may reside and work (as self-employed or employed
workers) in Spain with no need to obtain work authorization.
Foreigners to whom the Community system does not apply require administrative approval to be able
to work and reside in Spain. Employers who intend to hire a foreigner who is not authorized to work
in Spain (to whom the Community system does not apply) should previously obtain an authorization
from the Ministry of Labor and Social Affairs. Nevertheless, lack of a work permit will not render the
employment contract void with regard to the rights of the foreign worker and will not prevent him
from obtaining the benefits to which he may be entitled (however, the foreigner who does not have
a residence and work authorization will not be entitled to receive unemployment).
10.1 Nationals from non-EU countries
Under Spanish labor legislation, non-EU nationals intending to work in Spain must obtain a special
work visa and a work and residence authorization. The Spanish labor authorities grant different types
of work authorization depending on the type of work and its duration.
The duration of initial authorizations for employed work and residence will be of one year and will be
restricted to a certain geographical area and type of work (except for when otherwise established in
the Law and International Agreements signed by Spain). After the one-year period, initial
authorizations can be renewed for a two-year period. Once renewed, an authorization will allow its
holder to engage in any type of work anywhere in Spain. Work authorizations are granted taking into
account the employment situation in Spain (that is, the need for labor and the level of
unemployment for the jobs offered). Every quarter the Spanish National Employment Institute
publishes a catalog of jobs that are difficult to fill which provides a breakdown by province of the
occupations for which foreigners can be hired.
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However, there are certain preferential situations, such as foreigners who have ties with Spain,
rejoined relatives, highly qualified professionals, employees in the staff of a company or group of
companies in another Country who intend to render services for the same company or group of
companies in Spain, workers who assemble or repair imported machinery, or senior employees or
managers. In these cases, the domestic employment situation does not have to be certified.
Authorizations for self-employed work and residence are granted for an initial one-year period and
can be renewed on expiry for further two-year periods.
Where a worker has resided legally and continuously in Spain for five years and has renewed his or
her work and residence permits (whether for self-employed or employed work), he or she may obtain
a long duration residence permit. After obtaining such a permit, the worker must apply for a resident
alien identity card, which will be renewed every five years.
Other types of work authorization are as follows:
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AUTHORIZATION TYPE SCENARIO DURATION
Frontier workers Employed or self-employed work authorization for workers residing in
the frontier area of a neighboring State to which they return each
day. Its validity is restricted to this territorial area.
Five years at most, renewable on
expiry.
Temporary work Permitted types of work:
• Seasonal work for 9 months at most within a period of 12
consecutive months.
• Project work or services (assembly of industrial plants,
infrastructure, etc.).
• Senior management, professional sportsmen and women, artistes
in public performances, and such other groups as may be
determined by legislation.
• Training and trainee work.
The term of the contract, subject to a
one-year limit (except in the case of
seasonal authorizations), and not
renewable, except for the renewals
provided for in labor legislation.
Cross-border work Granted to foreigners who work for a company established in a
country that does not belong to the EU or the European Economic
Area, and who are assigned temporarily to Spain in the following
cases:
• Execution of an agreement between the foreign company and the
company established in Spain that will receive the services.
• Temporary assignment of workers between companies of a Group
(including training).
• Temporary assignment of highly qualified workers to supervise or
advise on construction work or services that Spanish companies
perform abroad.
One year at the most, renewable for
another year at the most.
Table 5
TYPES OF WORK AUTHORIZATION
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The Decision of the Ministry of Employment and Inmigration 3498/2009, published in the Official
Gazette on December 29, 2009, regulates the collective hiring in origin of foreigner employees non
European for 2010 (previously called annual quota of foreigner workers), that is, the programmed
hiring of foreigner employees non European aiming to be permanent and that are pointed out in
their countries of origin from generic offers registered by employers as well as nominative offers). It
establishes the eventual need of 168 permanent posts of work.
Lastly, it is important to bear in mind the creation of the Unit of Large Enterprises (Unidad de Grandes
Empresas) under the Ruling of the Secretary of State for Immigration and Emigration dated February
28, 2007, ordering publication of the Spanish Cabinet Decision of February 16, 2007, approving the
rules determining the procedure for authorizing foreigners to enter, reside, and work in Spain where
their work is for employment-related, economic or social reasons, or reasons related to research and
development, or teaching, projects which require a high level of qualification, or for artistic
performances of special cultural interest.
Specific, more flexible mechanisms have been established for the processing of work and residence
permits (for both ordinary and cross-border employees) for qualified workers and for any family
members who simultaneously process their permits.
In order to access this new Unit, enterprises must meet some requirements regarding number of
employees and volume of investment in Spain.
10.2 Nationals from EU Member States
Nationals from other Member States of the European Union, the European Economic Area and
Switzerland do not need to obtain a work authorization as an employee or as a self-employed
worker, because EU legislation on the free movement of workers applies fully. They are therefore
entitled to perform any activity both as employees and as self-employed workers, in the same terms
as Spanish citizens.
AUTHORIZATION TYPE SCENARIO DURATION
Special regime forresearchers
It will be granted for foreigner researchers whose stay is exclusively
for research projects purposes, in the frame of reception agreement
signed with a research organism.
One year duration, renewable
annually whenever the holder still
meats the requirements established
for the initial authorization.
Residence andwork of highlyqualifiedprofessionals
It is granted to whom certifies higher education qualifications, or
exceptionally, have a minimum of five year professional experience
that could be considered comparable.
Holder of EU blue card that has resided at least eighteen months in
another EU country will be entitled to apply for this card.
Pending implementation.
Table 5 (Cont.)
TYPES OF WORK AUTHORIZATION
Since Royal Decree 240/2007, of February 16, 2007 came into force, citizens of the European Union
that intend to remain in Spain for more than three months must apply in person for registration on
the Central Register of Foreigners within three months of their arrival in Spain. Accordingly, EU
citizens must not apply for a resident alien identification card.
However, family members of EU citizens that are not themselves EU citizens must apply for the
resident alien identification card.
Lastly, pursuant to Royal Decree 1161/2009, July 10, those foreigner relative of European citizens
whose visa is required for the entrance will not be required to apply for such visa whenever they have
European residence card valid issued by another Country part of the EEE Agreement or Switzerland.
Guide to business in SpainLabor and Social Security regulations27
11. SOCIAL SECURITY SYSTEM8
As a general rule, all employers, their employees, self-employed workers, members of manufacturing
cooperatives, domestic personnel, military personnel, civil servants who reside and/or perform their
duties in Spain are required to be registered with, and pay contributions to, the Spanish Social
Security System. Even unemployed persons (subject to certain conditions) must pay contributions to
the Social Security System.
There are certain Bilateral Agreements on Social Security between Spain and other countries, which
regulate the effects on Spanish public benefits of periods of contribution to the Social Security Systems
of other States. The Agreements also determine the State in which Social Security contributions are to
be paid in cases of relocations and temporary or permanent assignments abroad.
11. Social security system
Guide to business in SpainLabor and Social Security regulations28
8 www.seg-social.eswww.mtin.es
Table 6
BILATERAL AGREEMENTS ON SOCIAL SECURITY
BILATERAL AGREEMENTS WITH SPAIN PERSONAL APPLICATION
Andorra Whichever nationalityArgentina Whichever nationalityAustralia Whichever nationalityBrazil Whichever nationalityCanada Whichever nationalityChile Spaniards and ChileanColombia Spaniards and ColombiansDominican Rep. Spaniards and DominicansEcuador Spaniards and EcuadoriansMorocco Spaniards and MoroccansMexico Spaniards and MexicansParaguay Whichever nationalityPeru Whichever nationalityPhilippines Spaniards and FilipinosRussia Spaniards and RussiansTunisia Spaniards and TunisiansUkraine Spaniards UkrainiansUruguay Whichever nationalityUSA Whichever nationalityVenezuela Spaniards and Venezuelans
Additionally, a Bilateral Agreement with Japan has also been approved, but it is not yet in force.
Since January 1, 1986, the date of Spain’s accession to the EU, EU Social Security legislation applies to
Spain. Two EU Regulations (Regulation Nos. 1408/71 and 574/72, as amended by Regulation No.
1249/92) ensure that the workers to whom they are applicable are not adversely affected from a
Guide to business in SpainLabor and Social Security regulations29
Social Security standpoint by moving from one Member State to another (Switzerland is included for
these purposes). October 30, 2009, EU Regulation 987/2009, of the Parliament and Council of
September 16, has been published in the Official European Union Journal, according to which
implements application rules of EU Regulation 883/2004, on the coordination of social security
systems. Therefore, both Regulations will apply from May 1, 2010, substituting previous Regulations
1408/1971 and 574/1972.
The following basic rules apply in such cases:
�• Workers are subject only to the Social Security legislation of one Member State. As a general rule,
the applicable Social Security legislation will be that of the country in which the worker carries on
his activity. There are some exceptions to this general rule.
�• If a worker of one EU Member State is temporarily relocated to another Member State to work for
his company in that other Member State, the worker will remain subject to the Social Security
legislation of the first Member State, provided that the foreseeable duration of the work to be
done does not exceed 12 months and he or she is not sent to replace another employee who has
completed the period of time for which he or she was relocated (new regulations envisage an
initial period of 24 months). This 12-month period can be extended for an additional period of the
same duration. After that it may be extended again if the competent authorities of both States so
agree.
�• If certain requirements are met, the time during which a worker of one Member State contributes
to the Social Security System of another Member State will count as a period of contribution to his
or her own country’s Social Security System for the purpose of determining if the grace periods
required for his or her future benefits under his or her own national Social Security System are
met.
There are different contribution programs under the Spanish Social Security System:
a) General Social Security program.
b) There are other situations within the general Social Security program qualifying for special
treatment, namely:
— Artists.
— Railroad workers.
— Sales representatives.
— Bullfighting professionals.
— Professional soccer players.
Guide to business in SpainLabor and Social Security regulations30
c) Special social security programs for:
�• Agricultural workers (self-employed agricultural workers are included under the regime for self-
employed workers following the entry in force of Law 18/2007 of July 4, 2007).
— Seamen.
— Self-employed workers.
— Civil servants and military personnel.
— Domestic personnel.
— Coal miners.
— Students.
Classification under these programs depends on the nature, conditions and characteristics of the
activities carried on in Spain.
Unless one of the special programs applies, the general Social Security program. Under this program,
Social Security contributions are paid partly by the employer and partly by the employee. Personnel
are classified under a number of professional and job categories for the purpose of determining their
Social Security contribution. Each category has maximum and minimum contribution bases, which
are generally reviewed from year to year. Employees whose total compensation exceeds the
maximum base, or does not reach the minimum base, must bring their contributions into line with
the contribution base for their respective category.
For 2010, the maximum contribution base is €3,198 per month for all professional categories and
groups. The minimum bases have been increased according to the professional categories and
contribution groups, from January 1, 2010 vis-à-vis those in 2009, by the same percentage as the
increase in the official minimum wage.
Therefore the situation for the general Social Security program in 2010 is as follows9:
Table 7
CONTRIBUTION PROGRAMS
CategoryMinimum Base
(Euros/month)
Maximum Base
(Euros/month)
Engineers and graduates 1,031.70 3,198Technical engineers and assistants 855.90 3,198Clerical and workshop supervisors 744.60 3,198Unqualified assistants 738.90 3,198Clerical officers 738.90 3,198Messengers 738.90 3,198Clerical assistants 738.90 3,198
9 According to Orden TIN/25/2010, January 12, that approves rulings forthe contributions to Social Security for 2010.
Guide to business in SpainLabor and Social Security regulations31
The contribution rates applicable to employers and employees in the General Social Security Program
in 2010 would be as follows:
Table 7 (Cont.)
CONTRIBUTION PROGRAMS
Foremen classes 1 and 2 24.63 106.60 Foremen class 3 and craftsmen 24.63 106.60Laborers 24.63 106.60Workers under 18 years of age 24.63 106.60
CategoryMinimum Base
(Euros/month)
Maximum Base
(Euros/month)
Table 8
CONTRIBUTION RATES EMPLOYERS/EMPLOYEES
Employer (%) Employee (%) Total (%)
General contingencies 23.6 4.7 28.3Unemployment• General rule (10) 5.50 1.55 7.05• Full-time fixed-term contracts 6.7 1.6 8.3• Part-time fixed-term contracts 7.7 1.6 9.3Professional training 0.6 0.1 0.7Wage Guarantee Fund 0.2 – 0.2Total general rule 29.9 6.35 36.25Total full-time fixed-term contracts 31.1 6.4 37.5Total part-time fixed-term contracts 32.1 6.4 38.5
The total employer contribution rate is increased by higher percentages for the occupational accident
and occupational disease contingencies provided for in the 2007 State Budget Law and modified by
Final Provision Eight of the 2010 General State Budget Law, which will depend, as a general rule, on
the activity of the company, although a common percentage will be applied across the board in the
case of some occupations (e.g. office work) or situations (e.g. temporary disability).
With respect to self-employed workers, the maximum contribution base for 2010 in the Special Social
Security program for self-employed workers is, like that of the General program, €3,198 per month.
The minimum contribution base for 2010 is €841.80 per month.
10 It includes: indefinite-term contracts (including part-time indefinite-term contracts and indefinite-term contracts for seasonal work), andfixed-term contracts (in the form of training contracts, hand-over andsubstitute contracts, except for contracts under which reductions arereceived pursuant to Royal Decree-Law 11/1998), and any type of contractmade with disabled workers who have been recognized as having adegree of disability of not less than 33% percent of their physical ormental capacity
Guide to business in SpainLabor and Social Security regulations32
For their part, executive directors who receive compensation and who do not have actual control of
the company should be included under the General Social Security program for employees as workers
“treated as” employees (i.e., without entitlement to unemployment benefit or the Wage Guarantee
Fund).
Lastly, it is worth mentioning the most recent reform of the social security system pursuant to Law
40/2007, of December 4, 2007. This new Law provides adequate regulatory support to part of the
commitments included in the Agreement on Social Security Measures, executed on July 13, 2006 by
the Spanish government, UGT, CCOO, CEOE and the CEPYME, which fundamentally affect benefits for
temporary disability, permanent disability, retirement and survivorship. Furthermore, it is also worth
mentioning the recent publication of Royal Decree 295/2009, March 6, on social security regulations
of maternity, paternity, risk during pregnancy and breast feeding benefits.
Guide to business in SpainLabor and Social Security regulations33
12. PREVENTION OF OCCUPATIONAL RISKS11
Under Law 31/1995, amended by Law 54/2003, on the Prevention of Occupational Risks and its
implementing legislation, employers must ensure the health and safety of their employees, which
does not only mean complying with the legislation and remedying situations of risk, but also
planning preventive action from the outset of their business activities and planning ongoing action to
perfect the existing protection levels. This includes the obligation to perform risk assessments, adopt
measures in emergency cases, provide protective equipment and to ensure the health of employees,
which includes ensuring that pregnant or breastfeeding women do not perform tasks which may put
them or their unborn children/babies at risk.
All employers must have a prevention service to provide advice and assistance in prevention tasks, for
which the employer should nominate one or more workers. In companies with fewer than six
workers, this service may be provided directly by the employer, provided that it customarily conducts
its business at the workplace and has the necessary capacity to do so. It is also possible for a
prevention service to be organized externally or outsourced. Prevention services are fully governed by
Royal Decree 392/1997, amended by Royal Decree 604/2006, of May 19, 2006, which implements
Law 31/1995.
The Prevention Delegates, as employee representatives with specific risk prevention duties, supervise,
monitor and advise on any measure in this area.
Furthermore, at companies with more than 50 employees, a Health and Safety Committee must be
established and employers must consult this Committee regularly on employee health and safety
procedures.
A failure to comply with these obligations may give rise to liability at administrative, labor, criminal
and civil law. The Ministry of Labor and Social Affairs may impose substantial fines in the case of very
serious infringements.
Apart from Law 54/2003, which amends Law 31/1995 and the Labor Infringements and Penalties
Law and reforms the legislative framework for the prevention of occupational risks, bringing Spanish
law into line with EU regulations on health and safety at work, the entry into force of Royal Decree
171/2004 in April 2004 should also be highlighted. The Royal Decree implements Article 24 of Law
31/1995 on the Prevention of Occupational Risks with regard to the coordination of business
activities and also Royal Decree 2177/2004, which amends Royal Decree 1215/1997 establishing the
minimum health and safety requirements for the use of work equipment by workers in temporary
work at a height.
Increasingly stringent regulations on the prevention of occupational risks are being implemented in
Spain and the EU to afford greater protection to workers.
12. Prevention of occupational risks
11 www.mtin.es
[email protected] Estatal para la Promoción y Atracción de las
Inversiones Exteriores, S.A.U. RM: Tomo 21818, libro 0, folio
15, sección 8, hoja M-388683,
Inscripción 1. NIF: A-84479013. Depósito legal: M-3674-2007.
Published 2010
This guide was researched and written by Garrigues on behalf
of INVEST IN SPAIN.
This guide is correct to the best of our knowledge and belief at
the date indicated below. It is, however, written as a general
guide so it is necesary that specific professional advice be
sought before any action is taken.
Madrid, January 2010
Prepared by:
6Spanish Intellectual Property legislation isconsistent with the Intellectual Property laws ofother EU Member States. Spain has ratified themost relevant international treaties in thissubject, which entails non-Spanish nationalsmay obtain protection of their IP rights in Spain,and that Spanish nationals may obtain suchprotection in virtually every other country in theworld.
This chapter describes the different ways ofprotecting trade marks, patents, utility models,plant varieties, industrial designs, topographiesof semiconductor products and computersoftware in Spain, also focusing on the legalremedies available against Intellectual Propertyinfringements.
Guide to business in Spain
Intellectualproperty law
Guide to business in SpainIntellectual property law2
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Guide to business in Spain
Intellectualproperty law
1. Introduction
2. Trade marks
3. Protection of inventions in Spain
4. Plant varieties
5. Industrial designs
6. Topographies of semiconductor products
7. Copyright
8. Unfair competition
9. Action against infringement of
intellectual property rights
Galicia
Asturias Cantabria PaísVasco
La Rioja
Navarra
Castilla y León
Extremadura
Andalucía
Castilla - La Mancha
Comunidad de Madrid
Aragón
Cataluña
Murcia
ComunidadValenciana
Canarias
Baleares
FRANCE
PORTUGAL
MORROCO
La Coruña
Santiago de Compostela Lugo
Orense
OviedoSantander
León
Palencia
Valladolid
Segovia
Ávila
Soria
Logroño
Vitoria
Pamplona
Huesca
Zaragoza
Lérida
Tarragona
Castellón de la Plana
Valencia
Alicante
Murcia
Albacete
Cuenca
Madrid
Toledo
Cáceres
Mérida
Córdoba
Sevilla
Huelva
Cádiz
Ceuta
Málaga
Granada
Jaén
Almería
Melilla
BadajozCiudad Real
Guadalajara
Palma De Mallorca
Barcelona
Gerona
Teruel
BilbaoSan Sebastián
Salamanca
Burgos
Zamora
Pontevedra
Las Palmas de Gran Canaria
Santa Cruz de Tenerife
Guide to business in SpainIntellectual property law3
1. Introduction
1. INTRODUCTION
Intellectual property is one of a company’s main assets. It is therefore vital to ensure that it is
properly protected before investing in a new market.
In Spain, with rare exceptions, the registration principle prevails, which means that there can be no
right to an invention or trade mark unless it has been previously registered. Spain, unlike the United
States for example, follows the “first-to-file” system. The first person to apply for registration will have
priority rights therefore use will give no rights against third parties except in the case of well-known
marks.
The principle of territoriality also prevails in the registration system, which entails protection is only
available in countries where the trade mark or patent is registered. In other countries, the mark or
patent could in principle, be freely used by third parties. Because the registration of a trade mark or a
patent in its country of origin does not confer automatic protection in other countries, protection
must consequently be sought by registration in each relevant country.
Intellectual property rights are assets, and, like tangible goods, may be assigned, encumbered or
transferred by any means provided by law.
Third parties may obtain licenses to use registered rights in exchange for payment.
Spain has ratified the main International Conventions in this area, which with rare exceptions, allow
non-Spanish nationals to protect their rights in Spain.
Guide to business in SpainIntellectual property law4
Spain’s membership of the European Union has also forced Spanish legislation to implement the
guidelines laid down by the Community Directives on Intellectual Property, and Spain is therefore in
line with Europe.
A list of the main conventions is provided in the Exhibit at the end of this Chapter.
The main Intellectual Property Conventions ratified by Spain include the following:
�• Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).
�• Paris Convention.
�• Patent Cooperation Treaty (PCT).
�• European Patent Convention.
�• Madrid Agreement.
�• Madrid Protocol.
2. TRADE MARKS
A trade mark is any sign the main function of which is to distinguish the goods and services of one
undertaking from those of other undertakings. It also plays an important role in advertising and
goodwill consolidation.
Rules on distinctive signs and on trade marks in particular, are effective and necessary instruments in
the fields of business policy and consumer protection.
When introducing a good or service on the Spanish market, steps must be taken to ensure that the
trade mark:
1. May be freely used.
2. May be registered.
3. Has no negative connotations, i.e. it is commercially suitable.
Before marketing goods or services, a search should be conducted to determine whether an identical
or similar mark has been registered previously for identical or similar goods or services, thereby
possibly preventing the sign from being used in the relevant territory.
After confirming that no prior third-party rights are being infringed, one of the various procedures for
obtaining registration should be chosen in order to secure exclusive rights and prevent the mark from
being used by other companies. Obtaining registration also involves assessing that the mark is not
generic, deceptive, descriptive or contrary to public policy or accepted principles of morality.
Since April 1996, the procedures through which a registration having effect in Spain can be obtained
are as follows:
�• National system.
�• International system: Madrid Agreement – Madrid Protocol.
�• Community Trade Mark.
2.1 National trade marks
National trade marks are registered by the Spanish Patent and Trade Mark Office. These marks may
consist of a large number of signs capable of being represented graphically, using words, names or
surnames, signatures, numbers and number combinations, slogans, drawings, sounds, colours and
three-dimensional shapes, including their packaging.
Since the Trade Marks Law (Law 17/2001, of December 17) came into force, on July 31, 2002, the
Spanish Office only conducts an ex officio examination as regards absolute grounds for refusal
(mainly, that the mark is not generic, misleading, descriptive or contrary to public policy). The
Spanish Office no longer examines relative grounds for refusal (the existence of identical or similar
2. Trade marks
Guide to business in SpainIntellectual property law5
earlier marks registered for identical or similar products, likely to be confused with the new trade
mark) unless an opposition is filed by the owners of earlier signs with effects in Spain.
The Spanish Patent and Trade Mark Office will not refuse trade marks ex officio based on relative
grounds but shall perform a computer search to notify the holders of previous identical or similar
signs, for informative purposes only, of the application, in case they are interested in filing notice of
opposition.
In the last seven years significant progress in the implementation of criteria consistent with the
predominant systems in other European countries, (e.g. a higher level of protection conferred to well-
known trade marks) has been made, also recently allowing on-line trade mark filing, as
contemplated in the eighth Additional Disposition of the Trade Marks Law.
In addition, we refer to Spain’s ratification of the Singapore Treaty on the Law of Trademarks,
essentially aimed at creating a modern international framework for the harmonisation of
administrative trademark registration procedures. Considering the Singapore Treaty explicitly
recognises that non-traditional or non-conventional marks (such as holograms, smell, taste or tactile
marks) benefit from protection, we may anticipate significant changes both from a legal and
practical standpoint in the protection of non-traditional marks in Spain.
Trade mark registration is valid for ten years and can be renewed indefinitely for further ten-year
periods; however the registration may lapse or be revoked if the trade mark is not renewed, if it is not
effectively used during an uninterrupted five-year period, or if it becomes generic or deceptive in
connection with the goods and/or services it covers.
2.2 International system
The “International System” comprises the Madrid Agreement of 1891 and the Protocol to the Madrid
Agreement of 1989 administered by the World Intellectual Property Organization (WIPO) with
headquarters in Geneva.
It is important to point out that although known as the “International System”, it is not strictly
speaking an international registration but rather a system in which various national registrations
may be obtained through a unified administrative procedure.
The applicant must designate the countries where he wishes to obtain protection. WIPO then
proceeds to notify the national Offices of the designated countries and if no oppositions are filed
pursuant to the national laws of each of the countries concerned within one year (pursuant to the
Agreement) or 18 months (pursuant to the Protocol), the trade mark will be registered.
This however is not an open system because it can only be used by natural or legal persons who are
domiciled or who have a real and effective establishment in a country signatory to one or both of the
above conventions and may, on the basis of a registration or application at the Trade Marks Office of
such State, obtain an international registration effective in all or some of the countries of the Madrid
Union.
Guide to business in SpainIntellectual property law6
The possibility of filing international trade mark applications in the Spanish language as of April 1,
2004 heralds a significant breakthrough for international trade mark protection.
The adoption of Spanish as the third working language of the Madrid Protocol (together with English
and French), will surely promote commercial relations due to the internationalisation of Spanish
companies abroad and to the attraction of international entrepreneurial activities to Spanish
markets.
Said initiative will also be an added incentive for Spanish-speaking countries to join the Madrid
System for the international registration of trade marks, offering their nationals the possibility of
filing applications in their native tongue and an affordable and efficient way of obtaining and
maintaining their trade marks.
The most relevant additions to the Madrid System in the last years are the United States of America,
where the Protocol became effective on November 2, 2003, and the European Union, which ratified
the Madrid Protocol on October 1, 2004.
The European Union’s accession to the Madrid Protocol is the first time the EU as a regional body,
adheres to a WIPO treaty. The extraordinary importance of said accession lies in the encouragement
and development of economic activities and competition, and the improvement of the degree of
integration and operation of the internal market.
2.3 Community Trade Marks
The main feature of the Community trade mark (CTM) is its unitary character. A single procedure and
a single registration provide the owner of a trade mark with registered protection in the whole
European Union, which since January 1, 2007 has included two new Member States: Bulgaria and
Romania, making a total of 27 Member States. The Community trade mark covers a market of circa
500 million consumers with a single registration.
It is important to point out that the Community trade mark does not replace trade mark rights in
each Member State. The national, international and Community trade mark systems coexist and in
some cases complement each other.
The Community trade mark system provides a single registration which confers direct protection in all
the Member countries of the European Union through a single application and a unitary procedure.
Thus, rather than filing applications in each of the Member States where the relevant goods or
services are to be offered, any undertaking may obtain exclusive rights over its trade mark
throughout the European Union with a single Community trade mark registration.
This system is open to virtually all companies the world over, since any company domiciled or with an
establishment in the European Union or in a country which is a party to the Paris Convention, or
domiciled in a member state of the World Trade Organization, can obtain a CTM registration.
Guide to business in SpainIntellectual property law7
The Community trade mark is administered by the Office for Harmonization of the Internal Market
(OHIM) which is based in Alicante, Spain.
The application may be submitted in any of the 20 official languages of the European Union,
although the applicant is required to designate a second language (English, French, Spanish, Italian
or German) which may be used as the language of opposition, revocation or invalidity proceedings.
The OHIM only examines marks on absolute grounds (i.e. it will assess whether the mark is not
descriptive, generic, deceptive or contrary to public policy or accepted principles of morality in any of
the European Union countries). It does not examine applications on relative grounds (i.e. it will not
refuse registration ex-officio on account of the existence of any earlier trade mark applications or
registrations in the European Union). It is up to the owners of these registrations to file an opposition
which will be decided upon by the OHIM. Considering there are over 5 million trade marks in the
European Union, finding one which can be freely used and registered as a Community trade mark is
not always an easy task.
The main legal consequence of the Community Trade Mark system enlargement due to the
adherence of the aforementioned new Member States is the automatic extension of all Community
Trade Marks filed before the date of said adherence, (whether they have already been registered or
not) to the territories of the new Member States, without any administrative intervention nor the
payment of additional fees.
Extended CTMs may not be challenged based on absolute grounds for refusal (e.g. because the CTM
is descriptive in Bulgarian), however, the owners of earlier national rights in the new Member States
may prevent the use of the extended CTMs in the territory covered by the right, provided that such
rights were acquired in good faith before the date of accession and provided further that it is possible
pursuant to the applicable national legislation.
As mentioned in the previous section, the adherence of the European Union to the Madrid Protocol
connects the registration procedure of a CTM to the International trade mark registration System,
enabling any citizen based in an EU State to protect its trade marks as a Community trade mark and
also as an international registration in the Member States of the Madrid Protocol.
Another important advantage of the Community trade mark is that no evidence of use is required to
obtain registration, and use of a mark in any Member State is sufficient to maintain its validity. Once
registered, a Community trade mark is valid for 10 years. This period can be renewed for further 10-
year terms subject to payment of the appropriate fees.
Moreover, the dramatic reduction in May 2009 of the official fees relating to the registration of
Community trade marks constitutes a great incentive to choosing this registration system.
The Community trade mark confers its proprietor the right to prevent unauthorised third parties
throughout the entire European Union from using signs that because of their identity with or
similarity to the mark and the identity or similarity of the goods or services they cover could generate
a likelihood of confusion. It is relevant to mention regarding infringement actions that measures
Guide to business in SpainIntellectual property law8
Guide to business in SpainIntellectual property law9
against the violation of trade mark rights may be enforced in any Member State of the European
Union. Community trade mark infringement actions are brought before Community trade mark
courts, which are national courts designated by each of the Member States.
In this regard, we must mention Law 8/2003, of July 9, the Bankruptcy Reform Law (which modifies
Law 6/1985 on the Judiciary), which designates the Mercantile Courts and the Alicante Provincial
Court as first and second instance Community Trade Mark courts in Spain, respectively, making their
jurisdiction extensive to these effects to the entire national territory.
Guide to business in SpainIntellectual property law10
3. PROTECTION OF INVENTIONS IN SPAIN
Inventions are fully protected under Spanish law through patents, utility models, and designs, which
guarantee the exclusive exploitation by their proprietors or by authorised third parties.
3.1 Patents
Patents seek to boost investments in R+D and to develop a country’s technology. The State grants
exclusive rights to the invention for a specific term (generally 20 years) on the understanding that
once this period has expired, the invention will become public domain to the benefit of society.
The patent owner may exploit the invention and prevent third parties from exploiting it, marketing it
or putting it into the course of trade without consent. During the duration of the patent, third parties
may only exploit the invention where the necessary license has been granted.
In order for an invention to be patentable, it must be new, involve inventive step and be capable of
industrial application. Consequently, the three main requirements to obtain a patent are as follows:
a. Novelty.
b. Inventive step.
c. Industrial application.
Scientific discoveries or theories, mathematical methods, literary, scientific, artistic works and any
other aesthetic creations, ways of performing a mental act, playing a game or doing business are not
considered patentable. It is not possible to obtain a patent for an invention if it is a new animal or
plant variety, a method of medical treatment or diagnosis.
The amendment of the Patents Law implementing the European Directive for the legal protection of
bio-technological inventions constitutes a significant step in this field. It should be noted that
although it is expressly admitted that inventions of this kind are patentable, clear restrictions are
established, particularly emphasizing the defence of ethics and public policy by excluding patents the
exploitation of which might be contrary to these principles.
In Spain both inventions and procedures may be patentable. Pharmaceutical products have been
patentable since 1992.
In connection with patents relating to medicinal products, we must refer to the inclusion of the
“Bolar clause” or “Bolar exemption” in the Spanish Patent Law.
According to this exemption, which is in accordance with the contents of Spanish Law 29/2006 on
the Safety and Rational Use of Drugs and Sanitary Products, performing the necessary studies, tests
and trials on a patented product before the patent has expired, will not amount to patent
infringement where said tests and trials are conducted in order to obtain regulatory approval of
generic drugs.
3. Protection of inventions in Spain
Patents are granted for a period of 20 years from the date on which the application is filed. A
maintenance fee, which is subject to a gradual annual increase, is due yearly. Once the 20-year
period has lapsed, anyone may make, use, offer for sale, or sell or import the invention without
permission of the patentee, provided that matter covered by other unexpired patents is not used. The
Complementary Protection Certificate for pharmaceutical and phytosanitary products, which has
been in force since 1998, extends the patent by up to a maximum of 5 years for the time it took to
obtain the relevant administrative authorization required to market the products.
In addition to the national patent application system, regional registration systems are also
available. Such systems allow the applicant to obtain protection for the invention in one or more
countries; however each country determines whether or not to protect the patent in its territory
pursuant to the applicable legislation.
Since Spain’s ratification of the Munich European Patent Convention (EPC) in 1973, Spain may be
designated in a European patent application. European patents are administered by the European
Patent Office, based in Munich. The EPC system allows the registration of a bundle of national
patents enforceable in the countries designated by the applicant.
3.2 PCT - Patent Cooperation Treaty
Spain has also ratified the PCT, which simplifies and reduces the cost of obtaining international
patent protection through a unified procedure for its application and obtaining search reports, which
are necessary to determine the novelty of the invention and the inventive step. By filing one
international patent application under the PCT you can simultaneously seek protection for an
invention in over one hundred countries throughout the world. However as opposed to the European
patent, registration is granted by each of the relevant national Offices.
3.3 Utility models
This form of protection is intended for new inventions involving an inventive step whereby an object is
given a configuration, structure, or constitution that results in an advantage, appreciable in practice,
for its use or manufacture.
A lesser degree of invention is required for utility models than for patents and, unlike patents, utility
models require only national and not absolute novelty. They are granted for a non-extendable period
of 10 years.
This system of protection is particularly suitable for protecting tools, objects and devices of practical
use.
Guide to business in SpainIntellectual property law11
4. Plant varieties
4. PLANT VARIETIES
Plant varieties constitute a category of intellectual property the legal status of which relates in many
ways to that of patents. A plant variety may be considered distinct if it is clearly distinguishable from
any other variety whose existence is a matter of common knowledge on the date of application;
uniform if it is sufficiently uniform in the expression of its characteristics; and stable if it remains
unchanged after repeated propagation.
At present, the protection of plant varieties is regulated in Spain by Law 3/2000, of January 7, on the
Legal System of Plant Variety Protection, and in the EU by (EC) Council Regulation No. 2100/94, of
July 27, on Community Plant Variety Rights.
The aforementioned Law 3/2000 has been modified by Law 3/2002, of March 12, in order to
recognise Spanish Autonomous Communities as competent authorities in registration-related
procedures of plant variety rights.
As of October 1, 2004, the Spanish Criminal Code expressly includes the counterfeiting of plant
varieties, the unauthorised reproduction or multiplication thereof, and the unauthorised use of the
name of said varieties as criminal offences, which are penalised with fines, special disqualification
and even prison.
Guide to business in SpainIntellectual property law12
Guide to business in SpainIntellectual property law13
5. INDUSTRIAL DESIGNS
Unlike patents and utility models, designs protect the aesthetic appearance of goods rather than
their functional novelty.
Industrial designs are objects that may serve as prototypes for the manufacture of a product and that
can be described in terms of their structure, configuration, ornamentation or representation.
At present there are three procedures through which designs may be protected:
�• National system.
�• Community Designs.
�• International system.
5.1 National System
The 20/2003 Industrial Design Law is the result of the efforts to modernise intellectual property
legislation, particularly with regard to industrial models, which, until recently was regulated by a law
dating from 1929.
Amongst the most relevant features of said Law is the so-called twelve-month “grace period” which
allows the holder or authorised third party to disclose the design without destroying its novelty. This
allows a proprietor the opportunity to determine whether seeking protection for a design is likely to
be worth the time and costs the registration before the Spanish Patent and Trademark Office entails.
Registration is granted for a period of five years from the date on which the application was filed,
renewable for further five-year periods up to a maximum of 25 years.
It is also important to emphasize that the owner of a design shall have the right to use the design
and to obtain relief should any third party use it without consent after its registration is published.
In short, the current Industrial Design Law endeavours to put an end to deliberate copying,
counterfeiting and piracy, and to foster creativity and innovation.
5.2 Community System
Community designs are protected in the European Union by Council Regulation 6/2002, which
creates a uniform and unified legal framework within the EU in areas as significant as the
automobile, textile, and shoe industries.
The essential feature of the Community design system is the recognition of both registered and
unregistered designs, provided these meet the requirements of novelty and individual character.
A Registered Community Design (RCD) is filed before the OHIM and confers its owner the exclusive
right to use and prevent the use by unauthorised third parties of said design. Designs are protected
5. Industrial designs
Guide to business in SpainIntellectual property law14
for a period of five years that can be renewed for further five-year periods up to a maximum of 25
years.
The Unregistered Community Design (UCD) protects a design for a period of three years form the
date on which the design was first made available to the public within the Community and gives the
right to prevent the commercial use of the design only if the use results from copying.
The UCD is particularly advantageous for those commercial sectors, such as the fashion industry,
which produce short-lived designs. Since the duration of registration is of lesser importance, a three-
year protection period is reasonable.
The current design legislation encourages innovation and development of new products, providing
mainly individual and medium-sized designers with a simple, cost-efficient, unitary system with effect
in all 27 EU-Member States similar to that of Community trade marks.
5.3 International System. The Hague Agreement
The Hague Agreement Concerning the International Deposit of Industrial Designs (a WIPO-
administered treaty) gives the owner of an industrial design the possibility to protect his design in
several countries by simply filing one application.
A national of any contracting party may protect its designs in any of the Member States, filing a
single international application with WIPO. Such application, however, shall be subject to the
applicable national legislation of each of the designated Member States.
In this regard, we must highlight the European Union's membership of the Geneva Act of the Hague
Agreement for the international registration of industrial designs, which became operational on 1
January 2008. By joining the Community design and the Hague System, the applicants of an
international design may designate the 27 Member States of the EU with a single application and
also base the application for an international design on a Community design. Such process is aimed
at simplifying registration procedures, reduce the costs deriving from the international protection of
designs and simplify the management of such rights.
Lastly, we should refer to the recent inclusion of Spanish as a working language in The Hague
System. The addition of Spanish to the current language regime, effective April 1st 2010, will entail a
significant advantage for Spanish companies seeking the protection of their designs abroad, further
acting as an incentive to attract more Spanish-speaking Member States.
6. Topographies of semiconductor products
6. TOPOGRAPHIES OF SEMICONDUCTOR PRODUCTS
Spanish legislation grants a period of protection of 10 years for topographies of semiconductor
products, which are integrated semi-conductor circuits known as “chips”. The subject-matter of
protection is not the integrated circuit itself but the way in which it is physically mounted and the
physical arrangement of all its elements.
For a semiconductor product to qualify for protection, the topography must be the result of the
creator’s own intellectual efforts and must not be commonplace among manufacturers of
semiconductor pro- ducts. The law requires originality and creativity.
The governing provisions are to be found in Law 11/1988, the result of the transposition to Spanish
law of Community Directive 87/54/EEC of December 16, 1986.
Guide to business in SpainIntellectual property law15
7. COPYRIGHT
In Spain, copyright is governed by Legislative Royal Decree 1/1996 of April 12, 1996. In addition, as far
as copyright issues are concerned, it should be borne in mind that Spain is party to the Bern
Convention for the Protection of Literary and Artistic Works.
All literary, artistic or scientific works which are original are protected by copyright, in particular,
books, music compositions, audiovisual works, projects, plans, graphics, computer programs and
databases.
In Spain, copyright protection is automatic, since it exists from the very moment the work is created.
However, works that qualify for copyright protection may be registered on the Copyright Register, in
order to serve as stronger evidence.
Copyright protection is granted for 70 years from the death of the author, where the author is a
natural person. In those cases in which the author is a legal person, the term of protection is 70 years
from January 1 of the year following that in which the work was lawfully published, or following the
year of its creation, if the work was not published.
Copyright generates various economic and “moral” rights. Moral rights cannot be waived or
assigned and they entitle the author to decide, inter alia, whether his work is to be published and to
demand the acknowledgement as author of the work. Economic or exploitation rights can traded
and transferred to third parties.
In Spain, the author of the work is assumed to be the owner of the rights unless the work was
created within a labour relationship, it is a collective work or the rights are assigned to a third party.
As mentioned, computer programs and their accompanying documentation are protected by
copyright and, with certain exceptions, are treated in the same way as literary works.
Apart from copyright, the Spanish Copyright Law also grants neighboring rights to performers,
phonogram producers, producers of audiovisual recordings and broadcasting organizations.
7. Copyright
Guide to business in SpainIntellectual property law16
8. UNFAIR COMPETITION
Intellectual property rights are also protected by unfair competition legislation. Spain introduced
unfair competition legislation in 1991, which is proving to be highly effective in practice.
The concept of unfair competition is very wide since any conduct objectively contrary to good faith is
deemed to be unfair. Amongst others, the following are deemed to be unfair: acts of confusion or
deception, acts of denigration, comparison, imitation, exploitation of a third party’s reputation,
breach of confidentiality, incitement to breach of contract, infringement of laws relating to
discrimination and dumping.
Unfair competition rules also relate to the protection of know-how by deeming the disclosure or
exploitation, without the consent of their proprietor, of industrial or business secrets obtained
lawfully in the understanding that they would be kept confidential, unfair.
In connection with trademark infringement, we should bear in mind that if an action is fairly based
on trademark law, it should not also be actionable as unfair competition, to the extent the relief
provided by such laws overlaps. As the Spanish Supreme Court has clarified, the Unfair Competition
Law “neither substitutes nor displaces the Trademarks Law”. In other words, the unfair competition
legislation should not be invoked to resolve pure trademark-related conflicts.
8. Unfair competition
Guide to business in SpainIntellectual property law17
9. ACTION AGAINST INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS
The owner of intellectual property rights may enforce its rights in Spain bringing the appropriate civil
and criminal actions against infringers.
9.1 Civil actions
The procedure for bringing action before the Civil Courts is governed by the Civil Procedure Law,
which establishes the ordinary trial as the procedural means for the trade mark owner to defend his
rights against third parties’ infringements.
The trade mark owner whose rights has been infringed can claim:
�• An order for the cessation of the infringing acts.
�• Damages.
�• Seizure of the infringing goods.
�• To be awarded the seized objects or their means of production.
�• All necessary steps to prevent the continuation of the infringement; and/or:
�• Publication of the judgment against the infringer.
The owner of the rights may also seek injunctive relief to ensure the effectiveness of the available
actions.
9.2 Criminal action
Following the amendment of the Spanish Criminal Code, counterfeiting of plant varieties and parallel
import activities are expressly recognised as criminal offences as of October 1, 2004. Said offences
are punished with terms of imprisonment and fines ranging from twelve to twenty four months.
Said amendments of the Spanish Criminal Code establish sterner penalties where the offence is
aggravated by certain circumstances. In such cases, imprisonment ranges from one to four years,
fines from twelve to twenty-four months, and a two to five-year special disqualification from
practicing the profession related to the offence committed.
Please note the day-fine system consists of an economic penalty from a minimum of €1.20 to a
maximum of €300.51, established according to the nature of the infringement and the economic
situation of the convicted party.
We must also mention Law 28/2002, of October 24, for the partial reform of the Criminal Procedure
Law, also known as the “Fast Lawsuits Law”, and the basic Law supplementary thereto. This Law
9. Action against infringement of intellectual property rights
Guide to business in SpainIntellectual property law18
enables criminal offences against intellectual property rights to be pursued faster and more
effectively. Failure to report the infringement does not prevent the preliminary investigation for the
prevention of criminal offences involving intellectual property rights and the enforcement thereof.
Lastly, special reference is made to Law 19/2006 of June 5 for the extension of protection of
intellectual property rights and the adoption of procedural rules to ensure the enforcement of the
relevant Community Regulations.
The aforesaid Law transposes into Spanish legislation Directive 2004/48/EC of the European
Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights,
the objective of which is to ensure that intellectual property rights benefit from a high, equivalent
and homogeneous level of protection in the internal market. In order to achieve said objective, it is
relevant to mention that substantive laws, such as the Revised Intellectual Property Law, the Patent
Law, the Trade Mark Law and the Industrial Design Law, as well as procedural laws, such as the Civil
Procedure Law, were duly modified.
Among the most relevant measures established by the above-mentioned Law we may mention the
possibility of requesting information on the origin and distribution networks of the goods or services
in which the infringement is materialized, as well as access to the banking, financial and commercial
documents of the infringing party.
The forms of injunctive relief aimed at preventing infringements which appear to be imminent have
been extended and the method for calculating the damages payable for the infringement of
intellectual property rights has been accordingly modified.
In conclusion, Law 19/2006 improves the procedural mechanisms previous to bringing action for the
infringement of intellectual property rights, enabling this type of offence to be pursued faster and
more effectively, further deterring the commission of new infringements.
Guide to business in SpainIntellectual property law19
Guide to business in SpainIntellectual property law20
AppendixIntellectual property conventions
1 WTO: World Trade Organization2 TRIP’S: Trade-Related aspects of Intellectual Property Rights3 CTM: Community Trade Mark4 PCT: Patent Cooperation Treaty5 EPC: European Patent Convention6 E: States recognizing European Patents7 O: Observer Governments. With the exception of the Holy See, observers should commence negotiations for adhesion in the term of 5 years
after becoming observers.8 Albania has been invited to accede to the EPC.
Appendix
INTELLECTUAL PROPERTY CONVENTIONS
COUNTRY
IP Trade Marks Patents Designs Copyright
Paris WTO1 Madrid Madrid Hague Berne
Convention (Trip’s)2 Agreement Protocol CTM3 PCT4 EPC5
Agreement Convention
Afghanistan o
African Intellectual Property xOrganisation (OAPI)
Albania x x x x x E8 x x
Algeria x o x x x
Andorra x o x
Angola x x x
Antigua and Barbuda x x x x x
Argentina x x x
Armenia x x x x x x x
Australia x x x x x
Austria x x x x x x x x
Azerbaijan x o x x x x
Bahamas x o x
Bahrain x x x x x
Bangladesh x x x
Barbados x x x x
Belarus x o x x x x
Belgium x x x x x x x x x
Belize x x x x x
Benin x x x x x
Bhutan x o x x x
Bolivia x x x
Bosnia and Herzegovina x o x x x E x x
Botswana x x x x x x
Brazil x x x x
Brunei x x
Guide to business in SpainIntellectual property law21
Appendix (Cont.)
INTELLECTUAL PROPERTY CONVENTIONS
COUNTRY
IP Trade Marks Patents Designs Copyright
Paris WTO1 Madrid Madrid Hague Berne
Convention (Trip’s)2 Agreement Protocol CTM3 PCT4 EPC5
Agreement Convention
Bulgaria x x x x x x x x x
Burkina Faso x x x x
Burundi x x
Cambodia x x
Cameroon x x x x
Canada x x x x
Cape Verde x x
Central African Republic x x x x
Chad x x x x
Chile x x x x
China x x x x x x
Colombia x x x x
Comoros x o x x
Congo x x x x
Costa Rica x x x x
Côte d’Ivoire x x x x x
Croatia x x x x x x x x
Cuba x x x x x x
Cyprus x x x x x x x x
Czech Republic x x x x x x x x
Democratic People’s Republic of Korea x x x x x x
Democratic Republic of the Congo x x x
Denmark x x x x x x x x
Djibouti x x x
Dominica x x x x
Dominican Republic x x x x
1 WTO: World Trade Organization2 TRIP’S: Trade-Related aspects of Intellectual Property Rights3 CTM: Community Trade Mark4 PCT: Patent Cooperation Treaty5 EPC: European Patent Convention6 E: States recognizing European Patents7 O: Observer Governments. With the exception of the Holy See, observers should commence negotiations for adhesion in the term of 5 years
after becoming observers.
Guide to business in SpainIntellectual property law22
Appendix (Cont.)
INTELLECTUAL PROPERTY CONVENTIONS
COUNTRY
IP Trade Marks Patents Designs Copyright
Paris WTO1 Madrid Madrid Hague Berne
Convention (Trip’s)2 Agreement Protocol CTM3 PCT4 EPC5
Agreement Convention
Ecuador x x x x
Equatorial Guinea x o x x
Egypt x x x x x x
El Salvador x x x x
Estonia x x x x x x x x
Ethiopia o
European Communities x x x
Fiji x x
Finland x x x x x x x
France x x x x x x x x x
Gabon x x x x x
Gambia x x x x
Georgia x x x x x x
Germany x x x x x x x x x
Ghana x x x x x x
Greece x x x x x x x x
Grenada x x x x
Guatemala x x x x
Guinea x x x x
Guinea-Bissau x x x x
Guyana x x x
Haiti x x x
Honduras x x x x
Hong Kong x
Hungary x x x x x x x x x
Holy See x o x
Iceland x x x x x x x
1 WTO: World Trade Organization2 TRIP’S: Trade-Related aspects of Intellectual Property Rights3 CTM: Community Trade Mark4 PCT: Patent Cooperation Treaty5 EPC: European Patent Convention6 E: States recognizing European Patents7 O: Observer Governments. With the exception of the Holy See, observers should commence negotiations for adhesion in the term of 5 years
after becoming observers.
Guide to business in SpainIntellectual property law23
Appendix (Cont.)
INTELLECTUAL PROPERTY CONVENTIONS
COUNTRY
IP Trade Marks Patents Designs Copyright
Paris WTO1 Madrid Madrid Hague Berne
Convention (Trip’s)2 Agreement Protocol CTM3 PCT4 EPC5
Agreement Convention
India x x x x
Indonesia x x x x x
Iran, (Islamic Republic of) x o x x
Iraq x o
Ireland x x x x x x x
Israel x x x x
Italy x x x x x x x x x
Jamaica x x x
Japan x x x x x
Jordan x x x
Kazakhstan x o x x x
Kenya x x x x x x
Kuwait x
Kyrgyzstan x x x x x x x
Laos x o x
Latvia x x x x x x x x x
Lebanon x o x
Lesotho x x x x x x
Liberia x o x x x x
Libya x o x x
Liechtenstein x x x x x x x x
Lithuania x x x x x x x x
Luxembourg x x x x x x x x x
Macao x
Madagascar x x x x x
Malawi x x x x
Malaysia x x x x
1 WTO: World Trade Organization2 TRIP’S: Trade-Related aspects of Intellectual Property Rights3 CTM: Community Trade Mark4 PCT: Patent Cooperation Treaty5 EPC: European Patent Convention6 E: States recognizing European Patents7 O: Observer Governments. With the exception of the Holy See, observers should commence negotiations for adhesion in the term of 5 years
after becoming observers.
Guide to business in SpainIntellectual property law24
Appendix (Cont.)
INTELLECTUAL PROPERTY CONVENTIONS
COUNTRY
IP Trade Marks Patents Designs Copyright
Paris WTO1 Madrid Madrid Hague Berne
Convention (Trip’s)2 Agreement Protocol CTM3 PCT4 EPC5
Agreement Convention
Maldives x
Mali x x x x x
Malta x x x x x x
Mauritania x x x x
Mauritius x x x
Mexico x x x x
Micronesia x
Monaco x x x x x x x
Mongolia x x x x x x x
Montenegro x o x x x x x
Morocco x x x x x x x
Mozambique x x x x x
Myanmar x
Namibia x x x x x x x
Nepal x x x
New Zealand x x x x
Nicaragua x x x x
Niger x x x x x
Nigeria x x x x
Norway x x x x x x
Oman x x x x x x
Pakistan x x x
Panama x x x
Papua New Guinea x x x
Paraguay x x x
1 WTO: World Trade Organization2 TRIP’S: Trade-Related aspects of Intellectual Property Rights3 CTM: Community Trade Mark4 PCT: Patent Cooperation Treaty5 EPC: European Patent Convention6 E: States recognizing European Patents7 O: Observer Governments. With the exception of the Holy See, observers should commence negotiations for adhesion in the term of 5 years
after becoming observers.
Guide to business in SpainIntellectual property law25
Appendix (Cont.)
INTELLECTUAL PROPERTY CONVENTIONS
COUNTRY
IP Trade Marks Patents Designs Copyright
Paris WTO1 Madrid Madrid Hague Berne
Convention (Trip’s)2 Agreement Protocol CTM3 PCT4 EPC5
Agreement Convention
Penghu, Kinmen and Matsu (Customs Territory other than Taiwan) x
Peru x x x x
Philippines x x x x
Poland x x x x x x x x x
Portugal x x x x x x x x
Qatar x x x
Republic of Korea x x x x x
Republic of Macedonia (the former Yugoslav Republic of Macedonia) x x x x x x x x
Republic of Moldova x x x x x x x
Romania x x x x x x x x x
Russian Federation x o x x x x
Rwanda x x x
Saint Kitts and Nevis x x x x
Saint Vincent and the Grenadines x x x x
Saint Lucia x x x x
Samoa o x
San Marino x x x x x
Sao Tome and Prince x o x x x
Saudi Arabia x x x
Senegal x x x x x
Serbia x o x x x E8 x x
1 WTO: World Trade Organization2 TRIP’S: Trade-Related aspects of Intellectual Property Rights3 CTM: Community Trade Mark4 PCT: Patent Cooperation Treaty5 EPC: European Patent Convention6 E: States recognizing European Patents7 O: Observer Governments. With the exception of the Holy See, observers should commence negotiations for adhesion in the term of 5 years
after becoming observers.8 Serbia has been invited to accede to the EPC.
Guide to business in SpainIntellectual property law26
Appendix (Cont.)
INTELLECTUAL PROPERTY CONVENTIONS
COUNTRY
IP Trade Marks Patents Designs Copyright
Paris WTO1 Madrid Madrid Hague Berne
Convention (Trip’s)2 Agreement Protocol CTM3 PCT4 EPC5
Agreement Convention
Seychelles x o x
Sierra Leone x x x x x
Singapore x x x x x x
Slovakia x x x x x x x x
Slovenia x x x x x x x x x
Solomon Islands x
Slovakia x x x x x x x x
Slovenia x x x x x x x x x
South Africa x x x x
Spain x x x x x x x x x
Sri Lanka x x x x
Sudan x o x x x x
Suriname x x x x
Swaziland x x x x x x
Sweden x x x x x x x
Switzerland x x x x x x x x
Syria x x x x x x
Tajikistan x o x x x
Thailand x x x x
The Netherlands x x x x x x x x x
Togo x x x x
Tonga x x x
Trinidad and Tobago x x x x
Tunisia x x x x x
Turkey x x x x x x x
Turkmenistan x x x
1 WTO: World Trade Organization2 TRIP’S: Trade-Related aspects of Intellectual Property Rights3 CTM: Community Trade Mark4 PCT: Patent Cooperation Treaty5 EPC: European Patent Convention6 E: States recognizing European Patents7 O: Observer Governments. With the exception of the Holy See, observers should commence negotiations for adhesion in the term of 5 years
after becoming observers.
Guide to business in SpainIntellectual property law27
Appendix (Cont.)
INTELLECTUAL PROPERTY CONVENTIONS
COUNTRY
IP Trade Marks Patents Designs Copyright
Paris WTO1 Madrid Madrid Hague Berne
Convention (Trip’s)2 Agreement Protocol CTM3 PCT4 EPC5
Agreement Convention
Uganda x x x
Ukraine x x x x x x x
United Arab Emirates x x x x
United Kingdom x x x x x x x
United Republic of Tanzania x x x x
United States of America x x x x x
Uruguay x x x
Uzbekistan x o x x x x
Vanuatu o
Venezuela x x x
Viet Nam x x x x x x
Yemen x o x
Zambia x x x x x
Zimbabwe x x x x
1 WTO: World Trade Organization2 TRIP’S: Trade-Related aspects of Intellectual Property Rights3 CTM: Community Trade Mark4 PCT: Patent Cooperation Treaty5 EPC: European Patent Convention6 E: States recognizing European Patents7 O: Observer Governments. With the exception of the Holy See, observers should commence negotiations for adhesion in the term of 5 years
after becoming observers.
[email protected] Estatal para la Promoción y Atracción de las
Inversiones Exteriores, S.A.U. RM: Tomo 21818, libro 0, folio
15, sección 8, hoja M-388683,
Inscripción 1. NIF: A-84479013. Depósito legal: M-3674-2007.
Published 2010
This guide was researched and written by Garrigues on behalf
of INVEST IN SPAIN.
This guide is correct to the best of our knowledge and belief at
the date indicated below. It is, however, written as a general
guide so it is necesary that specific professional advice be
sought before any action is taken.
Madrid, January 2010
Prepared by:
7The main legal and tax issues to be taken into account inSpain with respect to e-commerce are discussed in thischapter.
In Spain, as in neighboring countries, e-commerce-relatedactivities are now being regulated specifically. Therefore, intransactions involving e-commerce, regard should be hadto the legislation on distance sales, advertising, standardcontract terms, electronic signatures, data protection,intellectual and industrial property, and e-commerce andinformation society services. Apart from these specificlaws, it is also necessary to examine the general legislationon civil and commercial contracts.
E-commerce raises tax issues that can be addressed withdifficulty from a purely Spanish perspective. For thisreason, the Spanish tax authorities have preferred to waituntil a consensus is reached on the measures to beadopted regionally and even worldwide. Fair progress hasbeen made in reaching a consensus on the VAT treatmentof “on-line e-commerce”. As for the direct taxation issues,it is foreseeable that any consensus will take the form of acoordinated, uniform interpretation of the various criteriadetermining the tax treatment of e-commerce, ratherthan a legislative change. A good example of this is theamendments made to the commentaries on the OECDModel Convention.
Guide to business in Spain
Legal frameworkand tax implications of E-commerce in Spain
@
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain2
73
5
20
Guide to business in Spain
Legal frameworkand tax implications of E-commerce in Spain
@1. Introduction
2. Defining regulatory principles
3. Tax implications of e-commerce in Spain
Galicia
Asturias Cantabria PaísVasco
La Rioja
Navarra
Castilla y León
Extremadura
Andalucía
Castilla - La Mancha
Comunidad de Madrid
Aragón
Cataluña
Murcia
ComunidadValenciana
Canarias
Baleares
FRANCE
PORTUGAL
MORROCO
La Coruña
Santiago de Compostela Lugo
Orense
OviedoSantander
León
Palencia
Valladolid
Segovia
Ávila
Soria
Logroño
Vitoria
Pamplona
Huesca
Zaragoza
Lérida
Tarragona
Castellón de la Plana
Valencia
Alicante
Murcia
Albacete
Cuenca
Madrid
Toledo
Cáceres
Mérida
Córdoba
Sevilla
Huelva
Cádiz
Ceuta
Málaga
Granada
Jaén
Almería
Melilla
BadajozCiudad Real
Guadalajara
Palma De Mallorca
Barcelona
Gerona
Teruel
BilbaoSan Sebastián
Salamanca
Burgos
Zamora
Pontevedra
Las Palmas de Gran Canaria
Santa Cruz de Tenerife
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain3
1. Introduction
1. INTRODUCTION
E-commerce-related activities are regulated by diverse rules contained in Spanish legislation.
Therefore, in commercial transactions performed by telematic means, regard should be had to
legislation on distance sales, advertising, standard contract terms, electronic signatures, data
protection, intellectual and industrial property, and e-commerce and information society services.
Apart from these specific laws, it is also necessary to look to the general legislation on civil and
commercial contracts. Moreover, should the activity performed through electronic means be subject
to sectorial regulations (e.g. banking, insurance, travel agencies, etc.), such legislation may be taken
into consideration.
In any event, the Spanish legislature is currently making resolute headway in regulating transactions
of this nature. Examples of its aim to legislate on matters relating to new information technologies
include the E-Commerce and Information Society Services Law, and, more recently, Electronic
Signature Law 59/2003.
A fundamental point to bear in mind when undertaking any initiative in the area of electronic
transactions is that the applicable legislation varies depending on the potential recipient of the
related offer. Consequently, there is greater leeway for the parties to agree if the transaction takes
place between companies (business to business, B2B) than if the commercial dealings are between a
company and a private consumer as the final recipient (business to consumer, B2C), since, among
others, consumer protection legislation will apply in the latter case.
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain4
In the tax sphere, e-commerce raises issues that are difficult to address from a purely Spanish
perspective. Perhaps for that reason, the Spanish tax authorities have not seen fit to adopt unilateral
measures, preferring to wait until a consensus is reached on the measures to be adopted regionally
and even worldwide. As will be explained below, the process of reaching a consensus on the VAT
treatment of “online e-commerce” is fairly advanced, as was shown by the approval of the EU
Directive on e-commerce and its consequent transposition into Spanish law since July 1, 2003
onwards.
As for the direct taxation issues (the existence of permanent establishments, the legal
characterization of income, the transfer pricing problem and the application of the “place-of-
effective-management” rule), it is foreseeable that consensus will take the form of a coordinated,
more uniform interpretation of the various criteria determining the tax treatment of e-commerce,
rather than a legislative change. As will be explained later, an example of this greater coordination is
the amendment made to the commentaries on the OECD Model Convention.
2. DEFINING REGULATORY PRINCIPLES
2.1 Civil and Commercial Legislation
2.1.1 Civil and Commercial Codes
Electronic contracts are fully subject to the rules established by the Spanish Civil Code on obligations
and contracts and by the Commercial Code.
Electronic contracts are also subject to EC Regulation 593/2008, of June 17, 2008, on the law
applicable to contractual obligations (Rome I) which supplements the legislation existing in this area
and which was already reflected in EC Regulation 864/2007, of July 11, 2007, on the law applicable
to non-contractual obligations (Rome II). EC Regulation 593/2008 will apply to contractual
obligations in the civil and commercial matters in situations involving a conflict of laws.
Both the Civil Code and the Commercial Code were amended by Law 34/2002 on E-Commerce and
Information Society Services in order to specifically establish that in contracts concluded by automatic
means, there is consent from the moment acceptance is expressed.
2.1.2 Distance sales
Equally applicable to electronic sales is Retail Trade Law 7/1996 in its Chapter on distance sales. This
Law defines “distance sales” as sales concluded without the simultaneous physical presence of the
buyer and the seller, where the seller’s offer and the buyer’s acceptance are conveyed exclusively by a
means of distance communication of any nature and within a distance contract system organized by
the seller. Therefore, sales made by telematic means would be treated as distance sales, although
the specific legislation on information society services and e-commerce would preferentially apply.
This Law establishes that distance sale offers must contain at least the following:
�• The seller’s identity.
�• The special features of the product, the price, and the shipping expenses and, if applicable, the
cost of using the distance communication technique if it is calculated on a basis other than the
basic rate basis.
�• The payment method, and delivery or types of fulfillment of orders.
�• The period for which the offer remains valid and, if applicable, the minimum term of the contract.
�• The existence of a right to withdraw or terminate the contract and, if applicable, the circumstances
and conditions in which the seller could supply a product of equivalent price and quality.
�• The out-of-court dispute resolution procedure, if applicable, in which the seller participates.
In sales of this type, consumers are also afforded a number of rights, such as:
2. Defining regulatory principles
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain5
�• The need for their express consent to the distance transaction, so that the failure to reply cannot
be construed as acceptance of the offer.
�• Prohibition on unsolicited shipments, where such shipments include a request for payment.
�• The right to withdraw (with exceptions in cases such as the sale of assets subject to financial
market rate fluctuations that the seller cannot control) within seven days from the receipt of the
product, the exercise of which is not subject to any formality or penalty.
However, please note that distance sales, in which a consumer takes part, are regulated by
Legislative Royal Decree 1/2007, of November 16, 2007, approving the Revised General Consumer
and User Protection Law and other supplementary laws.
2.1.3 Consumer protection
Whenever e-commerce activities are targeted at consumers, it is also necessary to comply with
consumer protection legislation, regulated in Legislative Royal Decree 1/2007, of November 16,
2007, approving the Revised General Consumer and User Protection Law and other supplementary
laws. This Law, which since December 2007 constitutes the main regulation to be considered in the
relation with consumers and users, revises and repeals the following laws:
�• General Consumer and User Protection Law 26/1984.
�• The Package Travel Law.
�• The Law on contracts concluded outside commercial outlets.
�• The Law on liability for damage caused by defective products.
�• The Law on safeguards in the sale of consumer goods.
In this regard, the referred Legislative Royal Decree regulates the clauses which are deemed unfair in
dealings with consumers.
It should also be noted that Law 22/2007, of July 11, 2007, on the distance marketing of consumer
financial services shall also been taken into consideration when dealing with consumers in the
financial sector. The purpose of this Law is to implement Directive 2002/65/EC of the European
Parliament and of the Council of September 23, 2002. The Law extends the protection granted by
the general Law to the users of remote financial services by establishing, among others, the generic
requirement to provide the consumer with precise and exhaustive information on the financial
contract prior to its signature and by granting the consumer the right to withdraw from the distance
contract previously concluded.
Also, if in making the contract there is an intention to incorporate predisposed clauses into a plurality
of contracts, regard must be had to Standard Contract Terms Law 7/1998, the former Article 5.3 of
which (now Article 5.4) is implemented by Royal Decree 1906/1999 on telephone or electronic
contracts with standard terms.
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain6
The referred Royal Decree establishes the requirements that must be met by distance contracts
concluded by telephone, or by electronic or telematic means and which contain standard contract
terms. “Standard contract terms” means pre-formulated terms the inclusion of which in a contract
has been imposed by one of the parties (regardless of who actually drafted them, or their external
appearance, scope, or other circumstances) and which have been drafted for inclusion in numerous
contracts.
Royal Decree 1906/1999 does not apply expressly to certain types of contract such as, for example,
government contracts, employment contracts, contracts for the incorporation of companies,
contracts for regulating family relations, contracts relating to financial services that are regulated by
their own specific legislation, and so on.
Conversely, the rules imposed by this Royal Decree apply to those contracts which contain standard
contract terms that have been adhered or consented to in Spain, whatever the law applicable to
them.
To such effect, Royal Decree 1906/1999 imposes the following obligations when contracting by
telephone or by electronic or telematic means with standard contract terms:
�• To provide the consumer with prior information on all the terms of the contract at least 3 days
before the conclusion of the contract, and to send the consumer the full wording of the standard
terms by any suitable means.
�• To send to the adhering party a receipt and information on all the terms of the contract
concluded. This information must be sent immediately or when the good is delivered or when the
contract is concluded, and it must be in writing or on another durable medium proposed by the
adhering party and that is fit for the communication effected.
�• The adhering party can exercise the right to withdraw from the contract, without incurring any
penalty or expense, within seven business days, according to the official calendar of the adhering
party’s place of habitual residence. Time in the seven-day period will start running upon receipt of
the merchandise when the purpose of the contract is the delivery of goods or from the conclusion
of the contract when the contract is for the provision of services. If the information on the standard
terms or the documentary confirmation is provided after the delivery of the merchandise or the
conclusion of the contract, time in the seven-day period will start running from the performance of
this obligation.
�• The pre-formulating party also has the burden of proving that it has performed the duties
imposed by the Royal Decree. Such duties include that of ensuring the existence and content of
prior information on the terms, the delivery of the standard terms of, and documentary support
for, the contract and, if applicable, the express waiver of the adhering party to the right of
withdrawal.
In this same framework of consumer protection, as a result of Directive 1999/44/EC, Law 23/2003
on Consumer Goods Sale Warranties was enacted. This Law, which was revised in the
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain7
aforementioned Legislative Royal Decree 1/2007, contains a draft of measures aimed at ensuring a
minimum uniform standard of consumer protection. The main innovative feature of this Law was the
establishment of a free 2-year warranty for consumers on all consumer goods, a safeguard which has
been included in the aforementioned Royal Decree. The Law aims to offer consumers a range of
possible remedies when the goods acquired are not in keeping with the terms of the contract,
enabling consumers to demand their repair or substitution.
2.1.4 Other recent applicable regulations
Due to its particular importance in electronic commerce it is worth underscoring the recent approval
of Payment Services Law 16/2009, of November 13, 2009 which aims to adapt Spanish legislation to
Community legislation in order to create a common legal framework that helps the operation of the
single market in payment services.
The new Payment Services Law mainly affects the payment transactions that are most commonly
used in an electronic commerce environment: transfers, direct debiting and cards, establishing as a
general rule that the payer and the payee of the transaction must each bear the charges levied by
their respective payment services providers and allowing merchants to charge a supplement or make
a discount according to the payment instrument used, a practice which until now prevented
agreements between card issuers and stores.
This Law establishes the rules of access to the market by payment providers, creating a new category
of payment services providers known as “payment institutions”, which will benefit competition in the
market and the security of consumers. Similarly, the Payment Services Law regulates, among other
aspects, the authorization regime (consent and withdrawal of consent) of payment transactions, the
execution (receipt, refusal, revocability) of payment orders, requests for refunds, the liability of
payment services providers, out-of-court complaint and redress procedures for the settlement of
disputes and the rules on penalties applicable to payment services providers.
Lastly, worthy of note is the recent entry into force of Law 29/2009, of December 30, 2009,
modifying the legal regime governing unfair competition and advertising in order to enhance
consumer and user protection. Special mention should be made of the unfair practice status to be
granted to the making of unwanted and reiterated proposals by telephone, fax, e-mail and other
means of long-distance communication, unless such proposals are legally justified for the purpose of
complying with a contractual obligation. Moreover, when issuing such communications, traders and
professionals must use systems that enable consumers to place on record their opposition to
continuing to receive commercial proposals from such traders or professionals. Thus, when making
such proposals by telephone, calls must be made from an identifiable number.
2.2 Telematic billing
The Value Added Tax Law 37/1992 states in Article 88.2 the possibility of issuing invoices or
analogous documents through telematic means with the same effects as it has been accomplished
with paper based invoices. In this respect, Royal Decree Law 1496/2003 states that the obligation to
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Guide to business in SpainLegal framework and tax implications of e-commerce in Spain9
issue invoices or analogous documents could be performed through any resource and, particularly,
through electronic means, provided that the addressee has given its express consent and that the
used electronic resources guarantee the authenticity of its origin and the integrity of its contents. For
these purposes, transmission and storage of invoices “by electronic means” shall mean transmission
or making available to the recipient and storage using electronic equipment for processing (including
digital compression) and storage of data, and employing wires, radio transmission, optical
technologies or other electromagnetic means.
Moreover, the recent Order EHA/962/20071 issued by the Ministry of Economy and Finance,
establishes and further develops particular obligations referred to telematic billing. Thus, such Order
clarifies that any Advanced Electronic Signature based in a certain certificate and generated through
safe signing procedures will be valid in order to guarantee the authenticity and origin of the bill. The
Order also clarifies the legal requirements that electronic invoices issued abroad must meet in order
to be validly accepted in Spain.
This Order has been implemented by various pieces of legislation, including Order PRE/2971/2007,
on the issue of invoices electronically where the addressee of the invoice is Central Government or
public agencies related or attached to it, and on the submission to Central Government or to its
related or attached public agencies of invoices issued between private individuals. This Order
contains the requirements that need to be met by companies that bill the government electronically.
2.3 Electronic signature
In order to ensure the technical security and legal certainty of business activities that are carried on
electronically, Electronic Signature Law 59/2003 was enacted.
This new Law aims to promote more widespread use of the electronic signatures as an instrument
that generates trust and security in telematic communications, thereby contributing to the
development of e-commerce and of the “e-government.”
“Electronic signature” is defined by the Law as a set of data, in electronic form, attached to or
associated with other electronic data, which can be used as a method for identifying the signatory. A
separate class of electronic signature is the “advanced electronic signature,” which is recognized as a
signature which permits the signatory to be identified and the integrity of the data signed to be
verified, since it is linked exclusively to the signatory and to the data to which it relates and since it
has been created by means that the signatory can keep under his sole control.
The Law includes the concept of “recognized electronic signature”, defining it as an advanced
electronic signature based on a certificate recognized and generated through a secure-signature-
1 Order EHA/92/2007, of April 10, 2007, implementing certain provisionsconcerning telematic billing and electronic invoice storage, contained inRoyal Decree 1496/2003, of November 28, 2003, approving theregulations governing billing obligations.
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain10
creation device. Also defined are the concepts of “electronic date” and “statement of certification
practices.”
Under the referred Law, both individuals and legal entities can act as signatories. In this way, the Law
aims to encourage the placing of orders and issuing of invoices by telematic means, while at the
same time safeguarding legal certainty for the entity holding the electronic signature and for the
third parties who have dealings with it. However, electronic certificates of legal entities will not alter
civil and commercial legislation as regards the provisions governing the concept of the hierarchical or
voluntary representative.
Furthermore, the Electronic Signature Law regulates the activity of certification service providers
issuing certificates that link signature verification data to a certain signatory. The Government also
has a service to publicize information on the certification service providers operating in the market.
Given that it is not necessary to obtain prior authorization in order to provide certification services,
the Ministry of Industry, Tourism and Trade2 is empowered to use independent and technically
qualified entities to monitor and inspect certification service providers.
Furthermore, in order to be able to offer their services, certification service providers must arrange
liability insurance of at least €3 million to cover any risk of liability for damage or loss, although the
Law makes this requirement flexible by permitting providers to combine various insurance
instruments in order to be able cover such amount.
Lastly, Electronic Signatures Law 59/2003 contains provisions regulating the electronic national
identity card, which is defined as a recognized electronic certificate intended to popularize the use of
secure electronic instruments capable of conferring the same integrity and authenticity as currently
surround communications through physical means.
2.4 Electronic money
The Spanish legislation on electronic means of payment is somewhat scarce. Despite this, Law
44/2002 on Measures for the Reform of the Financial System regulates e-money in the Chapter on
“technological innovation.” This Law transposes Directive 2000/46/EC on the taking up, pursuit of
and prudential supervision of the business of electronic money institutions.
“Electronic money” is defined by the Law as the monetary value as represented by a claim on the
issuer which is stored on an electronic device, issued on receipt of funds of an amount not less in
value than the monetary value issued and accepted as a means of payment by enterprises other than
the issuer.
A number of specific management and control procedures ensuring the sound operation and
stability of the financial system are required in order to issue electronic money. Accordingly, the
Ministry of Economy and Finance (following a report by Bank of Spain3) will be responsible for
2 www.mityc.es3 www.bde.es
approving the creation of Electronic Money Institutions, and the Bank of Spain will be responsible for
monitoring and inspecting these institutions and for ensuring they are recorded on the register
created for that purpose.
Law 44/2002 on Measures to Reform the Financial System has been implemented by Royal Decree
322/2008, of February 29, 2008, on the legal regime for electronic money institutions. It should be
noted in this regard that only one of the three waivers contained in Directive 2000/46/EC of the
European Parliament and of the Council of September 18, 2000, on the taking up, pursuit of and
prudential supervision of the business of electronic money institutions, has been transposed into
Spanish legislation. Thus, only the waiver established in Article 8(b) of that Directive has been
transposed into Spanish law and, consequently, certain articles of Royal Decree 322/2008 will not
apply where the electronic money issued by the institution is accepted as a means of payment only
by any subsidiaries of the institution which perform operational or other ancillary functions related to
electronic money issued or distributed by the institution, any parent undertaking of the institution or
any other subsidiaries of that parent undertaking.
2.5 Personal data protection
Another aspect that may have e-commerce implications is the possible processing of any personal
data under transactions of this nature.
Personal Data Protection Organic Law 15/1999 regulates the processing of an individual’s personal
data obtained by public and private entities in the course of their duties. Under the Law, personal
data cannot be used indiscriminately and there are penalties in the event of a breach of the statutory
obligations. The Organic Law applies to “personal data,” meaning any information concerning
identified or unidentified individuals. Accordingly, it does not apply to data concerning legal entities;
in addition, it does not apply to data concerning individual entrepreneurs or individuals being the
contact person of a legal entity where the personal data is used exclusively in a “B2B” framework
and where such data is limited to the following: name and surname(s), functions or jobs performed,
as well as the postal or e-mail address and professional telephone and fax numbers.
Personal data protection legislation revolves around the following principles:
�• The data subject must give prior consent to the processing of his or her personal data, except for
the exceptions envisaged by the Law.
�• The processing of specially protected data (i.e., data referring to ideology, labor union
membership, religion, beliefs, ethnicity, health, and sex life) require the data subject’s express
consent (in writing in the first four cases).
�• The data subject must be informed of a number of matters in relation to the envisaged processing
of his or her personal data.
�• Personal data may only be processed where they are adequate, relevant and not excessive in
relation to the purpose for which they have been obtained.
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain11
�• Personal data may only be communicated to a third party if the data subject has given his or her
prior consent for such purpose, unless such communication is permitted by the Law.
�• When the communication is addressed to a third party classified by the Law as a data processor,
which provides a service entailing access to such data, prior consent by the data subject is not
required, but the relationship must be regulated in a contract for services that includes a number
of provisions established by the Law. For example, in the context of outsourcing agreements, the
companies in charge of providing said services are usually considered as data processors with
respect to the data of the contracting company and in the framework of the rendering of the
outsourcing services.
�• Data subjects are afforded the rights of access, rectification, cancellation, and opposition to and of
the processing of their personal data.
�• The creation of personal data filing systems must be previously notified to the Spanish Data
Protection Agency4, the agency in charge of enforcing this legislation.
�• The establishment of minor, serious or very serious infringements as a result of breaches of the
obligations imposed by this Law, with penalties of up to €601,012.10.
It should also be noted that communications of data involving the international movement of
personal data require the prior authorization of the Director of the Spanish Data Protection Agency,
when such data is to be sent to countries without a level of protection comparable to that of Spain,
except in a number of specific cases such as, for example, when the data subject gives his or her
unambiguous consent to the transfer of his or her data. In this connection, it is assumed that States
that are part of the European Economic Area ensure an adequate level of protection. In other cases,
a declaration in this connection is required from the EU Commission5 or a ruling from the Spanish
Data Protection Agency that the data protection offered by the country in question is appropriate.
Also of special note is the approval and entry into force of the regulations implementing Personal
Data Protection Organic Law 15/1999. These Regulations include many of the standards and
recommendations that the Spanish Data Protection Agency has been issuing in recent years on the
practical application of, and ways to execute, the various principles that govern personal data
protection. In this respect, the Regulations govern matters such as ways of obtaining consent, in
particular where data is processed for marketing purposes, the outsourcing of personal data
processing or the way in which data subjects can exercise their rights of access, cancellation,
rectification and opposition. The Regulations also include a chapter on the security measures that
must be taken by data controllers, regardless of whether the data is processed by automatic or
manual means.
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4 www.agpd.es5 Up to now, according to different Decisions the European Commissionconsider that the following countries provide an adequate level ofprotection: Switzerland, Hungary, Canada, Argentina, Guernsey, Isle ofMan and Jersey.
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2.6 Intellectual and industrial property and domain names
2.6.1 Intellectual property
The legal protection of intellectual property is hugely important when engaging in e-commerce in
the “information society.” For this reason, it is essential to determine as clearly as possible the
ownership of the rights which can flow from content and information based on new technologies,
the main hallmark of which is to facilitate the transmission and broad dissemination of such content
and information. The key Spanish legislation in this area is Legislative Royal Decree 1/1996, approving
the Revised Intellectual Property Law.
Article 10 of the Revised Law establishes that all original literary, artistic or scientific creations
expressed by any means or on any medium, whether tangible or intangible, currently known or
invented in the future, are intellectual property. Accordingly, any creations meeting the originality
requirement are capable of being protected, including graphic designs and source codes of, and
information contained on, websites.
Website content will be afforded such protection as pertains to the specific category of the content
(graphics, music, literary works, audiovisual, databases, etc.) and, therefore, the person in charge of
the website must hold the related rights, either as the original owner (of the collective work under his
management or developed by employees) or as a licensee.
Intellectual property has two clearly differentiated facets: on the one hand, the author’s moral right
to the work in question, which is nonwaivable and inalienable, that is to say, the right to the
paternity of the work, to demand that its integrity be respected, and to modify the work or withdraw
it from the market; and on the other hand, the author’s economic right to the work, which is
waivable and alienable even after death, and is composed of the rights of reproduction, distribution,
transformation, and public communication.
In protecting intellectual property, the owner may seek both civil and criminal remedies. The Revised
Law affords the holder of the rights of exploitation the possibility of applying for the cessation of
unlawful activities (e.g., a website unlawfully disseminating a protected work could be closed down)
and of seeking damages. From a criminal law standpoint, the protection of intellectual property on
the Internet is based on Article 270 of the Criminal Code, which defines crimes against intellectual
property as the reproduction, plagiarism, distribution or public communication of a literary, artistic
or scientific work, in whole or in part, or the transformation, interpretation or performance thereof
affixed on any type of medium or communicated by any means, without the permission of the
holders or assigns of the relevant intellectual property rights.
It should be noted that Law 23/2006 has recently been enacted to implement Directive 2001/29/EC
on the harmonization of certain aspects of copyright and related rights in the information society,
which amends the Revised Intellectual Property Law. The Law harmonizes the economic rights of
reproduction, distribution and public communication, and regulates the new forms of interactive on-
demand services, adapting the rules governing these rights to the new operating procedures existing
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain14
in the Information Society. One of the points most debated in preparing the Law was the regulation
of the right to remuneration for private copies matching the interests of the holders of intellectual
property rights with the interests of entities subject to the payment of remuneration for private
copies.
Also enacted was Law 19/2006, of June 5, 2006, which expands the means available for protecting
intellectual property rights and establishes procedural rules to facilitate the application of various EU
regulations.
2.6.2 Industrial property
When engaging in e-commerce, regard should also be had to industrial property matters. Inventions
can be patented and, with respect to e-commerce, patents on encryption and compression
algorithms may be established. However, Article 4.c of Patents and Utility Models Law 11/1986
provides that plans, rules, and methods for conducting a business, as well as software, cannot be
patented.
2.6.3 Domain names
Another essential issue for Internet operators to take into account is the registration and use of
domain names. In this respect, regard must be had to Order ITC/1542/2005 approving the National
Plan for Internet Domain Names under the country code for Spain (“.es”), which repeals the previous
Order CTE/662/2003.
Under this order, Red.es, a public for-profit entity, continues to perform the function of the public
authority assigning domain names under the “.es” code.
The previous order sought to reduce the restrictions on the assignation of domain names under the
“.es” code by reducing the existing registration prohibitions, especially those which affected
geographical or generic terms, and increasing the legitimacy and type of domain names that could
be requested under the “.es” code.
Notwithstanding the above, evidence or linkage between the domain name applied for and the
individual interested in registering it was still required. The new rules change the requirements
necessary to obtain a “.es” domain name, considerably reducing the “a priori” monitoring of
applications for such domain names and allowing them to be transferred to third parties.
In line with the international trend, Order ITC/1542/2005 simplifies the system for assigning “.es”
domain names, which can be requested directly from the granting authority or through an agent.
Thus, second-level domain names under the code “.es” will be assigned on a “first come, first serve”
basis. This assignment can be requested by individuals or legal entities and entities without legal
personality that have interests in or ties with Spain. However, those which coincide with a first-level
domain name or with generally known names of Internet terms will not be assigned.
It is also established that domain names under the codes “.com.es,” “.nom.es,” “.org.es,” “.gob.es”
and “.edu.es” may be assigned in the third level. Third-level domain names will also be assigned on a
“first come, first serve” basis. The persons or entities that can apply for the domain names will vary
according to the codes. Thus, for example, the Spanish Public Authorities and the public law entities
attached to them can request domain names under the “.gov.es” code.
In general, the domain name must fulfill the rules of syntax, that is, the only valid characters are
letters of the Spanish alphabet, numbers (“0”-“9”) and the hyphen, provided that the last-
mentioned is not the first or the last character, and the name must be a minimum of three and a
maximum of sixty-three characters long, etc.
Furthermore, the National Plan establishes that the right to use a domain name under the “.es”
code is transferable provided that the acquiror meets the requirements necessary to own the domain
name and that the transfer is notified to the assigning authority.
Also, one of the main features of Order ITC/1542/2005 is the establishment of an extrajudicial body
of mediation and arbitration for the resolution of disputes concerning the assignment of “.es”
domain names.
2.7 Law 34/2002 on E-Commerce and Information Society Services
Law 34/2002 on E-Commerce and Information Society Services (ECISSA), in force since October 12,
2002, transposes Directive 2000/31/EC of the European Parliament and of the Council, relating to
certain legal aspects of the services of the information society, particularly e-commerce on the
domestic market.
The ECISSA defines as information society services any service provided for a valuable consideration,
long-distance, through electronic channels and upon individual request by the recipient, including
also those not paid by the recipient, to the extent that they constitute an economic activity for the
provider. Specifically, the following are deemed to be information society services:
�• The contracting for goods and services through electronic means.
�• The organization and management of auctions using electronic means or of virtual shopping
centers or markets.
�• The management of purchases on the network by groups of persons.
�• The sending of commercial communications.
�• The supply of information through telematic channels.
�• Video upon demand, as a service that the user may select through the network and, in general,
the distribution of contents upon individual request.
The ECISSA applies to information society service providers established in Spain. In this respect, the
provider is considered to be established in Spain when its place of residence or registered office is
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain15
located in Spanish territory, provided that it coincides with the place where its administrative
management and business administration are actually centralized. Otherwise, the place where such
management or direction is performed will be considered.
Likewise, the ECISSA will apply to services rendered by providers who are resident or have a registered
office in any other State when the services are offered through a permanent establishment located in
Spain. Therefore, the use of technological means located in Spain to provide or access the service will
not alone determine that the provider has an establishment in Spain.
The above notwithstanding, the requirements of the ECISSA will apply to service providers established
in another State of the European Union or the European Economic Area when the recipient of the
services is located in Spain and the services affect:
�• Intellectual or industrial property rights.
�• Advertising issued by collective investment institutions.
�• Direct insurance activities.
�• Obligations arising from contracts with consumers.
�• The lawfulness of non-requested commercial communications by e-mail.
In any case, the organization, transfer, amendment and extinguishment of rights in rem on real
properties located in Spain will be subject to the formal requirements of validity and effectiveness
established by the laws of Spain.
The ECISSA establishes the basic legal regime for information society service providers and e-mail
activities, including:
�• The principle of freedom to provide services not subject to prior authorization is established to
provide information society services, except as regards public policy, public health protection,
public security or consumer protection. In the case of service providers established in States that
do not belong to the European Economic Area, this principle will be applied in accordance with the
applicable international agreements.
�• The following obligations are imposed on information society service providers:
— To put in place the means to permit the recipients of the services and the responsible bodies to
access easily, directly and free of charge, to the information on the provider (corporate name,
registered office, registration particulars, tax identification number, etc.), on the price of the
product (stating if it includes applicable expenses and shipping expenses) and on the codes of
conduct to which it has adhered.
— For providers of intermediation services, to cooperate with the responsible authorities in
interrupting the provision of information society services or in withdrawing contents.
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain16
Please note that depending on the concrete provision of services that these intermediation
service provider carry out (access to the internet, e-mail services), they are obliged to provide
certain information such as, for example, the security measures in place, the filters for certain
persons to access the site or the responsibility of the users.
�• A specific system of liabilities is established for information society service providers, without
prejudice to the provisions of civil, criminal and administrative legislation.
— Network operators and access suppliers will not be liable for the information transmitted
unless they have originated the transmission, changed the data or selected these or their
recipients.
— Service providers that make a temporary copy of the data requested by users are not liable for
the stored information unless they change it, permit access by recipients who fail to comply
with the conditions established for the purpose, fail to observe the generally accepted
standards for the update of the information, interfere in the lawful use of the technology, fail
to withdraw the stored information or do not render their access impossible when they
become aware that a court or responsible administrative authority has ordered that it be
withdrawn or that access to it be impeded.
— Data storage or hosting service providers will not be liable for stored information if they are
unaware that such information is unlawful or, if they are so aware, they act diligently to
withdraw or render access to the data impossible.
— The providers of services providing links or search instruments or contents will not be liable if
they are unaware of the unlawful nature of the activity or the information to which they refer
or recommend or, if they are so aware, if they act diligently to omit or render useless the
respective link.
With regards to the last two paragraphs, it should be borne in mind that Spanish legislation
considers to be effective knowledge where a competent body has declared the data unlawful,
ordered the withdrawal thereof or disabled the access thereto, or has declared the existence of
harm and the provider is aware of the corresponding decision, notwithstanding procedures to
detect and withdraw contents that providers apply pursuant to voluntary agreements and
other means of effective knowledge that may be established. This criterion is slightly different
from that adopted in other European legislations.
�• A specific system is established for commercial communications through electronic channels,
without prejudice to the legislation in force on commercial, publicity and personal data protection
matters. Thus, commercial communications through electronic channels must be clearly
identifiable, stating the individual or corporation for whom they are performed, including at the
beginning of the message the word “publi” (advertisement) and stating clearly the conditions for
access and participation, in the case of discounts, prizes, gifts, competitions or promotional
games.
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain17
� Additionally, advertising or promotional communications sent by e-mail or similar form of
communication that have not been previously requested or expressly authorized by the recipients
are prohibited. However, Law 32/2003 introduced an exception to the previous prohibition of
obtaining express consent from the recipient of commercial communications. Thus, express
consent will not be necessary when there is a pre-existing contractual relationship, provided that
the supplier had lawfully obtained the recipient’s contact data and that the commercial
communications refer to goods or services of the provider’s own company which are similar to
those for which the recipient initially made a contract.
�• Contracts through electronic channels are regulated, recognizing the effectiveness of the
agreements made through electronic channels when consent has been granted and other
requirements necessary for their validity are met. Additionally the following provisions are
established for contracts made through electronic channels:
— The requirement that a document should be placed on record in writing is considered to be
met when it is contained on electronic support.
— Documents on electronic support are admitted as documentary evidence in lawsuits.
— Determination of the legislation applicable to the contract made through electronic channels
will be governed by the provisions of international private law.
— A series of obligations is established prior to the commencement of the contracting procedures
relating to the information that should be furnished on the formalities for the making of the
contract, the validity of offers or proposals of contracts and the availability, if any, of general
contracting conditions.
— The offeror is obliged to confirm receipt of the acceptance within 24 hours after its receipt by
an acknowledgement sent by e-mail or equivalent means to that used in the contracting
procedure, permitting the recipient to file such confirmation.
— Agreements made through electronic channels in which the consumer participates will be
assumed to have been made in the place where the consumer has his customary place of
residence. When these contracts are made between entrepreneurs or professionals, they will
be assumed to have been made, in the absence of a provision on the matter, in the place
where the service provider is established.
When dealing with agreements entered into with customers, the Revised General Consumer
and User Protection Law should be taken into account, in particular in connection with
distance sales.
• The recognition is made of a cause of action for cessation against conduct contravening the
ECISSA that is detrimental to collective or general consumers’ interests and the promotion of the
out-of-court settlement of dispute.
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain18
�• Minor, serious and gross infringements are established due to failure to comply with the
obligations imposed in the ECISSA, with penalties of up to €600,000.
Lastly, Final Provision Eight of the ECISSA has been implemented through the approval of Royal
Decree 292/2004, of February 20, creating the public label of trust in Information Society Services
and E-Commerce and regulating its requirements and the procedure whereby it is granted. This Royal
Decree seeks to encourage the use of codes of conduct, especially those which are drawn up with the
participation of consumer and user associations that use the consumers’ arbitration system or other
extrajudicial systems for resolving disputes with consumers. The Royal Decree also creates a public
label of trust which is intended to aid consumers and users in distinguishing which seals and codes
provide a suitable level of protection.
However, it is worth noting that Law 56/2007, of December 28, 2007, on Measures to Promote
Information Society Services, modified, inter alia, the ECISSA and the Law on Electronic Signatures,
and included measures aimed at avoiding the excessive obligations existing in the provision of e-
commerce and information society services. Moreover, this Law seeks convergence with Europe and
between autonomous communities and autonomous cities in matters relating to e-commerce and
information society services. Among other provisions, we can highlight the establishment of the duty
to cooperate for the intermediary service providers, the inclusion of nuances in the liability exemption
regime for services providers that include links to other web pages and clarification of the duty of
information to be given to the public. In addition, Article 2 of the Law establishes that enterprises in
certain sectors with a special impact on economic activity (such as suppliers of electricity, water and
gas, telecommunications companies, financial institutions, insurers, hypermarkets, transportation
companies, travel agencies), as long as they are of a certain size, must provide an electronic
communication channel to service users who have recognized electronic signature certificates.
Another important law in this regard is Law 25/2007, of October 18, 2007, on the keeping of data
relating to electronic communications and to public communications networks, which establishes
that operators that provide electronic communication services to the public or operate public
communications networks must i) keep the data generated or processed within the context of the
service for a period of 12 months—a period which may be reduced or extended between 6 months
and 2 years for certain categories of data— and ii) disclose such data to authorized agents
whenever so required by a judicial authorization for the purposes of detecting, investigating and
prosecuting serious offenses contemplated in the Criminal Code and in the special criminal laws.
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain19
3. Tax implications of e-commerce in Spain
3. TAX IMPLICATIONS OF E-COMMERCE IN SPAIN
3.1 Problems, general principles and initiatives taken in relation to taxation
Except for Spain’s commitments to the European Union on value added tax (“VAT”), at present there
is no tax regime in Spain which specifically regulates the trading of goods and services on the
Internet. Therefore, the same taxes and the same rules as those for other forms of commerce apply.
This approach is in tune with the principles enunciated by the Spanish Tax Agency in the Report of the
Commission analyzing the impact of e-commerce on the Spanish tax system prepared by the Office of
the Secretary of State for Finance.
With respect to VAT and formal VAT obligations, the basic bodies of legislation emanating from the
European Union are as follows:
�• Council Directive 2006/112/EC of November 28, 2006 on the common system of value added tax,
which entered into force on January 1, 2007 and has been amended several times since then. This
Directive recasts in a single legal text the main rules governing VAT and, in particular, those
contained in the Sixth Directive (77/388/EEC), in Directive 2002/38/EC as regards the value
added tax arrangements applicable to radio and television broadcasting services and certain
electronically supplied services, and in Directive 2001/115/EC with a view to simplifying,
modernizing and harmonizing the conditions laid down for invoicing in respect of value added tax,
all of which are consequently repealed.
�• Council Regulation (EC) no. 1798/2003 of October 7, 2003 on administrative cooperation in the
field of value added tax and repealing Regulation (EEC) no. 218/92 on administrative cooperation
in the field of indirect taxation (VAT) as regards additional measures regarding electronic
commerce. This Regulation has recently been amended by Council Regulation no. 143/2008 of
February 12, 2008 and by Council Regulation no. 37/2009 of December 16, 2008, which applies
starting January 1, 2010. The amendments mainly affect the rules and procedures for the
exchange by electronic means of value added tax information, in light of the changes introduced
in the place-of-supply rules.
It should be noted that the value added tax arrangements applicable to radio and television
broadcasting services and certain electronically supplied services were in force temporarily until
December 31, 2006. Council Directive 2006/138/EC of December 19, 2006 amends Directive
2006/112/EC on the common system of value added tax as regards the period of validity of the value
added tax arrangements applicable to these services, extending such period of validity until
December 31, 2008. In turn, Council Directive 2008/8/EC of February 12, 2008 amends, effective
January 1, 2009, Directive 2006/112/EC, extending the above-mentioned period of validity to
December 31, 2009. In addition, although Directive 2008/8/EC will be transposed in several phases,
the first of which entered into force on January 1, 2010, it should be noted that that Directive amends
Directive 2006/112/EEC as regards the place of supply of services. Among the changes introduced by
the Directive, of note is the replacement of the current general rule for the place of supply of services
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain20
(supplier’s place of business) with the rule that the place of supply of services to a taxable person
acting as such (i.e. a trader or professional) shall be the place where that person has established his
business (recipient’s place of business). The general rule for services supplied to non-taxable persons
remains unchanged (i.e. the place where the supplier has established his business). The additional
changes introduced with effect from January 1, 2015, with respect to electronically supplied services
are discussed in the section on the indirect taxation of e-commerce.
The provisions of these Directives and their transposition into Spanish law are examined in the
section on the indirect taxation of e-commerce.
3.2 Direct taxation
Despite there being no differences in the tax treatment of income obtained electronically, there are a
number of issues that have been addressed by both the OECD and by the Spanish tax authorities
themselves:
a) The permanent establishment issue.
b) Legal characterization of income generated by the sale of goods and services on the Internet.
c) Determination of taxable income and the transfer pricing problem.
d) Application of the place of effective management rule to determine the tax residence of taxpayers
engaging in e-commerce.
The most relevant considerations and the progress made in analyzing those issues are summarized
below:
3.2.1 The permanent establishment issue
The issue specifically addressed is whether one or more of the following elements can be regarded as
permanent establishments in the country where a company selling a good or supplying a service on
the Internet is located:
�• Server.
�• Website on server.
�• ISP (Internet Service Provider).
In January 2003, the OECD published commentaries on the Articles of the Model Tax Convention.
Specifically, a commentary on Article 5 (in relation to the definition of “permanent establishment”)
was introduced so as to take account of the elements which define new forms of commerce. This has
not been modified by the commentaries on the Model Tax Convention published by the OECD in July
2008.
The main conclusions drawn from the commentary are as follows:
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain21
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain22
�• A distinction must be made between a computer or server (which can constitute a permanent
establishment) and the software used by that computer (which cannot constitute a permanent
establishment). This distinction is important because the entity that operates the server hosting
the website is normally different from the entity that carries on business over the Internet (hosting
agreements).
�• A website does not in itself constitute tangible property and, therefore, cannot be deemed a
“place of business” if this is defined as facilities, equipment, or machinery capable of constituting
a permanent establishment.
�• In order for a server to constitute a fixed place of business it must be permanent, in that it must be
located in a certain place for a sufficient length of time. What counts is whether, in fact, it is
moved from one place to another rather than whether or not it can be moved. In this regard, a
server used for e-commerce can be a permanent establishment regardless of whether or not there
are personnel to operate that server, where no personnel are required for the operation assigned
to the server.
� When determining whether or not the server installed by a given company in a country constitutes
a permanent establishment of that company, it is particularly important to analyze whether the
company engages in business activities specific to its corporate purpose through that server or
whether, on the contrary, it only engages in activities of a preparatory or auxiliary character (such
as advertising, market research, data gathering, providing a communications link between
suppliers and customers, and making backup copies).
�• ISPs do not generally constitute permanent establishments of companies that engage in e-
commerce on websites since ISPs are not normally agents of a dependent status for those non-
resident companies.
3.2.2 Legal characterization of income
The second relevant issue in this area concerns the characterization of income and, in particular, the
possibility that certain goods delivered on line may, merely by virtue of the fact that they are
protected by intellectual or industrial property laws (such as music, books and, in particular,
software), be characterized as generators of royalties and, therefore, be subject to taxation in the
country of source.
The commentaries on the OECD Model Convention characterize as business profits (instead of
royalties) almost all payments made for all intangible goods delivered electronically, on the ground
that the subject-matter of those transactions are copies of images, sounds or text rather than the
right to exploit them commercially.
However, Spain, by way of an observation on the commentaries on the Model Convention, holds the
view that payments relating to the acquisition of rights in software may constitute a royalty.
Specifically, in its observation in the 2003 version of the Model Convention, Spain considered that
payments relating to software are royalties where less than full rights to the software are transferred
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain23
either if the payments are in consideration for the right to use a copyright on software for
commercial exploitation or if they relate to software acquired for the business use of the purchaser
where in this last case the software is not absolutely standard but rather adapted to the customer’s
needs. The Directorate-General of Taxes expressed this view in its binding ruling of January 31, 2006.
However, the commentaries on the OECD Model Convention published in July 2008 take the novel
view that payments made under arrangements between a software copyright holder and a
distribution intermediary do not constitute a royalty if the rights acquired by the distributor are
limited to those necessary for the commercial intermediary to distribute copies of the software. Thus,
since distributors are paying only for the acquisition of the software copies and not to exploit any
right in the software copyrights (without the right to reproduce the software), payments in these
types of arrangements would be dealt with as business profits.
In light of this change in the commentaries on the Model Convention, Spain has introduced a nuance
in the observations on the commentaries published in July 2008, indicating that payments in
consideration for the right to use a copyright on software for commercial exploitation constitute a
royalty, except for payments for the right to distribute standardized software copies, not comprising
the right neither to customize nor to reproduce them.
Therefore, and as acknowledged by the Directorate-General of Taxes in its binding ruling of
November 10, 2008, Spain considers that payments made for the right to distribute standardized
software copies constitute business profits, although it continues to treat as royalties payments made
for the right to distribute software where the software has been adapted.
It should also be noted that under Article 13 of the Revised Text of the Non-resident Income Tax Law,
approved by Legislative Royal Decree 5/2004, of March 5, amounts such as those paid for the use or
the granting of use of rights in software are characterized as royalties.
Also, in some tax treaties signed by Spain, income derived from the grant of the right to use software
is expressly characterized as a royalty. In those cases where no mention is made, such as the Spain-
US tax treaty, for the purpose of characterizing the applicable tax rate, the tax authorities have
interpreted that the transfer of software cannot be characterized as a scientific or literary work and,
therefore, cannot benefit from the rates specially envisaged for such work.
3.2.3 Determination of taxable income and the transfer pricing problem
The extensive use of intranets among different companies belonging to multinational groups and
the enormous mobility of transactions over computer networks create highly complex problems
when applying the traditional arm’s-length principle to valuing intercompany transactions. This is
because:
�• E-commerce encourages the detachment of activities from their location since it hugely multiplies
transactions between companies within the same group.
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain24
�• The special characteristics of online trade in content and services on the Internet make it very
difficult to ascertain the market value of commercial transactions, above all bearing in mind that,
sometimes, electronic content can be downloaded and services can be received free of charge.
Due to the above, tax authorities in OECD countries (including Spain) are advocating the
development of bilateral or multilateral systems for advance pricing agreements, applying the OECD
transfer pricing guidelines to e-commerce. Noteworthy in this regard is the creation of an EU Joint
Transfer Pricing Forum in which, among other matters, nonlegislative measures are being proposed
to enable a uniform application of the OECD guidelines in the European Union.
3.2.4 Application of the place of effective management rule
The special characteristics of e-commerce (which include easy detachability from location, relative
anonymity, and the mobility of the parties involved) make the traditional rules on determining which
country has the jurisdiction to tax the worldwide income obtained by one enterprise (based on the
principle of residence by reference to the place of formation, the place of the registered office, or the
place of effective management) more difficult to apply to taxpayers engaging in e-commerce.
Indeed, the parameters established in the tax treaties for the purpose of apportioning tax powers
among States in case of conflict (most of them based on the “place-of-effective-management”
principle) are overridden in an area such as e-commerce, where the various managing bodies of the
same enterprise can be located in different jurisdictions and be totally mobile during the year. In this
regard, it can be extremely difficult to determine which place is the enterprise‘s place of effective
management, and this can lead to double taxation or no taxation at all.
Although the international organizations that have examined this issue and the Spanish tax
authorities themselves are aware of this problem, they have yet to arrive at clear conclusions on how
to resolve it. Accordingly, a close watch must be kept on progress in the work being done in this area.
3.3 Indirect taxation
It is in the area of VAT where the most relevant coordinated legislative measures have been adopted.
The indirect taxation implications for e-commerce mainly concern “online e-commerce,” a term that
refers to products supplied on the Internet in digitized form (books, software, photographs, movies,
music, and so on) and downloaded by a customer in real time onto his or her computer, having
clicked on to the supplier’s website and paid for the products in question (in contrast to offline
supplies where products sold on the Internet are subsequently delivered by using conventional means
of transportation).
Offline e-commerce poses fewer technical difficulties in relation to the VAT treatment of transactions
because it still involves the physical supply of a tangible good. Accordingly, the traditional VAT
concepts apply: domestic transactions, intra-Community acquisitions, and schemes for distance sales
or imports.
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain25
The main VAT issues arising in relation to e-commerce (especially online e-commerce) are in essence
the following:
�• The definition of “taxable event” as a supply of goods or services in online e-commerce
transactions and the application of the relevant rules for determining the place of supply in order
to determine its VAT treatment.
�• The determination of the VAT rates applicable to the different types of e-commerce.
�• The adaptation of the formal obligations and management of VAT to the realities of e-commerce
and, particularly, the obligations regarding invoices.
Each of these issues is briefly outlined below:
3.3.1 Definition of “taxable event” as a supply of goods or services for the purpose of determiningthe place of supply
Law 53/2003 of December 30, on Tax, Administrative, Labor and Social Security Measures
introduced certain changes to the current VAT Law with a view to redressing the damaging economic
distortions now suffered by EU-based operators, and to bring the VAT Law into line with the changes
introduced by the Directive 2002/38/EC. This Directive is based on the premise that all EU Member
States will uniformly treat transactions performed electronically as supplies of services:
�• The services affected by the changes are electronically supplied services including transactions for
computer software, data processing, and other similar services relating to the use of computers
and the supply of information, provided that they are supplied for consideration, when their
transmission is sent initially and received at destination by electronic data processing equipment.
The fact that the supplier and recipient of a service communicate by e-mail does not of itself mean
that the service is an electronically supplied service.
�• The services are deemed to have been supplied in the territory where Spanish VAT applies if:
— The recipient is a trader or professional and his place of business is in Spain.
— The supplier is established in Spain and the recipient is a nontrader residing in the EU or having
an unidentifiable domicile.
— The services are supplied from outside the EU and the recipient is a nontrader domiciled in
Spain.
— The recipient is a trader or professional, the services are actually consumed in Spain, and the
services have not been deemed supplied pursuant to the above rules in the EU, Canary Islands,
Ceuta or Melilla.
However, as has been noted, Directive 2008/8/EC establishes new place-of-supply rules for services that
also affect services supplied electronically. In any case, the amendments that entered into force on
January 1, 2010, have not made substantial changes to the place of supply of electronic services.
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain26
Indeed, as far as “Business to Business” (B2B) transactions are concerned, the general rule will apply
whereby the services are deemed supplied at the recipient’s place of business, whereas in “Business to
Consumer” (B2C) transactions, the services will also be deemed supplied at the recipient’s place of
business, except in cases where the trader or professional supplying the service is established in the EU
and supplies the services to final consumers that are also established in the EU. Thus, the only new
feature is that the reference to cases where the customer’s address is not known has been eliminated.
In addition, as noted above, Directive 2008/8/EC introduces specific changes applicable to electronic
services starting January 1, 2015. Specifically, from that date onwards, the place of supply of services
supplied electronically by an EU-established trader to non-taxable persons who are established in an
EU Member State, or who have their permanent address or usually reside in an EU Member State,
will be the place where the non-taxable person is established, or where he has his permanent
address or usually resides. In other words, the changes that will take effect on January 1, 2015 will
mean that all electronically supplied services will be deemed supplied where the recipient has his
permanent address or usually resides.
It is worth noting that, due to problems that arose during its passage through Parliament, initially
the transposition in Spain of Directive 2008/8/EC was not carried out through the modification of
VAT Law 37/1992, of December 28, 1992, but rather through a Decision of the Directorate-General of
Taxes of December 23, 2009. Notwithstanding the amendments to be introduced into Law 37/1992
were finally passed by Parliament and Published on March 2,2010 in the Official State Gazette. In any
case,aproved amendments do not include the amendments to be introduced from January 1, 2015
onwards.
In this connection, the place of supply for electronically supplied services can be summarized in
accordance with the following table:
Supplier Recipient Place of Supply
EU / Non-EU Trader established in Spain Spain
EU / Non-EU Non-EU trader and actual consumption in Spain Spain
Spain Nontrader resident in the EU Spain
EU Nontrader resident in Spain Country of origin*
Non-EU Nontrader resident or domiciled in Spain Spain (Application ofspecial scheme)
Table 1
PLACE OF SUPPLY DETERMINATION
* As noted, in accordance with the amendments to be introduced from 2015 onwards, these services would be deemed supplied where the recipienthas his permanent address or usually resides.
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain27
�• As regards determining who is the taxable person, it has been decided to fully apply the current
legislation (Article 84 of the VAT Law) which establishes that:
— In general, the supplier of services is the taxable person, regardless of where he is established.
— In special circumstances, the recipient of the services (rather than the supplier) is the taxable
person and is obligated to reverse charge the VAT under the “reversal of VAT liability”
mechanism (this applies only where the supplier is a trader not established for VAT purposes in
Spain and the customer receiving the services is a trader or professional established in Spain).
— Furthermore, in cases where the supplier of the services is not established in the EU and the
customer is a final consumer (in Business to Consumer, or “B2C,” transactions), the supplier of
the services is the taxable person. However, with a view to simplifying their obligations,
suppliers only have to register (electronically) for VAT in one Member State, although they will
have to charge the VAT relating to each of the jurisdictions where their customers are located
and pay it over (also by telematic means) to the tax authorities of the Member State in which
they are registered. Subsequently, that Member State will reapportion the VAT collected
among the other countries.
Non-established traders or professionals that apply this special regime in Spain will be entitled to
a refund of input VAT in accordance with the refund procedure for non-established traders, without
being subject to the generally applicable reciprocal treatment requirement established in the
legislation.
In addition, as noted above, Council Directive 2008/8/EC introduces specific changes that will
apply to electronic services from January 1, 2015. Specifically, as from that date, the place of
supply of services supplied electronically by an EU-established trader to non-taxable persons who
are established in a Member State, or who have their permanent address or usually reside in a
Member State, will be the place where the non-taxable person is established, or where he has his
permanent address or usually resides.
Likewise, a system similar to the existing one will be established for supplies of services by non-EU
traders so as to permit the payment of VAT in the Member State where the supplier of the service
resides.
3.3.2 Determination of the VAT rates applicable to the various types of e-commerce
In line with the view held by the Spanish tax authorities, the standard VAT rate of 16% will apply in all
cases, since it is a type of service for which the VAT Law makes no special provision. This rate will rise
to 18% starting July 1, 2010, as established in the State Budget Law for 2010.
3.3.3 Formal obligations and management of taxes
As regards formal obligations and the management of taxes, both the EU and the Spanish tax
authorities ascribe to the principle that this form of commerce should not be hindered by the
imposition of formal obligations that reduce the speed with which transactions should be performed.
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain28
Of particular relevance in this regard are the rules contained in the Council Regulation (EEC) No.
1798/2003 on administrative cooperation in the field of indirect taxation, which, among other
matters, provides that individuals and legal entities involved in intra-Community transactions can
access the databases kept by the tax authorities of each Member State. This possibility of identifying
reliably the status under which the recipient is acting (trader, professional or final consumer) is
absolutely decisive for the proper tax treatment of each transaction.
Lastly, it should be noted that the criteria contained in Council Directive 2006/122/EEC of November
28, 2006 concerning VAT billing have been transposed into Spanish Law by Royal Decree 1496/2003,
of November 28, regulating billing obligations, with effect from January 1, 2004.
The Royal Decree on billing establishes the legal rules applicable to the sending of invoices
electronically, establishing that they may be sent electronically.
Invoices can also be kept in an electronic format provided that it ensures the legibility of the invoices
in the original format, in which they have been received, as well as the data and mechanisms that
guarantee the authenticity of their origin and the integrity of their contents.
Electronic invoices will be accepted for the purposes of charging and deducting VAT and for
supporting expenses or credits taken for the purposes of other taxes. The contents of invoices issued
electronically must be the same as those of invoices issued conventionally.
Order EHA/962/2007, of April 10, 2007, implemented certain provisions on the telematic billing and
the electronic storage of invoices in accordance with the provisions of the Billing Royal Decree and
the references which such Royal Decree made to a subsequent implementation of these concepts.
Under the Order, invoices can be sent electronically provided that the authenticity of their origin and
the integrity of the documents sent are ensured, and provided that the recipient has given his express
consent. For these purposes, authenticity can be ensured by using an advanced electronic signature,
an electronic data exchange system, or other electronic billing systems proposed by the taxpayer. In
the case of this last kind of system, the Order regulates the procedure to be followed to validate it.
Specifically, the procedure is commenced by submitting a prior application for authorization to the
State Tax Agency. The application must be addressed to the Director of the Financial and Tax
Inspection Department.
In addition, the Order implements the requirements that both the issuer and the recipient must meet
when storing invoices issued electronically. The Order establishes that the party receiving the invoice
must store the invoices, as a general rule, in the format and on the media (electronic or on paper) in
and on which they were issued.
However, the Order allows for the possibility of converting the invoice received into another format
provided that the requirements contained in the Order are met. Accordingly, if a document is
received in electronic format, signed through an acknowledged or officially approved signature
system, such document can be printed and stored on paper if the requirements of the Order are
Guide to business in SpainLegal framework and tax implications of e-commerce in Spain29
satisfied (i.e. use of software that enables printing on paper together with certain graphic marks of
authentication).
On the other hand, original documents on paper can be replaced with files containing graphic
images and, consequently, the paper can be destroyed, provided that the requirements contained in
the Order (i.e. use of certified digitalization software) are fulfilled.images and, consequently, the
paper can be destroyed, provided that the requirements contained in the Order (i.e. use of certified
digitalization software) are fulfilled.
[email protected] Estatal para la Promoción y Atracción de las
Inversiones Exteriores, S.A.U. RM: Tomo 21818, libro 0, folio
15, sección 8, hoja M-388683,
Inscripción 1. NIF: A-84479013. Depósito legal: M-3674-2007.
Published 2010
This guide was researched and written by Garrigues on behalf
of INVEST IN SPAIN.
This guide is correct to the best of our knowledge and belief at
the date indicated below. It is, however, written as a general
guide so it is necesary that specific professional advice be
sought before any action is taken.
Madrid, January 2010
Prepared by:
8This chapter contains the contact details of themost important entities in Spain and Spanishcommercial service offices currently locatedabroad.
Guide to business in Spain
Useful addresses
>
Guide to business in SpainUseful addresses2
Guide to business in Spain
Useful addresses
> 81. Relevant institutions
2. Other institutions
3. Stock exchanges and National Securities
Market Commission
4. Official banks
5. Autonomous Community and
Autonomous City investment promotion
agencies
6. Spanish economic and commercial
offices abroad
3
5
6
8
10
7
Galicia
Asturias Cantabria PaísVasco
La Rioja
Navarra
Castilla y León
Extremadura
Andalucía
Castilla - La Mancha
Comunidad de Madrid
Aragón
Cataluña
Murcia
ComunidadValenciana
Canarias
Baleares
FRANCE
PORTUGAL
MORROCO
La Coruña
Santiago de Compostela Lugo
Orense
OviedoSantander
León
Palencia
Valladolid
Segovia
Ávila
Soria
Logroño
Vitoria
Pamplona
Huesca
Zaragoza
Lérida
Tarragona
Castellón de la Plana
Valencia
Alicante
Murcia
Albacete
Cuenca
Madrid
Toledo
Cáceres
Mérida
Córdoba
Sevilla
Huelva
Cádiz
Ceuta
Málaga
Granada
Jaén
Almería
Melilla
BadajozCiudad Real
Guadalajara
Palma De Mallorca
Barcelona
Gerona
Teruel
BilbaoSan Sebastián
Salamanca
Burgos
Zamora
Pontevedra
Las Palmas de Gran Canaria
Santa Cruz de Tenerife
Guide to business in SpainUseful addresses3
1. Relevant institutions
1. RELEVANT INSTITUTIONS
INVEST IN SPAIN
C/ Orense, 58. 3ª planta
28020 Madrid
Tel.: 00 (34) 91 503 58 00
web: www.investinspain.org
SECRETARÍA DE ESTADO DE COMERCIO
Paseo de la Castellana, 160-162
28046 Madrid
Tel.: 00 34 (902) 44 60 06
web: www.comercio.mityc.es
INSTITUTO ESPAÑOL DE COMERCIO EXTERIOR (ICEX)
Paseo de la Castellana, 14-16
28046 Madrid
Tel.: 902 34 90 00
web: www.icex.es
DIRECCIÓN GENERAL DE COMERCIO E INVERSIONES
Paseo de la Castellana, 162
28046 Madrid
Tel.: 00 34 (91) 349 36 00
web: www.mityc.es
SUBDIRECCIÓN GENERAL DE INCENTIVOS REGIONALES
Paseo de la Castellana, 162
28046 Madrid
Tel.: 00 34 (91) 553 49 65
web: www.pap.meh.es
DIRECCIÓN GENERAL DE TRIBUTOS
C/ Alcalá, 5
28014 Madrid
Tel.: 00 34 (91) 595 80 00
web: www.meh.es
DIRECCIÓN GENERAL DEL TESORO
Paseo del Prado, 6
28014 Madrid
Tel.: 00 34 (91) 209 95 00
web: www.tesoro.es
CENTRO DE DESARROLLO TECNOLÓGICO INDUSTRIAL (CDTI)
C/ Cid, 4
28001 Madrid
Tel.: 00 34 (91) 581 55 00 / 209 55 00
web: www.cdti.es
DIRECCIÓN GENERAL DE POLÍTICA DE LA PEQUEÑA Y MEDIANA
EMPRESA
Paseo de la Castellana, 160. planta 11-12
28046 Madrid
Tel.: 00 34 (91) 545 08 20 / 900 19 00 92
web: www.ipyme.org
Guide to business in SpainUseful addresses4
DIRECCIÓN GENERAL DE TRABAJO
C/ Pío Baroja, 6
28009 Madrid
Tel.: 00 34 (91) 363 18 01 / 02
Info: 00 34 (91) 363 18 85
web: www.mtas.es
SECRETARÍA DE ESTADO DE INMIGRACIÓN Y EMIGRACIÓN
C/ José Abascal, 39. 1ª planta
28003 Madrid
Tel.: 00 34 (91) 363 70 00
web: www.mtas.es
DIRECCIÓN GENERAL DE ASUNTOS Y ASISTENCIA CONSULARES
C/ Juan de Mena, 4
28014 Madrid
Tel.: 00 34 (91) 379 17 00
web: www.mae.es
AGENCIA ESTATAL DE ADMINISTRACIÓN TRIBUTARIA (AEAT):
DPTO. DE ADUANAS E IMPUESTOS ESPECIALES
Avda. Llano Castellano, 17
28071 Madrid
Tel.: 00 34 (91) 728 96 75
web: www.aeat.es
MINISTERIO DE MEDIO AMBIENTE Y MEDIO RURAL Y MARINO
Paseo de la Infanta Isabel, 1
28071 Madrid
Tel.: 00 34 (91) 347 53 68 / 347 57 24
web: www.marm.es
INSTITUTO NACIONAL DE EMPLEO (INEM)
C/ Condesa de Venadito, 9
28027 Madrid
Tel.: 00 34 (91) 585 98 88
web: www.inem.es
COMPAÑÍA ESPAÑOLA DE FINANCIACIÓN DEL DESARROLLO
(COFIDES)
C/ Príncipe de Vergara, 132. 9ª planta
28002 Madrid
Tel.: 00 34 (91) 745 44 80 / 562 60 08
web: www.cofides.es
CONSEJO SUPERIOR DE INVESTIGACIONES CIENTÍFICAS (CSIC)
C/ Serrano, 117
28006 Madrid
Tel.: 00 34 (91) 585 50 00 / 50 01 / 50 50
web: www.csic.es
2. OTHER INSTITUTIONS
CONSEJO SUPERIOR DE CÁMARAS DE COMERCIO INDUSTRIA Y
NAVEGACIÓN DE ESPAÑA (CSC)
C/ Ribera del Loira, 12
28042 Madrid
Tel.: 00 34 (91) 590 69 00
web: www.camaras.org
CONFEDERACION ESPAÑOLA DE ORGANIZACIONES
EMPRESARIALES (CEOE)
C/ Diego de León, 50
28006 Madrid
Tel.: 00 34 (91) 566 34 00
web: www.ceoe.es
CONFEDERACIÓN ESPAÑOLA DE LA PEQUEÑA Y MEDIANA
EMPRESA (CEPYME)
C/ Diego de León, 50
28006 Madrid
Tel.: 00 34 (91) 411 61 61
web: www.cepyme.es
AGENCIA ESPAÑOLA DE COOPERACION INTERNACIONAL (AECI)
Avda. Reyes Católicos, 4
28040 Madrid
Tel.: 00 34 (91) 583 81 00
web: www.aeci.es
INSTITUTO DE CONTABILIDAD Y AUDITORÍA DE CUENTAS
C/ Huertas, 26
28014 Madrid
Tel: 00 34 (91) 389 56 00
web: www.icac.meh.es
ASOCIACIÓN ESPAÑOLA DE CONTABILIDAD Y ADMINISTRACIÓN
DE EMPRESAS
C/ Rafael Bergamin, 16 B
28043 Madrid
Tel.: 00 34 (91) 547 37 56
web: www.aeca.es
2. Other institutions
Guide to business in SpainUseful addresses5
3. Stock exchanges and National Securities Market Commission
3. STOCK EXCHANGES AND NATIONAL SECURITIES MARKETCOMMISSION
COMISIÓN NACIONAL DEL MERCADO DE VALORES (CNMV)
C/ Miguel Ángel, 11
28010 Madrid
Tel.: 00 34 (91) 585 15 00 / 902 14 92 00
Fax: 00 34 (91) 319 33 73
c.e.: [email protected]
web: www.cnmv.es
BOLSA DE MADRID
Plaza de la Lealtad, 1
28014 Madrid
Tel.: 00 34 (91) 589 11 84
Fax: 00 34 (91) 589 12 52
c.e.: [email protected]
web: www.bolsamadrid.es
BOLSA DE BARCELONA
Paseo de Gracia, 19
08007 Barcelona
Tel.: 00 34 (93) 401 35 55
Fax: 00 34 (93) 401 36 50
c.e.: [email protected]
web: www.borsabcn.es
BOLSA DE BILBAO
C/ José María Olábarri, 1
48001 Bilbao
Tel.: 00 34 (94) 403 44 00
Fax: 00 34 (94) 403 44 30
c.e.: [email protected]
web: www.bolsabilbao.es
BOLSA DE VALENCIA
C/ Libreros, 2-4
46002 Valencia
Tel.: 00 34 (96) 387 01 00
Fax: 00 34 (96) 387 01 33 / 60
c.e.: [email protected]
web: www.bolsavalencia.es
Guide to business in SpainUseful addresses6
4. Official banks
4. OFFICIAL BANKS
BANCO DE ESPAÑA
C/ Alcalá, 48
28014 Madrid
Tel.: 00 34 (91) 338 50 00
Fax: 00 34 (91) 338 54 87
c.e.: [email protected]
web: www.bde.es
INSTITUTO DE CRÉDITO OFICIAL (ICO)
Paseo del Prado, 4
28014 Madrid
Tel.: 00 34 (91) 592 16 00 / 902 12 11 21
Fax: 00 34 (91) 592 17 00
c.e.: [email protected]
web: www.ico.es
Guide to business in SpainUseful addresses7
5. Autonomous Community and Autonomous City investment promotionagencies
5. AUTONOMOUS COMMUNITY AND AUTONOMOUS CITYINVESTMENT PROMOTION AGENCIES
ANDALUCÍA
AGENCIA DE INNVOACIÓN Y DESARROLLO DE ANDALUCÍA
C/ Torneo, 26
41002 Sevilla
Tel.: 00 34 (95) 503 08 31
Fax: 00 34 (95) 503 07 98
c.e.: [email protected]
web: www.agenciaidea.es
ARAGÓN
ARAGON EXTERIOR S.A. (AREX)
C/ Alfonso I, nº17. 5ª Planta
50003 Zaragoza
Tel.: 00 34 (976) 22 15 71
Fax: 00 34 (976) 21 89 74
c.e.: [email protected]
web: www.aragonexterior.es
ASTURIAS
INSTITUTO DE DESARROLLO ECONÓMICO DEL PRINCIPADO DE
ASTURIAS (IDEPA)
Parque Tecnológico de Asturias
33428 Llanera (Asturias)
Tel.: 00 34 (985) 98 00 20
Fax: 00 34 (985) 26 44 55
c.e.: [email protected]
web: www.idepa.es
BALEARES
INSTITUTO DE INNOVACIÓN EMPRESARIAL
Camí de son Rapinya, s/n
07013 Palma de Mallorca
Tel.: 00 34 (971) 17 60 55
Fax: 00 34 (971) 78 48 65
c.e.: [email protected]
web: www.idi.es
CANARIAS
PROEXCA (SOCIEDAD CANARIA DE FOMENTO ECONÓMICO, S.A.)
C/ Nicolás Estévanez, 30-B. 2ª Planta
35007 Las Palmas de Gran Canaria
Tel: 00 34 (928) 30 74 50
Fax: 00 34 (928) 30 74 67
E-Mail: [email protected] /
web: www.proexca.es
CANTABRIA
SODERCAN, S.A., (SOCIEDAD PARA EL DESARROLLO REGIONAL
DE CANTABRIA)
C/ Hernán Cortés, 39
39003 Santander
Tel..: 00 34 (942) 29 00 03
Fax: 00 34 (942) 29 02 76
c.e.: informació[email protected]
web: www.sodercan.com
CASTILLA LA MANCHA
INSTITUTO DE PROMOCIÓN EXTERIOR DE CASTILLA-LA MANCHA
(IPEX)
P.I. Santa María de Benquerencia
C/ Río Cabriel, s/n
45071 Toledo
Tel.: 00 34 (925) 28 66 50
Fax: 00 34 (925) 28 66 55
C.e.: [email protected]
web: www.ipex.es
CASTILLA – LEÓN
EXCAL
C/ Jacinto Benavente, 2
Arroyo de la Encomienda. 47195 Valladolid
Tel.: 00 34 (983) 29 39 66
Fax: 00 34 (983) 20 98 03
c.e.: [email protected]
web: www.excal.es
CATALUÑA
ACC1Ó
Paseo de Gracia, 129
08008 Barcelona
Tel.: 00 34 (93) 476 72 84/00
Fax: 00 34 (93) 476 73 03/00
c.e.: [email protected]
web: www.cidem.com
CEUTA
PROCESA (SOCIEDAD DE PROMOCIÓN Y DESARROLLO DE CEUTA)
C/ Padilla, s/n
Edificio Ceuta Center, 1ª Planta.
51000 Ceuta
Tel.: 00 34 (95) 652 82 72
Fax: 00 34 (95) 652 82 73
c.e.: [email protected]
web: www.procesa.es
Guide to business in SpainUseful addresses8
Guide to business in SpainUseful addresses9
EXTREMADURA
SOFIEX (SOCIEDAD DE FOMENTO INDUSTRIAL)
Avda. José Fernández López, 4
06800 Mérida (Badajoz)
Tel.: 00 34 (924) 31 91 59
Fax: 00 34 (924) 31 92 12
c.e.: [email protected]
web: www.sofiex.es
GALICIA
INSTITUTO GALLEGO DE PROMOCIÓN ECONÓMICA (IGAPE)
Complejo Administrativo San Lázaro, s/n
15703 Santiago de Compostela (La Coruña)
Tel.: 00 34 (981) 54 11 80
Fax: 00 34 (981) 54 11 90
c.e.: [email protected]
web: www.igape.es
LA RIOJA
CONSEJERÍA DE HACIENDA Y PROMOCIÓN ECONÓMICA.
AGENCIA DE DESARROLLO ECONÓMICO DE LA RIOJA
C/ Muro de la Mata, 13-14
26071 Logroño
Tel.: 00 34 (941) 29 15 00
Fax: 00 34 (941) 29 15 43 / 44
c.e.: [email protected]
web: www.ader.es
MADRID
PROMOMADRID DESARROLLO INTERNACIONAL DE MADRID, S.A.
C/ Suero de Quiñones, 34. 4ª planta
28002 Madrid
Tel.: 00 34 (91) 745 01 27
Fax: 00 34 (91) 411 09 13
c.e.: [email protected]
web: www.promomadrid.com
MELILLA
PROYECTO MELILLA, S.A.
C/La Dalia, 26
Polígono Industrial de SEPES. 52006 Melilla
Tel.: 00 34 (95) 267 98 04
Fax: 00 34 (95) 267 98 10
c.e..: [email protected]
web: www.promesa.net
MURCIA
INSTITUTO DE FOMENTO DE LA REGIÓN DE MURCIA
Avda. de la Fama, 3
30003 Murcia
Tel.: 00 34 (968) 36 22 07
Fax: 00 34 (968) 36 61 63
c.e.: [email protected]
web: www.ifrm-murcia.es
NAVARRA
SODENA, SOCIEDAD DE DESARROLLO DE NAVARRA
Avda. Carlos III el Noble, 36. 1º Dcha.
31003 Pamplona
Tel.: 00 34 (848) 42 19 42
Fax: 00 34 (848) 42 19 43
c.e.: [email protected]
web: www.sodena.com
PAÍS VASCO
SPRI (SOCIEDAD PARA LA PROMOCIÓN Y RECONVERSIÓN
INDUSTRIAL, S.A.)
Alameda de Urquijo, 36. 4ª planta. Edificio Plaza Bizkaia
48011 Bilbao
Tel.: 00 34 (94) 403 70 00 (centralita)
Fax: 00 34 (94) 403 70 22
c.e..: [email protected]
web: www.spri.es
VALENCIA
COMUNIDAD VALENCIANA DE INVERSIONES
C/ Doctor Romagosa, 1. 2º
46002 Valencia
Tel.: 00 34 (96) 342 73 50
Fax: 00 34 (96) 342 73 53
c.e.: [email protected]
web: www.invest-vci.com
ZEC Tenerife
Avenida Marítima, 3. 5ª
Edificio Mapfre
38003 Santa Cruz de Tenerife
Tel.: 00 34 (922) 29 80 10
Fax: 00 34 (922) 27 80 63
c.e.: [email protected]
web: www.zec.org
Guide to business in SpainUseful addresses10
6. SPANISH ECONOMIC AND COMMERCIAL OFFICESABROAD (WWW.OFICINASCOMERCIALES.ES)
ALMATY (Kazakstán)
20, 1/2 Kaybek bi Str.
Almaty 050010, Kazakhstan
Tels.: 00 (732.72) 93.02.40/66/67
Fax: 00 (732 .72) 93.02.59
c.e.: [email protected]
AMMÁN (Jordania)
Shmeisani. Abed Al
Hamid Sharaf St Strand Bldg. 1st Floor
P.O. BOX 927148
Ammán - 11110 (Jordan)
Tels.: 00 (962-6) 560.12.81 / 568.92.05
Fax: 00 (962-6) 560.31.61
c.e.: [email protected]
ANKARA (Turquía)
And Sokak, 8/14
06680 Cankaya
Ankara
Tels.: 00 (90-312) 468.70.47
Fax: 00 (90-312) 468.69.75
c.e.: [email protected]
ARGEL (Argelia)
5, Rue Césarée. Hydra Argel
16030 Argel (Argelia)
Tels.: 00 (213-21) 60.11.34
Fax: 00 (213-21) 60.11.61
c.e.: [email protected]
ASUNCIÓN (Paraguay)
Quesada 5864
Asunción (Paraguay)
Tels.: 00 (595-21) 66.47.76 / 66.28.65 / 66.28.53
Fax: 00 (595-21) 66.46.70
c.e.: [email protected]
ATENAS (Grecia)
Vasileos Konstantinou, 44
Atenas 116-35 (Grecia)
Tels.: 00 (30-1) 210 724.71.95 / 90
Fax: 00 (30-1) 210 729.17.36
c.e.: [email protected]
BANGKOK (Tailandia, Laos, Camboya y Myanmar)
26th Floor Serm – Mit Tower
159 Sukhumvit 21 Road
10110 Bangkok (Tailandia)
Tels.: 00 (66-2) 258.90.20/258.90.21
Fax: 00 (66-2) 258.99.90
c.e.: [email protected]
BEIRUT (Líbano)
Tabaris, Gebrantueini Square
Ashada Bldg. 4ª Planta
Beirut (Líbano)
Tels.: 00 (961-1) 32.75.00/56.33/56.22
Fax: 00 (961-1) 33.32.03
c.e.: [email protected]
BELGRADO (Serbia, Montenegro y República Federal Yugoslava)
Vojuode Suplikca, 40
11118 Belgrado
Tel.: 00 (38-111) 380.68.32
Fax: 00 (38-111) 380.74.67
c.e.: [email protected]
BERLÍN (Alemania)
Lichtenstemalle, 1
D-10787 Berlín (Alemania)
Tels.: 00 (49-30) 229.21.34
Fax: 00 (49-30) 229.30.95
c.e.: [email protected]
BERNA (Suiza)
Guttenbergsbasse, 14
CH 3011 Berna
Tels.: 00 (41-31) 381.21.71
Fax: 00 (41-31) 382.18.45
c.e.: [email protected]
BOGOTÁ (Colombia)
Carrera 9, nº 99-07, oficina 901
Torre La Equidad
Bogotá (Colombia)
Tels.: 00 (57-1) 655.54.00
Fax: 00 (57-1) 250.00.07
c.e.: [email protected]
BRASILIA (Brasil)
Av. das Naçoes, lote 44, quadra 811
70429-900 Brasilia D.F. (Brasil)
Tels.: 00 (55-61) 242.93.94/244.49.66
Fax: 00 (55-61) 242.08.99
c.e.: [email protected]
6. Spanish economic and commercial offices abroad(www.oficinascomerciales.es)
BRATISLAVA (República Eslovaca)
Prepóstska, 10
851 02 Bratislava
Tel.: (00-4212) 5441.57.30
Fax: (00-4212) 5441.58.30
c.e.: [email protected]
BRUSELAS (Bélgica y Luxemburgo)
Rue Montoyer, 10, 1º
B-1000 Bruselas (Bélgica)
Tel.: 00 (32-2) 551.10.40
Fax: 00 (32-2) 551.10.69
c.e.: [email protected]
REPRESENTACIÓN PERMANENTE DE ESPAÑA ANTE LA UE
Boulevard du Régente, 52
1000 Bruselas (Bélgica)
Tel.: 00 (32-2) 509.86.11
Fax: 00 (32-2) 511.19.40
c.e.: [email protected]
Web: www.es-ue.org
BUCAREST (Rumanía, Moldavia)
Bd. Dacia, 42 (16 antiguo)
79403 Bucarest (Rumania)
Tels.: 00 (42-1) 210.07.40/07.41
Fax: 00 (42-1) 210.04.97
c.e.: [email protected]
BUDAPEST (Hungría)
Nádor Utca. nº 23
1051 Budapest (Hungría)
Tel.: 00 (36-1) 302.00.74
Fax: 00 (36-1) 302.00.70
c.e.: [email protected]
BUENOS AIRES (Argentina)
Avda. Leandro N. Alem, 690 –6
1001 Buenos Aires (Argentina)
Tels.: 00 (54-11) 43.11.49.44/49.45/49.46
Fax: 00 (54-11) 43.12.66.19
c.e.: [email protected]
CARACAS (Venezuela, Antillas Holandesas, Barbados, Antigua,
Bahamas, Surinam, Bermudas, Dominica, Granada, San Cristóbal
y Nieves, San Vicente y Las Granadinas, Santa Lucía, Guayana y
Trinidad y Tobago, Aruba)
Avda. Francisco de Miranda. Edificio Parque Cristal
Los Palos Grandes
1060 Caracas (Venezuela)
Apartado de Correos (1060-A)
Tels.: 00 (58-212) 284.92.77
285.58.48 / 29.13
Fax: 00 (58-212) 284.99.64
c.e.: [email protected]
CASABLANCA (Marruecos)
31 Rue Faïdi Khalifa (Ed. Lafayette)
Casablanca (Marruecos) 21000
Tels.: 00 (2122) 2.31.31.18
Fax: 00 (2122) 2.31.32.70
c.e.:[email protected]
CHICAGO (EE.UU.) (Illinois, Indiana, Iowa, Minnesota, Missouri,
Nebraska, Dakota del Norte, Dakota del Sur, Ohio, Wisconsin,
Kentucky, Kansas y Michigan)
500 North Michigan Av. Planta 15 (Suite 1500)
Chicago - Illinois 60611 (EE.UU.)
Tels.: 00 (1-312) 644.11.54
Fax: 00 (1-312) 527.55.31
c.e.: [email protected]
COPENHAGUE (Dinamarca y Lituania)
Vesterbrogade, 10 - 3°
1620 Copenhague V (Dinamarca)
Tels.: 00 (45-33) 31.22.10
Fax: 00 (45-33) 21.33.90
c.e.: [email protected]
DAKAR (Senegal, Mauritania, Gambia, Mali, Guinea Bissau,
Cabo Verde, Liberia, Sierra Leona, Guinea Conakry, Niger y
Burkina Faso)
3-5 Avenue Carde, 2 eme étage droit
B.P. 4146, Dakar (Senegal)
Tels.: 00 (221) 821.03.68/86.93
Fax: 00 (221) 821.49.66
c.e.: [email protected]
DAMASCO (Siria y Chipre)
61 Al Hidjaz Al Jadid St./ C.P. 2738
Damasco (Siria)
Apartado de Correos 2738
Tels.: 00 (963-11) 333.00.15/36.19
Fax: 00 (963-11) 333.73.68
c.e.: [email protected]
DUBAI (Emiratos Árabes Unidos y Qatar)
Emirates Towers Offices (Planta 26 – of. 3)
Código postal 504929
Dubai (EAU)
Tel.: 00 (971-4) 330.01.10
Fax: 00 (971-4) 330.01.12
c.e.: [email protected]
DUBLÍN (Irlanda)
35, Molesworth St.
Dublín - 2 (Irlanda)
Tel.: 00 (353-1) 661.63.13
Fax: 00 (353-1) 661.01.11
c.e.: [email protected]
Guide to business in SpainUseful addresses11
DÜSSELDORF (Alemania)
Jägerhofstrasse, 32
40479 Düsseldorf (Alemania)
Tel.: 00 (49-211) 49.36.60
Fax: 00 (49-211) 49.97.11
c.e.: [email protected]
EL CAIRO (Egipto, Sudán, Etiopía y Djibouti)
19, Boulos Hanna Street
Midan Finney / Dokki
El Cairo (Egipto)
Tels.: 00 (20-2) 336.15.88/53.74
Fax: 00 (20-2) 336.15.77
c.e.: [email protected]
ESTAMBUL (Turquía)
Cumhuryet Cad., 18 K, 5 Dörtler Apt. Elmadag
Estambul (Turquía)
Tels.: 00 (90-212) 296.61.61 / 83.00
Fax: 00 (90-212) 296.88.30
c.e.: [email protected]
ESTOCOLMO (Suecia y Letonia)
Spanska Ambassadens Haudelsaudehing
SE-111-57 Estocolmo
Tel.: 00 (46-8) 24.66.10
Fax: 00 (46-8) 20.88.92
c.e.: [email protected]
GUATEMALA (Guatemala, Honduras, Nicaragua y Belice)
Edificio Géminis, 10 - Torre Sur - Oficina 1701
12 Calle 1 – 25, Zona 10
01010 Guatemala C.A. (Guatemala)
Tels.: 00 (502-3) 35.30.11/12/13/14
Fax: 00 (502-3) 35.30.16
c.e.: [email protected]
HELSINKI (Finlandia y Estonia)
Pohjoisesplanadi, 27C
00100 Helsinki (Finlandia)
Tel.: 00 (358-9) 685.05.30
Fax: 00 (358-9) 685.05.35
c.e.: [email protected]
HO CHI MINH CITY (Vietnam)
Pham Ngoc Thach Guest House
25, Phung Khac Khoan
District 1
Ho Chi Minh City (Vietnam)
Tel.: 00 (848) 825.01.73
Fax: 00 (848) 825.01.74
c.e.: [email protected]
HONG KONG (Macao y Hong Kong)
2004, Tower One, Lippo Centre
89 Queensway Admiralty
Hong Kong (China)
Tels.: 00 (852) 25.21.74.33 / 25.22.75.12
Fax: 00 (852) 28.45.34.48
c.e.: [email protected]
ISLAMABAD (Pakistán) (Afganistán)
Street 6, Ramna 5 - Diplomatic Enclave
Islamabad (Pakistán)
Código postal 1144
Tel.: 00 (9251) 227.94.84
Fax: 00 (9251) 208.87.74
c.e.: [email protected]
JOHANNESBURGO (República Sudafricana, Mozambique,
Lesotho, Swazilandia, Botswana y Zimbabwe)
Fedsure Towers, Planta 8
13 Fredman Drive
Sandton 2146 (Johannesburgo)
Código postal 781050
Tels.: 00 (27-11) 883.21.02
Fax: 00 (27-11) 883.26.24
c.e.:[email protected]
KIEV (Ucrania)
Vul skovorody, 19 A – 7º
04070 Kiev (Ucrania)
Tels.: 00 (38044) 494.29.40
Fax: 00 (38044) 494.29.42
c.e.: [email protected]
KUALA LUMPUR (Malasia y Brunei)
Menara Boustead, Piso 20
69, Jalan Raja Chulan
50200 Kuala Lumpur (Malasia)
Código postal 11856 – 50760 Kuala Lumpur
Tel.: 00 (60-3) 21.48.73.00
Fax: 00 (60-3) 21.41.50.06
c.e.:[email protected]
LA HABANA (Cuba)
Calle 22, nº 516, entre 5ª y 7ª
Miramar 11300
La Habana (Cuba)
Tels.: 00 (53-7) 204.81.00 / 98
Fax: 00 (53-7) 204.80.17
c.e.: [email protected]
Guide to business in SpainUseful addresses12
Guide to business in SpainUseful addresses13
LA HAYA (Países Bajos)
Embajada de España
Burg. Patijnlaan, 67
2585 B.J. La Haya (Países Bajos)
Tels.: 00 (31-70) 364.31.66 / 345.13.13/363.55.09
Fax: 00 (31-70) 360.82.74
c.e.: lahaya@es
LA PAZ (Bolivia)
Avda. 20 Octubre, esq. Calle Campos
Edif. Torre azul piso 15
Casilla de correo 1577 - La Paz
Tel.: 00 (591-2) 214.10.16
Fax: 00 (591-2) 244.01.88
c.e.: [email protected]
LAGOS (Nigeria, Ghana, Benin, Togo, Chad, Camerún, Gabón,
Guinea Ecuatorial y República Centroafricana)
Plot 933 Idejo St.
Código postal 50495 Ikoyi
Victoria Island-Lagos (Nigeria)
Tels.: 00 (234-1) 261.58.32 / 262.16.25
Fax: 00 (234-1) 261.74.27
c.e.: [email protected]
LIMA (Perú)
Avda. Jorge Basadre, 405
Apartado de Correos 270067
San Isidro - Lima 27 (Perú)
Tels.: 00 (51-1) 442.17.88 / 17.89
Fax: 00 (51-1) 442.17.90
c.e.: [email protected]
LISBOA (Portugal)
Campo Grande, 28 2ºA/B/E)
1700 093 Lisboa (Portugal)
Tel.: 00 (351-21) 781.76.40
Fax: 00 (351-21) 796.69.95
c.e.: [email protected]
LONDRES (Reino Unido)
66, Chiltern Street (2ª Y 3ª Planta)
Londres W1U 4LS (R.U.)
Tel.: 00 (44-20) 7467.23.30
Fax: 00 (44-20) 7487.55.86/7224.64.09
c.e.: [email protected]
LOS ÁNGELES (California, Alaska, Arizona, Hawai, Idaho,
Montana, Nevada, Nuevo México, Washington, Wyoming,
Colorado, Oregón y Utah)
1900 Avenue of the Stars – Suite 2430
Los Angeles, CA 90067 (EE.UU.)
Tels.: 00 (1-310) 277.51.25
Fax: 00 (1-310) 277.51.26
c.e.: [email protected]
LUANDA (Angola, República del Congo, República Democrática
del Congo, Santo Tomé y Príncipe, Zambia y Namibia)
Rua Jaime Cortesão, 16
Luanda (Angola)
Tel.: 00 (244 2) 22.350.227 / 351.938 / 350.121
Fax: 00 (244 2) 22.350.142
c.e.: [email protected]
MANILA (Filipinas)
Yuchengco Tower RCBC Plaza, Piso 27
Sen. Gil Puyat J. Puyat Avenue
Makati City, Metro Manila (Filipinas)
Tels.: 00 (63-2) 843.37.74/37.75/37.83
Fax: 00 (63-2) 843.37.90
c.e.: [email protected]
MÉXICO D.F. (México)Avda. Presidente Masarik, 473, Esq. MoliereColonia Los Morales - Polanco11510 México D.F. (México)Tel.: 00 (52-555) 281.23.50Fax: 00 (52-555) 281.21.30/24.51c.e.: [email protected]
MIAMI (Florida, Alabama, Arkansas, Georgia, Louisiana,Mississippi, Oklahoma, Tennessee y Texas)2655 Le Jeune Road (Suite 1114)Coral GablesMiami, FI 33134 (EE.UU.)Tel.: 00 (1-305) 446.43.87Fax: 00 (1-305) 446.26.02c.e.: [email protected]
MILÁN (Italia)Via del Vecchio/Politecnico, 3 (16ª)Milán 20121 (Italia)Tel.: 00 (39-02) 78.14.00Fax: 00 (39-02) 78.14.14c.e.: [email protected]
MONTERREY (México)Av. De la industria nº 555-B, 4º pisoCol. Campestre San Pedro Garza GarcíaC.P. 66265 Nuevo León, MéxicoTel.: 00 (5281) 8335 9992Fax: 00 (5281) 8335 9994 c.e.: [email protected]
MONTEVIDEO (Uruguay)Plaza Cagancha, 1335 (Piso 10 - Oficina 1001)11100 Montevideo (Uruguay)Tels.: 00 (598-2) 900.03.37/83.26/74.77Fax: 00 (598-2) 902.16.00c.e.: [email protected]
Guide to business in SpainUseful addresses14
MOSCÚ (Rusia, Armenia, Bielorrusia, Georgia, Kazajstán,
Kirguistán, Turkmenistán, Tayikistán, Uzbekistán y Azerbaiyán)
Business Center “Mojovaya”
UI Vozdvizhenka, 4/7
(Entrada por UI Mojovaya, 7 stro, 2,3º)
125009 Moscú (Federación Rusa)
Tels.: 00(7-495) 783.92.81/8283/8485
Fax: 00 (7-495) 783.92.91/86
c.e.: [email protected]
NAIROBI (Kenia, Uganda, Tanzania, Mauricio y Seychelles)
CBA Building 3 Rd. Floor, MARA & RAGATI ROADS UPPERHILL
P.O. BOX 20961
00202 Nairobi
Tels.: 00 254.202.71.14.34 / 41.11
Fax: 00 254.220.271.14.32
c.e.: [email protected]
NUEVA DELHI (India, Nepal, Sri Lanka, Bangladesh y Maldivas)
2 Palam Marg. Vasant Vihar
110057 Nueva Delhi (India)
Tels.: 00 (91-11) 2614.64.77/51.96/52.05/52.06
Fax: 00 (91-11) 2614.59.56/2614.32.17
c.e.: [email protected]
NUEVA YORK (Nueva York, Connecticut, Maine,
Massachussetts, New Hampshire, New Jersey,
Pennsylvania, Rhode Island y Vermont)
405 Lexington Av. Planta 44
10174-0331 Nueva York
Tels.: 00 (1-212) 661.49.59/49.60/61/62
Fax: 00 (1-212) 972.24.94/867.60.55
c.e.: [email protected]
OSLO (Noruega e Islandia)
Karl Johansgate, 18C
0159 Oslo (Noruega)
Tel.: 00 (47) 23.31.06.80/06.83
Fax: 00 (47) 23.31.06.86
c.e.: [email protected]
OTTAWA (Canadá)
151 Slater St. (Suite 801)
Ottawa - Ontario K1P 5H3 (Canadá)
Tels.: 00 (1-613) 236.04.00/04.09
Fax: 00 (1-613) 563.28.49
c.e.: [email protected]
PANAMÁ (Panamá y Costa Rica)
Edificio Bco. de Atlántico, calles 50 y 53, Obarrio
Apartado 8028, Panamé, R.P.
Tels.: 00 (507) 269.41.82/40.18
Fax: 00 (507) 264.34.58
c.e.: [email protected]
PARÍS (Francia, Martinica, Guadalupe, La Reunión, Polinesia
Francesa, Guayana Francesa, Nueva Caledonia, Monaco,
Andorra)
11, Avenue D´Lena. 75016 París (Francia)
Tel.: 00 (33-1) 53.57.95.50
Fax: 00 (33-1) 47.20.97.22
c.e.: [email protected]
PARÍS (Representación Permanente de España ante la OCDE)
22, Avenue Marceau
75008 París (Francia)
Tel.: 00 (33-1) 44.43.30.31/32/34
Fax: 00 (33-1) 40.70.06.54
c.e.: [email protected]
PEKÍN (Mongolia, China y Corea del Norte)
Spain Building, 5Th and 6Th Floor - Gongtinanlu A1-B,
CHAOYANG DISTRICT
100020 Beijing (China)
Tel.: 00 (8610) 58.79.97.33
Fax: 00 (8610) 58.79.97.34
c.e.: [email protected]
PRAGA (República Checa)
Stepánská, 10
12000 Praga-2 (República Checa)
Tels. 00 (42-02) 2494.12.55/56/57/58/59/60
Fax: 00 (42-02) 2494.11.15/12.26
c.e.: [email protected]
QUITO (Ecuador)
Edificio Fórum 300, piso 10
Avda. República 396 y Diego de Almagro -Quito (Ecuador)
Tels.: 00 (593-2) 254.47.16/61.74/
255.57.02/75.04
Fax: 00 (593-2) 256.41.74
c.e.: [email protected]
RABAT (Marruecos)
78, Avenue du Chellah
Rabat (Marruecos)
Tels.: 00 (212-3-7) 76.07.41/17.07/61.36
Fax: 00 (212-3-7) 76.81.82
c.e.: [email protected]
RIAD (Arabia Saudí, Omán, Yemen, Bahrein y Kuwait)
Avd. King Fahad-Distrito Olaya – Area C
Edificio Al faisaliah ToweR, Planta 11
Código postal 94.327
11693 Al Riyadh (Arabia Saudí)
Tels.: 00 (966-1) 464.51.25/461.21.54/273.47.07
Fax: 00 (966-1) 273.47.05/462.13.03
c.e.: [email protected]
ROMA (Italia, Albania, San Marino y Malta)
Viale delle Milizie, 12
00192 Roma (Italia)
Tels.: 00 (39-06) 372.82.06/81.27/82.23
Fax: 00 (39-06) 372.83.65
c.e.: [email protected]
SAN JUAN DE PUERTO RICO (Puerto Rico e Islas Vírgenes
Norteamericanas)
Edificio Capital Center – I
239 Avda. Arterial Hostos, ste. 705
Puerto Rico 00918-1476
Código postal 193179- San Juan PR 00919-3179
Tel.: 00 (1787) 758.63.45
Fax: 00 (1787) 758.69.48
c.e.: [email protected]
SAN SALVADOR (El Salvador)
Boulevard del Hipódromo
Edificio Gran Plaza Local 206 – 2º piso
Colonia San Benito
San Salvador (El Salvador)
Tel.: 00 (503) 2275.78.21/22
Fax: 00 (503) 2275.78.23
c.e.:[email protected]
SANTIAGO DE CHILE (Chile)
Avda. 11 de Septiembre 1901, esq. Calle Marchant Pereira, Piso 8
750- 0503 Providencia
Santiago de Chile (Chile)
Tel.: 00 (56-2) 204.97.86
Fax: 00 (56-2) 204.58.14
c.e.: [email protected]
SANTO DOMINGO (República Dominicana, Jamaica y Haití)
Avda. W. Churchill, Esquina Luis F. Thomén
Edificio Torre BHD (4ª Planta) Sector Evaristo Morales
Apartado Correos 21421
Santo Domingo (República Dominicana)
Tel.: 00 (1809) 567.56.82
Fax: 00 (1809) 542.60.26
c.e.: [email protected]
SAO PAULO (Brasil)
Praça General Gentil Falcao, 108. 8º Andar Cj. 82
Brooklin Novo- CEP 04571-010
São Paulo S.P.(Brasil)
Tel.: 00 (5511) 51.05.43.78
Fax: 00 (5511) 51.05.43.82
c.e.: [email protected]
SEÚL (Corea del Sur)
17th Fl. Cheonggye 11 Bldg. 149,
Seorin-dong, Chongro-gu
Seúl 110-726 (Corea del Sur)
Tels.: 00 (82-2) 736.84.54
Fax: 00 (82-2) 736.84.56
c.e.: [email protected]
SHANGHAI (China)
25Th Floor, Westgate Mall, 1038 Nanjing XI Road
200041 Shanghai (China)
Tels.: 00 (86-21) 62.17.26.20
Fax: 00 (86-21) 62.67.77.50
c.e.: [email protected]
SIDNEY (AUSTRALIA, NUEVA ZELANDA, PAPÚA NUEVA GUINEA,
FIYI, ISLAS SALOMÓN, TONGA)
Edgecliff Centre, Suite 408
203 New South Head Road
Edgecliff NSW 2027 Sidney (Australia)
Tels.: 00 (61-2) 93.62.42.12/42.13/42.14
Fax: 00 (61-2) 93.62.40.57
c.e.: [email protected]
SINGAPUR (Singapur)
7 Temasek Boulevard, 19-03 Suntec Tower one
Singapore 038987
Tels.: 00 (65) 6732.97.88/97.89
Fax: 00 (65) 6732.97.80
c.e.: [email protected]
SOFÍA (Bulgaria, Macedonia)
Dragan Tzankov, 36, world Trade Center Interpred
Bloque B, Piso 8, oficina 806
1040 Sofía
Tels.: 00 (3592) 971.20.01/969.38.67/969.31.85
Fax: 00 (3592) 971.20.63
c.e.: [email protected]
TEGUCIGALPA (Honduras)
Avda. República de Panamá 1702
Edificio CIICSA – 1702 Col. Palmira
Tegucigalpa (Honduras)
Tel.: 00 (504) 235.57.50
Fax: 00 (504) 235.57.51
c.e.: [email protected]
TEHERÁN (Irán y Afganistán)
26 Golgasht St. Africa Ave.
19158 Teherán (Irán)
Tel.: 00 (98-21) 201.61.18/ 2201 59 10/ 2204 15 28
Fax: 00 (98-21) 204.90.23
c.e.: [email protected]
Guide to business in SpainUseful addresses15
TEL-AVIV (Israel)
2, Ibn Gvirol St., Planta 4ª
64077 Tel-Aviv (Israel)
Tels.: 00 (972-3) 695.56.91/695.57.04
Fax: 00 (972-3) 695.29.94
c.e.: [email protected]
TOKIO (Japón)
3FI, 1-3-29, Roppongi, MINATO-KU
Tokio 106-0032
Tel.: 00 (81-3) 55.75.04.31
Fax: 00 (81-3) 55.75.64.31
c.e.: [email protected]
TORONTO (Canadá)
2, Bloor St. East (Suite 1506)
M4W 1A8 Toronto - Ontario (Canadá)
Tels.: 00 (1-416) 967.04.88
Fax: 00 (1-416) 968.95.47
c.e.: [email protected]
TRÍPOLI (Libia)
Wesait El-Ebdery- Zona fashlum
Código postal 3572
Trípoli, LIBIA
Tels.: 00 (218-21) 340.23.63/64/66/67
Fax: 00 (218-21) 340.23.59
c.e.: [email protected]
TÚNEZ (Túnez)
130, Av. Jugurtha
1082 Túnez (Túnez)
Tels.: 00 (21671) 78.81.03/78.03.39/79.66.43
Fax: 00 (21671) 78.76.02
c.e.: [email protected]
VARSOVIA (Polonia)
Genewska, 16
03-993 Varsovia (Polonia)
Código postal 111
Tels.: 00 (48-22) 617.94.08/63.68/616.09.54
Fax: 00 (48-22) 617.29.11
c.e.: [email protected]
VIENA (Austria y Eslovenia)
Stubenring, 16-1
A-1011 Viena (Austria)
Código postal 604
Tels.: 00 (43-1) 513.39.33/39.34
Fax: 00 (43-1) 513.81.47
c.e.: [email protected]
VILNIUS (Lituania)
Victoria Building
Jasinsicio 16 B- LT 01112 VILNIUS
Tels: 00 (370-5) 254.68.00/ 02
Fax : 00 (370-5) 254.68.01
E-Mail: [email protected]
WASHINGTON (Carolina del Norte, Carolina del Sur,
Delaware, Maryland, Virginia, West Virginia y
Distrito de Columbia)
2375 Pennsilvanya Av. N.W.
Washington, DC (EE.UU.) 20037-1736
Tel.: 00 (1-202) 728.23.68
Fax: 00 (1-202) 466.73.85
c.e.: [email protected]
YAKARTA (Indonesia)
JI. H. Agus Salim, 61
Código postal 41 Kosgoro
Yakarta 10350 (Indonesia)
Tels.: 00 (62-21) 310.74.90/391.75.43/44
Fax: 00 (62-21) 319.30.164
c.e.: [email protected]
ZAGREB (Croacia, Bosnia y Herzegovina)
Savska 41/1 (Edif. Zagrepcanka)
1000 Zagreb (Croacia)
Tels.: 00 (385-1) 617.69.01/617.72.23
Fax: 00 (385-1) 617.66.69
c.e.: [email protected]
Guide to business in SpainUseful addresses16
[email protected] Estatal para la Promoción y Atracción de las
Inversiones Exteriores, S.A.U. RM: Tomo 21818, libro 0, folio
15, sección 8, hoja M-388683,
Inscripción 1. NIF: A-84479013. Depósito legal: M-3674-2007.
Published 2010
This guide was researched and written by Garrigues on behalf
of INVEST IN SPAIN.
This guide is correct to the best of our knowledge and belief at
the date indicated below. It is, however, written as a general
guide so it is necesary that specific professional advice be
sought before any action is taken.
Madrid, January 2010
Prepared by:
IThis Exibit explains the basic legislative aspectsthat govern the various vehicles, corporate orotherwise, that can be used by foreign investorsin order to operate in Spain. Specifically, thelegal requirements that must be observed forboth formation (minimum capital and the timeat which it must be paid, minimum number ofmembers, requirement to be met by the bylaws,etc.), and the subsequent pursuit of its business(rules governing the adoption of usinessresolutions, powers of the managing body, therules on liability of partners and shareholders,etc.).
Guide to business in Spain
Appendix ICompany andcommercial law
{ }Currently being updated owing
to a change in legislation
Guide to business in SpainAppendix I. Company and commercial law2
I1. Applicable legislation
2. Forms of business enterprise
3. Liability of shareholders and members
4. Basic legislation governing an S.A.
5. Basic characteristics of an S.A.
6. Governing bodies of an S.A.
7. European public limited-liability company (S.E.)
8. Basic characteristics of limited liability
companies
9. Professional services firm (S.P.)
10. Sole shareholder companies
11. Branches
12. Representative office
3
5
6
7
9
14
20
22
26
28
29
32
Guide to business in Spain
Appendix ICompany and commercial law
{ }
Galicia
Asturias Cantabria PaísVasco
La Rioja
Navarra
Castilla y León
Extremadura
Andalucía
Castilla - La Mancha
Comunidad de Madrid
Aragón
Cataluña
Murcia
ComunidadValenciana
Canarias
Baleares
FRANCE
PORTUGAL
MORROCO
La Coruña
Santiago de Compostela Lugo
Orense
OviedoSantander
León
Palencia
Valladolid
Segovia
Ávila
Soria
Logroño
Vitoria
Pamplona
Huesca
Zaragoza
Lérida
Tarragona
Castellón de la Plana
Valencia
Alicante
Murcia
Albacete
Cuenca
Madrid
Toledo
Cáceres
Mérida
Córdoba
Sevilla
Huelva
Cádiz
Ceuta
Málaga
Granada
Jaén
Almería
Melilla
BadajozCiudad Real
Guadalajara
Palma De Mallorca
Barcelona
Gerona
Teruel
BilbaoSan Sebastián
Salamanca
Burgos
Zamora
Pontevedra
Las Palmas de Gran Canaria
Santa Cruz de Tenerife
Guide to business in SpainAppendix I. Company and commercial law3
1. Applicable legislation
1. APPLICABLE LEGISLATION
Spanish corporate law was substantially modified by Act 19/1989. One of the stated purposes of this
law was to adapt Spanish corporate law to the relevant EU Directives following Spain’s accession to
the European Community. However, Act 19/1989 is more than a mere adaptation, since it includes
many new provisions which are not required by EU law.
Due to the very substantial modifications introduced by Act 19/1989, an amended version of the
Corporations Law including such modifications was approved by Legislative Royal Decree 1564/1989
on December 22, 1989. This legislation is referred to hereinafter as the “Corporations Law”.
Following the promulgation of Act 19/1989, which dealt essentially with corporations, a new law
regulating limited liability companies was enacted in 1995 (Act 2/1995, of March 23, hereinafter the
“Limited Liability Companies Law”), and Royal Decree 1784/1996 was also enacted, establishing new
Mercantile Register Regulations. This corporate form was also provided for in Act 7/2003, of April 1,
2003, on the New Limited Liability Company.
The Commercial Code, the Corporations Law, the Limited Liability Companies Law and the Mercantile
Register Regulations are the basic sources of law in this field.
Lastly, the EU Council of Ministers on October 8, 2001, adopted Council Regulation (EC) no.
2157/2001, which passes the Statute for a European Company (SE), together with Council Directive
2001/86/EC, which completes the Statute for the European Company with regard to the involvement
of employees.
Guide to business in SpainAppendix I. Company and commercial law4
The Regulation came into force on October 8, 2004. Act 19/2005, of November 14, on the European
Company domiciled in Spain, guarantees the effectiveness of the directly applicable rules contained
in the Regulation, and is complemented by the internal measures required for such purposes.
Regarding the Directive, its implementation into national law was completed and came into force on
October 20, 2006, through Act 31/2006, of October 18, regulating the intervention of employees in
the Corporations and cooperative companies.
The Regulation on the European Company affords to companies operating in various Member States
the option of being established as a single company under certain aspects of EU law and being
capable to operate throughout the EU with a mixed regulation in which national and EU rules
coexist, and unified management and incorporation and operation system. For companies acting in
different EU Member States, the European Company offers the possibility of reducing their
administrative costs with a legal structure adapted to the EU Regulation. This new Regulation may
result in the restructuring of large companies currently operating in various Member States.
In addition, March 15, 2007, marked the approval of Act 2/2007 on Professional Services Firms,
which regulates the formation of commercial undertakings by members of professional associations,
with the special feature that such firms will be formed in accordance with any of the forms provided
for in the law, albeit subject to the specific requirements established for firms of this kind.
January 1, 2008, marked the entry into force of Act 16/2007, of July 4, on the reform and adaptation
of the corporate/commercial legislation on accounting matters for its international harmonization
based on EU legislation, which amends, inter alia, the Commercial Code, the Corporations Law and
the Limited Liability Companies Law.
Lastly, Act 3/2009, of April 3, on structural modifications to commercial companies entered into force
in July 2009, reflecting the desire of Spanish lawmakers to adequately respond to the growing trend
in internationalization of economic operators, in line with the latest legislation made at European
level (including Directive 2005/56/EC on cross-border mergers and Directive 2007/63/EC, amending
Council Directives 78/855/EEC and 82/891/EEC), and to readjust certain business restructuring
processes to ensure that they are adapted to current commercial law practices, including changes in
mergers, spin-offs or transfers en bloc of assets and liabilities, and international transfers of
registered office.
2. FORMS OF BUSINESS ENTERPRISE
Spanish law envisages various different kinds of mercantile entities, all of which can be used by
foreign investors.
The most significant are:
�• Corporation (“Sociedad Anónima”, abbreviated as “S.A.”).
�• European Public Limited-Liability Company (“Sociedad Anónima Europea”, abbreviated as “S.E.”)
�• Limited Liability Company (“Sociedad de Responsabilidad Limitada”, abbreviated as “S.L.” or
“S.R.L.”).
�• New Limited Liability Company (“Sociedad Limitada Nueva Empresa” abbreviated as “S.L.N.E.”).
�• General Partnership (“Sociedad Regular Colectiva”, abbreviated as “S.R.C.” or “S.C.”).
�• Limited Partnership (“Sociedad en Comandita”, abbreviated as “S. en Com.” Or “S. Com.”) or
Limited Partnership by Shares (“Sociedad en Comandita por Acciones”, abbreviated as “S.
Com. p. A.”).
�• Professional Services Firm (“Sociedad Profesional”, abbreviated as “S.P.”)1.
Traditionally, the corporation (“S.A.”) has been by far the most commonly used form, whereas thelimited partnership has been rarely used.
However, the limited liability company (“S.L.”) has gained popularity as a result, among otherreasons, of its comprehensive regulation under Act 2/1995 and a lower minimum capitalrequirement than that for S.A.’s.
As variations on the above corporate forms of S.A. and S.L., we find (i) the European public limited-liability company (S.E.) as the possibility offered by EU legislation to companies that operate invarious Member States to create a single company capable of operating in the EU in accordance witha single set of rules and a unified management system; (ii) the new limited liability company(S.L.N.E.) as a variation on the S.L. specially intended for small and medium-sized companies thatsimplifies the requirements for its formation; and (iii) lastly, the professional services firm (S.P.) thepurpose of which is the common pursuit of a professional association activity, which may be formedin accordance with any of the corporate forms legally established under their specific legal provisions.
Some of the salient features of each of the above corporate forms are summarized below. It shouldbe noted that in many instances the Law provides only minimum standards or general rules. Thefounders of a company have a great deal of flexibility in tailoring the structure of the company totheir specific needs through inclusion of certain clauses in the bylaws, for which purpose they shouldseek proper legal advice.
2. Forms of business enterprise
Guide to business in SpainAppendix I. Company and commercial law5
1 The corporate name of this kind of company should include, togetherwith the corporate form in question, the expression "Professional" or theabbreviation "P", (for example, "Sociedad anónima profesional"[Professional corporation] or "S.A.P.").
3. Liability of shareholders and members
3. LIABILITY OF SHAREHOLDERS AND MEMBERS
Both the S.A. and the S.L. are companies with capital in which the liability of the shareholders or
members is generally limited to the amount of capital contributed by each.
Technically, the capital of an S.A. is divided into shares, whereas the capital of an S.L. is divided into
participation units.
The general rule is clearly one of limited liability; however, under very exceptional circumstances, the
corporate veil can be pierced to protect the interest of third parties. In these exceptional cases, the
courts have followed the criteria of the “piercing of the corporate veil” (“levantamiento del velo”) as
a reaction against the misuse of the company’s legal status by the shareholders or members for
fraudulent purposes; the courts may look behind it and not differentiate between the company’s
assets and those of each of the shareholders or members when establishing liabilities.
Liability is not limited in a general partnership (S.R.C.). General partners are personally jointly and
severally liable with the whole of their net worth for the debts of the partnership.
A limited partnership (S. Com.) is a partnership in which there is at least one general partner and
one or more limited partners. General partners are personally jointly and severally liable with the
whole of their net worth for the debts of the partnership. Limited partners are only liable for the
amount of capital they contribute or promise to contribute to the partnership. The capital of limited
partnerships may be divided into participation units or shares.
Lastly, as regards the professional services firm (S.P.), without prejudice to the liability of the
members in accordance with the rules of the corporate form adopted, the professional members will
be jointly and severally liable with the firm for its professional acts, and they will be subject to such
general rules on contractual and noncontractual liability as may apply.
Guide to business in SpainAppendix I. Company and commercial law6
4. Basic legislation governing an S.A.
Guide to business in SpainAppendix I. Company and commercial law7
4. BASIC LEGISLATION GOVERNING AN S.A.
This section and the two following ones summarize some of the most significant substantive aspects
that commonly interest foreign investors with respect to the most widely used form of business entity
in Spain, the S.A.
For the most part, the issues discussed below are applicable to the S.L. as well, although some of the
most significant rules and exceptions applicable to the S.L. are dealt with in Section 8 below.
4.1 Minimum capital
The minimum amount of capital stock required for an S.A. pursuant to the Corporations Law is
€60,102. The capital must be fully subscribed and at least 25% of the par value of the shares must be
paid in.
When the capital stock is not fully paid up, the bylaws must state the manner and time period for the
payment of the remaining portion of subscribed capital. No maximum time period for payment of
calls on capital by contributions in cash is stated in the Law but five years is the maximum term for
full payment of contributions in kind.
4.2 Shareholders
No minimum number of shareholders is required by Spanish law to incorporate an S.A., although
sole shareholder companies are subject to a special system of publicity discussed in further detail in
Section 9 below.
Shareholders can be individuals or companies of any nationality and residence.
4.3 Formalities of incorporation
The shareholders or their representatives must appear before a notary public in order to execute the
public deed of incorporation. Subsequently, the public deed of incorporation has to be registered in
the Mercantile Register. Upon registration, the company acquires legal status and capacity.
There is an alternative procedure for incorporation called “successive formation”. Essentially, this
procedure involves an offering to the public at large by the promoters to subscribe shares before the
execution of the public deed of incorporation. To this end, means may be used such as publicity or
financial brokers. This system is rarely used in practice and much less so in the case of foreign
investors.
4.4 Contracts made in the corporation’s name prior to registration
The incorporation of an S.A. is a two-step process involving, as noted, execution of the public deed
before a notary public and registration in the Mercantile Register. It is only upon registration of the
public deed of incorporation that the corporation acquires legal capacity and becomes a legal entity.
Guide to business in SpainAppendix I. Company and commercial law8
Persons who enter into contracts in the name and on behalf of the corporation prior to its
registration are jointly and severally liable for their performance, unless such performance was made
conditional on the corporation’s registration and, if applicable its later assumption of liability.
Contracts made in the corporation’s name and on its behalf prior to its registration in the Mercantile
Register may generally be accepted by the corporation within three months from registration.
However, a corporation in the process of formation and its shareholders, up to the limit of the
amount they have undertaken to contribute (but not directors or representatives), are liable for the
following types of contract prior to registration:
�• Contracts that are indispensable for registration.
• Contracts entered into by the directors within the scope of the powers granted to them for the pre-
registration stage.
• Contracts entered into by virtue of a specific mandate granted by all the shareholders.
Upon registration, the corporation becomes bound by the foregoing acts and contracts.
In these cases, and if the corporation accepts acts performed prior to its registration within three
months from the date of registration, the joint and several liability of shareholders, directors or
representatives lapses.
Moreover, it should be noted that directors will be deemed to have authority to fully pursue the
corporate purpose and to perform and make all kinds of acts and contracts if the date of
commencement of the company’s operations coincides with the date of execution of the deed of
incorporation.
4.5 Acquisitions performed after registration
During the two years following incorporation, the corporation’s shareholders’ meeting must grant its
prior approval for acquisitions of assets for a consideration involving amounts in excess of 10% of the
capital stock, unless such acquisitions are within the ordinary scope of business of the corporation or
the purchase is made on a stock exchange or by public auction. In the cases in which prior
shareholders’ meeting approval is required, the requirements are basically as follows:
�• Issuance of a report prepared by the directors.
�• An independent valuation by the expert appointed by the Mercantile Register.
5. Basic characteristics of an S.A.
5. BASIC CHARACTERISTICS OF AN S.A.
5.1 Bylaws
An S.A. is basically governed by the Corporations Law and by its bylaws. The bylaws of an S.A. should
therefore be drafted in accordance with Corporations Law requirements and must at least include
reference to:
�• Name of the company.
�• Business purpose. This should be stated in a concrete and precise manner, since:
— It serves to establish the general frame-work for the activities of the company.
— The completion of the stated business purpose automatically leads to dissolution of the
company, unless the bylaws provide for an indefinite duration.
— If the business purpose is modified in such a way as to be replaced, the dissenting shareholders
and non-voting shareholders, if any, can withdraw from the company and are entitled to be
reimbursed for their shares.
�• Duration of the company. The bylaws will ordinarily stipulate that the duration is indefinite in order
to avoid triggering automatic dissolution.
�• The date on which activities commence, which normally cannot be earlier than the date of
execution of the public deed of incorporation.
�• The location of the company’s registered office, which must be in Spain, and the body competent
to establish, transfer or close branches.
�• Capital stock and shares.
�• Managing body. The bylaws must determine whether the administration is entrusted to a Board of
Directors or to some other body or person. In the case of collective management bodies, the
manner of debate and of adopting resolutions must be specified, as also the system for director’s
remuneration.
�• Restrictions, if any, on the free transferability of shares.
�• Ancillary obligations, if any. If ancillary obligations are created, the bylaws must state the content
of such obligations, whether or not they are remunerated, and the penalties, if any, for breach
thereof. Ancillary obligations are explained in further detail below.
�• The accounting year-end. If not stated expressly, the company will be deemed to end its
accounting year on December 31. The business year cannot exceed twelve months.
�• Special rights reserved to founders or promoters, if any.
Guide to business in SpainAppendix I. Company and commercial law9
Guide to business in SpainAppendix I. Company and commercial law10
Additionally, the public deed of incorporation, which includes the bylaws, may contain whatever
agreements and covenants the founders deem fit, provided that they do not contravene any law or
the fundamental principles that govern S.A.’s.
5.2 Capital stock requirements
The minimum subscribed capital for an S.A. is €60,102; at least 25% of the par value of all the shares
must be paid in upon incorporation.
For comparison purposes, the minimum capital requirements for other types of business enterprises
are as follows:
�• Limited Liability Company: €3,006, which must be fully paid in.
�• Limited Partnership by Shares: €60,102.
�• General Partnership: no minimum capital requirement.
In addition, specific regulations may provide that the capital stock of corporations engaged in certain
fields of business (e.g. banking, insurance, etc.) must, at the time of incorporation, exceed the
minimum amount required by the Corporations Law.
There are currently no mandatory minimum debt-equity ratios under Spanish mercantile law for any
type of business enterprise, (however, there is a debt-equity ratio for tax purposes: see Chapter 3,
section 2).
Lastly, it should be noted that there are special rules which could require an increase and/or
reduction in capital stock. These rules provide that there must be a certain balance between the
capital stock and the net worth of a corporation, whereby if losses are incurred reducing such net
worth to less than one-half of capital stock, the corporation will be under a mandatory cause for
dissolution, unless capital stock is sufficiently increased (or reduced) and, as from September 1,
2004, provided that it is not necessary to request for insolvency pursuant to Insolvency Law
22/2003, of July 9. On the other hand, it will be obligatory to reduce the capital when losses have
reduced the net worth of the corporation to less than two thirds of its capital stock and one fiscal year
has elapsed without its net worth having recovered. This capital reduction is not obligatory for limited
liability companies.
5.3 Shares
The following categories may be differentiated:
5.3.1 Registered vs. bearer shares
The shares of an S.A. can be registered or bearer shares. However, the shares must be registered in
the following cases:
�• If they are not fully paid in.
Guide to business in SpainAppendix I. Company and commercial law11
�• If their transferability is subject to restrictions.
�• If they are subject to ancillary obligations (see below).
When so required by special regulations (e.g. shares of banks and insurance companies).
5.3.2 Common vs. preferred stock
Preferred stock may be created as a separate class or classes pursuant to the same procedural
formalities applicable to amendment of the bylaws (i.e. quorum and voting requirements and
method of calling the shareholders’ meeting), and may include shares entitled to a preferential
dividend.
In any case, issues of shares will not be valid in the following cases:
�• Shares remunerated in the form of interest.
�• Shares which directly or indirectly alter the proportionality between their par value and voting
rights or the existing shareholders’ preferential right to subscribe new shares in capital increases.
With regard to the particular regulations on the issuance of preferred stock, there exist differences
resulting from whether the company is listed or non-listed on the stock exchange.
In the case of listed companies, the following obligations are established:
�• It is provided that where the privilege consists of the right to obtain a preferential dividend, when
distributable profits exist the company is obliged to distribute such preferential dividend.
�• The corporate bylaws should establish the consequences of failure to pay part or the entire
preferential dividend, whether this is or is not accumulative as regards the unpaid dividend, and
the possible rights of holders of privileged shares in connection with dividend to which the
ordinary shares may be entitled.
�• Higher ranking is provided for the shareholder owning privileged shares, since collection of
dividend by ordinary shares against the profits of one fiscal year is imperatively prohibited until the
preferential dividend for the same fiscal year has been paid.
In the case of non-listed companies, a more flexible system is maintained, since there are no rules of
imperative law making specific regulations in the bylaws obligatory. Nevertheless, the company is
obliged to declare a dividend wherever distributable profits exist, unless otherwise provided in its
corporate bylaws.
5.3.3 Shares issued with a premium
Shares may be issued with a premium payable to the company above their par value. In such cases
the premium must be fully paid in upon subscription of the shares.
5.3.4 Non-voting stock
Non-voting stock may be issued for a total par value that does not exceed one-half of the total paid-
in capital.
The special rights attached to non-voting stock are as follows:
�• Minimum annual dividend:
The minimum annual dividend shall be set by the bylaws in any percentage in relation to the
amount of paid-in capital corresponding to each non-voting share. The minimum annual dividend
and ordinary dividends are cumulative for a period of five years in the case of non-listed
companies. In the case of listed companies this period will be indefinite. In other words, non-
voting shares also participate proportionately with common shares if a dividend is distributed on
the common shares.
�• Preferential rights in liquidation:
In the event of liquidation of the company, non-voting shareholders rank above common
shareholders with respect to their right to obtain reimbursement of the paid-in portion of their
shares.
�• Capital reduction:
If capital is reduced to offset losses, the reduction must first be applied against all other classes of
stock before it can affect non-voting stock.
�• Shareholder rights:
Non-voting stock has the same basic rights as common stock except for the right to vote at
shareholders’ meetings (see description of basic shareholder rights below).
However, under certain exceptional circumstances, holders of non-voting shares may acquire a
transitory right to vote at shareholders’ meetings. Two examples follow:
�• Non-voting shareholders acquire the right to vote if the minimum annual dividend is not
distributed.
�• If, due to a capital reduction, all common shares are amortized, then non- voting stock becomes
voting stock until such time as equilibrium is restored between voting and non-voting stock (i.e.
new common shares are issued in sufficient number so that the total par value of non-voting stock
does not exceed one-half of total paid-in capital). If equilibrium is not restored within two years,
the company is subject to mandatory dissolution.
Guide to business in SpainAppendix I. Company and commercial law12
5.3.5 Redeemable shares
Redeemable shares as a form of privileged shares have been very recently introduced in Spanish
corporate legislation. However the possibility of issuing this type of shares is only open to listed
companies, subject to certain conditions.
Redeemable shares are those whose redemption of full or partial purchase by the issuer or by third
parties is fixed in time or released at the choice of the shareholder, according to the conditions of the
issue; or those whose redemption or full or partial purchase by the issuer or by third parties is
undertaken in any other manner, excluding that contemplated above.
5.3.6 Shares with ancillary obligations
An ancillary obligation is an obligation to perform certain acts or to refrain from performing certain
acts. Ancillary obligations do not form part of the capital stock of the company.
The shares of an S.A. can only be paid for with money or property, not with labor or services. The
ancillary obligation is a device whereby the labor or services or other obligations of particular
shareholders can be tied to the corporation.
5.3.7 Basic shareholder rights
The basic rights of shareholders are as follows:
�• Right to share in corporate earnings and in the assets upon liquidation.
�• Preferential right to subscribe new shares or convertible bond issues.
�• Right to attend and vote at shareholders’ meetings (except non-voting stock) and to challenge
corporate resolutions.
�• Right to obtain information about the company’s affairs.
5.3.8 Share certificates
In general, shares may be either issued physically as certificates or recorded by a book-entry system.
The conditions for recording shares under a book-entry system and the regulations of this system are
contained in the Securities Market Law (Act 24/1988), as amended by Act 37/1998 (partially
amended by Act 44/2002, of November 22, Act 35/2003, of November 4, and Royal Decree-Law
5/2005, of March 11) and by Act 26/2003.
Guide to business in SpainAppendix I. Company and commercial law13
6. Governing bodies of a S.A.
6. GOVERNING BODIES OF AN S.A.
The governing bodies of an S.A. are the shareholders’ meeting and the directors (who may or may
not be organized as a Board of Directors, as explained below).
6.1 Shareholders’ meeting
The shareholders’ meeting is the S.A.’s supreme governing body. The law distinguishes two types of
meeting: ordinary and extraordinary. Additionally, both ordinary and extraordinary meetings may be
held as universal meetings, as discussed below.
6.1.1 Ordinary shareholders’ meeting
An ordinary shareholders’ meeting may be held as and when stipulated by the bylaws, but an
ordinary meeting must be held within the first six months of the financial year to review
management’s conduct of the business and to approve, if appropriate, the financial statements of
the prior year and the proposed distribution of the prior year’s earnings. If the ordinary shareholders’
meeting is not held within the legal term, it may be called by a court, upon petition by the
shareholders and subject to prior hearing of the directors.
6.1.2 Extraordinary shareholders’ meeting
Any meeting of the shareholders other than as described above is an extraordinary shareholders’
meeting. An extraordinary shareholders’ meeting can be called:
�• By the company’s directors if and when they consider it in the company’s interests to do so.
�• By the company’s directors when requested to do so by shareholders representing at least 5% of
capital stock. In this case, the directors must call the meeting so requested to be held within thirty
days following the date of the notarial notification to them to call it.
�• By a court if the directors disregard the notification referred to above.
6.1.3 Venue and method of calling a meeting
Both ordinary and extraordinary shareholders’ meetings must be held in the municipality where the
company has its registered offices. A Spanish S.A. must be domiciled in Spain. Nevertheless, a
universal shareholders’ meeting (see below) may be held anywhere.
The formal requirements for calling a meeting, which relate to publicity and advance notice, are the
same for ordinary and extraordinary meetings. Meetings must generally be called by a notice
published in the Official Gazette of the Mercantile Register at least 15 days in advance of the meeting
and in a high-circulation newspaper of the province in which the company has its registered offices.
6.1.4 Universal shareholders’ meetings
Regardless of the type of shareholders’ meeting (ordinary or extraordinary), the formal call
requirements need not be followed if shareholders representing one hundred percent of the capital
Guide to business in SpainAppendix I. Company and commercial law14
Guide to business in SpainAppendix I. Company and commercial law15
stock are present and agree unanimously to hold a shareholders’ meeting. Such meetings are called
“universal” shareholders’ meetings.
6.1.5 Quorum and voting rules
Shareholders’ meetings may generally adopt resolutions by simple majority provided the quorum
requirements described below are met.
In general, the quorum for a shareholders’ meeting, on first call, exists when the shareholders
present or represented at the meeting own at least twenty five percent (25%) of the voting capital
stock. If a second call has to be made (because there was no quorum on first call), the meeting is
deemed to be legally convened regardless of the percentage of capital stock present or represented
at the meeting. A company’s bylaws may set special call and quorum requirements for shareholders’
meetings; however, the special quorum requirements cannot be lower than the legal requirements
outlined above.
Special quorums are required by law for the adoption of resolutions on certain matters, e.g.
debenture issuance, capital increase or reduction, any alteration of legal form, merger or spin-off of
the company and, in general, for the adoption of resolutions amending the bylaws. In such cases,
the quorum required on first call exists when the shareholders present or represented at the meeting
own at least fifty percent (50%) of the subscribed voting capital stock. On second call, a quorum will
exist if at least twenty-five percent (25%) of the voting capital stock is present or represented at the
meeting. However, if a meeting subject to a special quorum requirement is held on second call with
less than fifty percent (50%) of the voting capital stock present or represented, then a special voting
rule stipulates that resolutions may only be validly adopted by the ‘aye’ votes of shareholders owning
at least two-thirds of the capital stock present or represented at the meeting.
6.1.6 Proxies
A shareholder may be represented at a shareholders’ meeting by any person, who need not be a
shareholder unless the bylaws provide otherwise. The proxy must be in writing or using certain
means of long distance communication, and specific for each meeting.
A shareholder may cast his vote by mail, e-mail or using any other means of long distance
communication as provided for in the bylaws and will then be considered to be present for the
purpose of establishing the quorum for the meeting.
Special rules regulate the public solicitation of proxies. Proxies are deemed to have been solicited
publicly if one person represents more than three shareholders.
Guide to business in SpainAppendix I. Company and commercial law16
6.2 Directors
An S.A.’s executive governing body is its director or directors, who need not be Spanish citizens. The
actual form of administration, i.e. Board of Directors, sole director, joint and severally liable directors
or joint directors, must be stipulated in the bylaws, but can be changed at any time by the
shareholders’ meeting.
If a Board of Directors is created, it must have a minimum of three members. Furthermore, no
maximum legal limit exists.
A director is normally not required to be a shareholder unless the bylaws provide otherwise.
The Board of Directors may validly adopt resolutions in writing without holding a meeting, provided
certain requirements are met.
An S.A.’s directors are appointed by the shareholders’ meeting. Minority shareholders that meet
certain thresholds of ownership are entitled to proportional representation on the Board.
Appointment as a director becomes legally effective when accepted by the appointee, and must be
registered in the Mercantile Register within a stipulated period of time.
The term of office of directors is set by the bylaws and cannot exceed six years, and shall be equal for
all Directors. Directors may be re-elected for one or several further six-year periods.
The shareholders’ meeting can freely dismiss the directors at any time.
The following paragraphs refer to some special features of a Board of Directors:
6.2.1 Powers of the Board of Directors
�• The Board of Directors is the management body of the corporation.
�• With respect to third parties, the Board of Directors represents the company in all acts within the
scope of its corporate purpose. The company is bound even with respect to acts outside the scope
of its corporate purpose as registered in the Mercantile Register if a third party acted in good faith
and without gross negligence.
�• Any limitation on the representative powers of the Board, even if registered in the Mercantile
Register, is not binding on third parties.
�• An S.A.’s Board may delegate its functions to one or more managing directors or to an executive
committee of Board members (however, the Board cannot delegate its accountability, or its
obligation to submit annual financial statements to the shareholders’ meeting, or the powers
delegated to it by the shareholders’ meeting without specific authorization from the latter
to do so).
Guide to business in SpainAppendix I. Company and commercial law17
6.2.2 Adoption of resolutions by the Board
The quorum for a Board meeting is the presence, either personally or by proxy, of one-half plus one
of the Board members.
6.2.3 Majority for adoption of resolutions
Board resolutions are adopted:
�• Generally, by an absolute majority of the directors attending (in person or by proxy).
�• Exceptionally, for permanent delegation of Board powers, by the affirmative vote of two-thirds of
the Board’s members; such delegation is not legally valid until it has been registered in the
Mercantile Register.
6.2.4 Liability of directors
Directors are held to a standard of faithful defence of the corporate interests, loyalty and secrecy.
Directors are liable to the company, its shareholders and its creditors for damages caused by acts that
are illegal, contrary to the bylaws or done in breach of the duties pertaining to their office.
In such cases all the directors are jointly and severally liable. A director can only be exonerated from
liability if he proves that he did not participate in the adoption or execution of the resolution and
that he was unaware of the existence of the harmful act or, if he was aware of it, did everything
reasonably possible to mitigate it or at least expressly opposed the resolution giving rise to the harm.
6.2.5 Powers of attorney
In addition to the powers vested in the Board of Directors, general powers of attorney may be
conferred upon any person, whether or not a director, in which case they must be documented in a
public deed of powers of attorney registered in the Mercantile Register.
6.3 Requirements for the adoption of resolutions at the shareholders’ and boardmeetings
The legal or bylaw requirements for the adoption of resolutions at the shareholders’ and board
meetings of S.A.’s and S.L.’s are as follows:
Guide to business in SpainAppendix I. Company and commercial law18
Table 1
ADOPTION OF RESOLUTIONS AT THE SHAREHOLDRES’ AND BOARD MEETINGS
Spanish Corporations Law Limited Liability Companies Law
ArticleMinimum stake
requiredMinority Shareholders Rights in a Spanish S.A. and S.L.
Minimum stake
requiredArticle
Art. 114.1 1% Right to request the presence of a notary public at theShareholders’ Meeting.
5% Art. 55
Art. 100 5% Right to request the calling of a Shareholders’ Meeting atany time.
5% Art. 45
Art. 727.10* 1% or 5% Right to request the suspension of a resolution of theShareholders’ Meeting when such resolution has beencontested at Court.
5% Art. 56
Art. 134.2 5% Right to oppose an extrajudicial settlement of an action forliability filed by the Company against directors.
5% Art. 69
Art. 134.4 5% Right to file an action for liability of directors if such claimhas not been filed by the company itself.
5% Art. 69
Art. 143 5% Right to contest any resolution adopted by the Board ofDirectors.
5% Art. 70
Art. 205.2 5% Right to request the Mercantile Register to appoint anauditor.
5% Art. 84
Art. 269 5% Right to request the Court to appoint a receiver to monitorthe liquidation process should the company be dissolved forany reason.
Not Regulated
Art. 206 5% Right to request the Court to revoke the appointment ofan auditor.
5% Art. 84
Art. 112.1 >0% Right to request any kind of information regarding theCompany to be disclosed at a Shareholders’ Meeting.
25% Art. 51
Art. 97.3 5% Right to request an additional complement on the noticeconvening the Shareholders’ Meeting in order to includeone or more matters on the agenda.
Not Regulated
* According to Article 727 of Act 1/2000, on Civil Procedure.
Guide to business in SpainAppendix I. Company and commercial law19
Table 1
ADOPTION OF RESOLUTIONS AT THE SHAREHOLDRES’ AND BOARD MEETINGS
Art. 102 25% Quorum on first call for Shareholders’ Meetings. No quorum is required on second call. Inany case, a simple majority is required for the adoption of resolutions.
Art. 103.1 50% Quorum on first call for meetings where special resolutions, such as issuance ofdebentures, increase or reduction of capital, re-registration, merger, spin-off or any otheramendment of the bylaws, are adopted.
Spanish Corporations Law
ArticleMinimum stake
requiredMinority Shareholders Rights in a Spanish S.A.
Art. 103.2 25% Quorum on second call for meetings where special resolutions, such as issuance ofdebentures, increase or reduction of capital, re-registration, merger, spin-off or any otheramendment of the bylaws, are adopted. If at such meetings shareholders representingless than 50% of the subscribed voting capital are present, a 2/3 majority of the capitalpresent or represented is required for the adoption of resolutions.
Art. 140 >50% Required majority of votes cast by members present or represented for the adoption ofresolutions by the Board of Directors.
Art. 141.2 66% Required majority of votes cast by members of the board of directors present orrepresented for the permanent delegation of authority to the Executive Committee or inthe managing director.
Art. 53.2 b) >66% Required majority of votes for resolutions such as re-registration, merger, spin off,disapplication of the preemptive right in capital increases, removal of members, etc.
Art. 57 >50% Required majority of votes cast by members present or represented for the adoption ofresolutions by the Board of Directors..
Art. 57 >66% Required majority of votes cast by members of the Board of Directors present orrepresented for the delegation of authority to the Executive Committee or the managingdirector.
The quorums of attendance and majorities required to adopt resolutions at Shareholders’ and Board Meetings of S.A.Corporations are the following:
The quorums and majority of votes required for the adoption of resolutions at Members’ and Board Meetings of S.L.limited liability companies are the following:
Art. 53.1 33% Quorum for meetings the agenda of which includes resolutions not listed in Article 53.2a) or 53.2 b). In any case, a simple majority of the votes cast is required, provided that itrepresents least one-third of the votes attaching to the participation units into which thecapital is divided.
Art. 53.2 a) >50% Required majority of votes for resolutions to increase or reduce capital or to amend thebylaws in any way.
7. European public limited-liability company (S.E.)
Guide to business in SpainAppendix I. Company and commercial law20
1 www.inem.es
7. EUROPEAN PUBLIC LIMITED-LIABILITY COMPANY (S.E.)
Regulation (EC) no. 2157/2001, of October 8, which passes the Statute for a European Company
(S.E.), regulates the legal framework currently in force within the EU for this new type of European
corporate entity. Following its provisions, Act 19/2005, of November 14, which regulates the SE
domiciled in Spain, enacted the necessary measures to guarantee the effectiveness of those directly
applicable rules included in the Regulation, amending the Corporations Law and including a new
chapter. Moreover, this Regulation has been complemented in Spain by Act 31/2006, of October 18,
regulating the intervention of employees in the Corporations and cooperative companies, which
implemented the Council Directive 2001/86/EC, of October 8, 2001.
SE offers to companies carrying on business in various Member States the possibility of establishing
as a sole company under EU regulations and of operating in the EU under a sole legislation and
under a unified administrative and declaration system. For companies acting in different Member
Estates, SE offer the possibility of reducing administrative costs with a legal frame adapted to EU
regulations. Among the main features of this type of companies the following can be mentioned:
�• An S.E. is to be always considered as a derivative company since its foundation can only be carried
out by other pre-existing companies. That is to say, individuals are not allowed to create this type
of company.
�• Need for the existence of a European multinational nature on the process of association that
would give rise to the foundation of an S.E. In this sense, although different procedures are
regulated to incorporate an S.E., there are two common and unavoidable requirements aiming to
keep this European multinationality: (i) only companies incorporated under the laws of a Member
State are allowed to create an S.E., being also required that their corporate address and the
effective management have to be found within the EU, and (ii) at least two of the companies
intervening must be regulated by the law of two different Member States.
�• The subscribed capital shall not be less than €120,000, although the minimum required capital
can be higher in specific cases contemplated under Spanish legislation for companies that carry
out certain activities (i.e. lending institutions). Spanish regulations for corporations shall also
apply to shares’ subscription, payment, ownership and transfer.
�• S.E. can only be incorporated as follows:
— Merger: Merged companies shall be governed by the law of different Member States.
— Incorporation of a holding S.E.: Provided that at least two of the companies are governed by
the law of a different Member State, or for at least two years have had a subsidiary company
governed by the law of another Member State or a branch situated in another Member State.
— Incorporation of a subsidiary S.E.: Provided that at least two of the companies are governed by
the law of a different Member State, or for at least two years have had a subsidiary company
governed by the law of another Member State or a branch situated in another Member State.
Guide to business in SpainAppendix I. Company and commercial law21
— Re-registration of an existing S.A.: Provided that for at least two years it has had a subsidiary
company governed by the law of another Member State.
�• S.E. must be registered with the Mercantile Register of its corporate address.
• The governing bodies are: (i) General Meeting of Shareholders; and (ii) either a Supervisory Organ
and a Management Organ (two-tier system) or an Administrative Organ (one-tier system),
depending on the form adopted in the statutes.
• Shareholder’s liability is, in principle, limited to the subscribed capital.
• The name of a S.E. shall be preceded or followed by the abbreviation S.E.
• From a labor point of view, Act 31/2006 establishes several rights of information, consultation and
participation of the workers in the corporate bodies of an S.E. for those cases where such
involvement already existed within the founding companies at the time of the incorporation of the
S.E. (as it currently occurs in Germany, Austria and the Nordic countries).This is to guarantee the
participation of the workers in the S.E. for the purposes of allowing them to have an influence on
the decisions to be adopted within the company which directly affect them.
In general terms, the S.E. is an effective investment vehicle for those companies that already have a
business presence in the EU and wish to invest in Spain.
The S.E. has on the one hand the disadvantage of being a new type of company which, in certain
cases, may allow a greater participation of the employees in the management decisions of the
company, on the other had, it certainly has the advantage that its legal framework is known in all EU
countries.
8. BASIC CHARACTERISTICS OF LIMITED LIABILITY COMPANIES
8.1 Basic characteristics
Law 2/1995 on “Sociedades de Responsabilidad Limitada” (Limited Liability Companies) which came
into force on June 1, 1995, made certain important changes to the legal framework governing the
limited liability company (S.L.) which can sometimes be used as an alternative form of business entity
instead of the S.A.
Flexibility is one of the main objectives of Act 2/1995, which allows the participation unit holders
(members) a wide margin in setting up, in the bylaws, the rules concerning the internal governance
of an S.L.. A S.L. is intended to be a more closely held entity as evidenced by the fact that:
�• Participation units are generally not freely transferable unless acquired by other participation unit
holders, ascendants, descendants or companies within the same group. In fact, unless otherwise
provided in the bylaws, the Law establishes a pre-emptive acquisition right in favor of the other
members or the company itself in the event of transfer of the participation units to persons
different than those aforementioned.
• Debenture issues cannot be used as a means of raising funds because a S.L. is unable to issue
debentures since Act 2/1995 came into force.
• The scope for representation at the Members’ Meeting is limited.
Some salient features of the above-mentioned Law are described below:
�• An S.L. cannot have a capital stock of less than €3,006, which must be fully paid up at its
organization. Capital stock must be divided into participation units, but these need not all be the
same (and, consequently, they may carry different voting weight). Non-voting participation units
may be created, up to the limit of half the capital of the company.
�• The genuineness of monetary contributions made at the time of incorporation or in connection
with any capital increases must be attested to before a notary public.
�• No independent appraiser’s report on non-monetary contributions is required, in contrast to the
obligatory nature of this report in the case of non-monetary contributions to corporations,
although the founders and shareholders are jointly and severally liable for the genuineness of the
non-monetary contributions made. Similarly, in capital increases the directors of the company are
liable for the difference between the value of the non-monetary contributions stated in their
report and the real value of the contributions.
8. Basic characteristics of limited liability companies
Guide to business in SpainAppendix I. Company and commercial law22
8.2 New Limited Liability Company
In addition, Act 7/2003 on “Sociedad Limitada de Nueva Empresa“ (New Limited Liability Company),
which came into force on June 2, 2003, amended Act 2/1995, creating a specific type of limited
liability company, which is the New Limited Liability Company (S.L.N.E.). Act 7/2003 intends to
encourage the creation of small and medium-sized companies, simplifying the requirements for their
incorporation and for the development of their activity, as it can be inferred from the main features
that distinguish the S.L.N.E. from the limited liability company, specified bellow:
�• The S.L.N.E. can be registered, by means of the public deed of incorporation and an electronic
document, in just 48 hours from the execution of said deed.
�• In the incorporation of the company, the corporate name shall include the name and two
surnames of one of the members followed by an alphanumeric code, and also the mention
“Sociedad Limitada Nueva Empresa” or the abbreviation “S.L.N.E.”. The corporate name shall be
modified if said individual ceases to be a member.
�• The capital stock shall not be lower than €3,012 or superior to €120,202, and it will only be paid
up through contributions in cash. If the capital stock increases over €120,202, the company must
alter its legal form.
�• Only individuals can be members of a New Limited Liability Company. In the moment of its
incorporation, the S.L.N.E. shall not have more than 5 members, although this number can be
increased later. A member may only be a sole member in just one S.L.N.E.
�• The members of the Administration Body must be members of the company. This Body will never
adopt the form of a Board of Directors.
�• The corporate purpose of the company shall be one or all the activities established in Act 7/2003,
although any particular and different activity might be included.
�• The S.L.N.E. has the possibility of fulfilling accountant and fiscal duties by means of a single
register.
�• Act 7/2003 indicates that the S.L.N.E. will be able to postpone the payment of some taxes and/or
withholdings and prepayments between one and two years without having to grant any security
but paying interests for delayed payment.
8.3 Main differences between S.A. and S.L.
The main differences between S.A. and S.L. are as follows:
Guide to business in SpainAppendix I. Company and commercial law23
Attendance at andmajorities in Shareholders’/ Members’ Meetings
Different attendance requirements andmajorities are established for first andsecond call and depending on the contentof the decisions. These can be increased bythe by-laws.
Different majorities are establisheddepending on the content of the decisions.These can be increased by the by-laws.
Guide to business in SpainAppendix I. Company and commercial law24
Amendments to the by-laws
The directors or, as the case may be, theshareholders making the proposal shallprepare a written report to justify theamendment.
No report is required.
Contributions in kind A report from and independent expert isrequired.
No report is required.
Call for Shareholders’ /Members’ Meetings
Announcement published in the OfficialGazette of the Mercantile Register and inone of the daily newspapers with widestcirculation in the province where it has itscorporate address.
As indicated in the by-laws (call for bywritten communication is valid). If not,announcement published in the OfficialGazette of the Mercantile Register and inone of the daily newspapers with widestcirculation in the municipality where it hasits corporate address.
Place of Shareholders’ /Members’ Meetings
In the locality where the company has itscorporate address.
Where indicated in the by-laws, If not, inthe municipality where the company has itscorporate address.
Corporation Limited liability company
Minimum capital stock €60,102 €3,006
Paying in uponincorporation
At least 25%, and the share premium, asthe case may be.
Fully paid in.
Shares/ participation units They are securities. Debentures and othersecurities can be issued.
They are not securities. Debentures andother securities can not be issued.
Transfer of shares /participation units
Depends on their representation (sharecertificates, book entries, etc.) and on theirnature (nominative or bearer shares).
Shall be effectuated by a public document.
Table 2
MAIN DIFFERENCES BETWEEN S.A. AND S.L.
Attendance at andvoting rights inShareholders’ /Members’ Meetings
There might be restrictions(minimum number of shares,etc.).
These rights can not berestricted.
Guide to business in SpainAppendix I. Company and commercial law25
Table 2
MAIN DIFFERENCES BETWEEN S.A. AND S.L.
Corporation Limited liability company
Managing body The by-laws must indicate a specificmanaging body (Board of Directors, SoleDirector, etc.).
The by-laws may set forth different types ofmanaging bodies among those legallyprovided for and the Members’ Meetingwill select one of them.
Number of members of theBoard of Directorss
Minimum: 3.There is no maximum number.
Minimum: 3.A maximum of 12 members.
Term of the office ofDirector
Maximum 6 years. They may be re-electedfor periods of the same maximumduration.
Might be indefinite.
9. Professional services firm (S.P.)
Guide to business in SpainAppendix I. Company and commercial law26
9. PROFESSIONAL SERVICES FIRM (S.P.)
Act 2/2007, of March 15, 2007, brought into force the legislation governing a new kind of firm known
as the Professional Services Firm (S.P.). The objective of Act 2/2007 is to establish a regulatory
framework under which various members can pursue a professional activity in common under a
specific corporate form.
In this way, professional services firms are characterized by three specific general features:
�• Their corporate purpose can only be the pursuit in common by various members of a professional
activity (meaning an activity the pursuit of which requires an official university or professional
qualification and registration with a professional association). This feature also implies that all of
the firms that have such purpose must mandatorily be formed as professional services firms.
�• The professional members must have a stake in the company's capital ("professional members"
meaning individuals or other professional services firms that meet the requirements necessary to
engage in the professional activity).
�• Professional services firms may be formed in accordance with any of the forms provided for in the
law, provided that they contemplate the specific requirements included in the Professional
Services Firms Law.
In this respect, the Professional Services Firms Law establishes, among others, the following specific
requirements:
�• The composition of the professional services firm requires that three-fourths of the capital and of
the voting rights, or three-fourths of the capital and of the number of members in entities owned
and managed by the same persons, must belong to the professional members.
�• Likewise, three-fourths of the members of the managing body must be professional members, and
if the managing body has only one person, such duties must necessarily be performed by a
professional member.
�• The professional activity will be pursued in accordance with the code of ethics and disciplinary
rules specific to the professional activity in question, with the grounds of incompatibility or
disqualification of the members affecting the company itself. The professional services firm may
also be fined on the terms established in the disciplinary rules that apply under its professional
code.
�• Broadly speaking, to transfer the status of professional member, it is necessary to have the
consent of all of the professional members, unless the firm's bylaws permit transfers by an
agreement of the majority of the members.
�• In addition to the necessity of their registration at the Mercantile Registry, professional services
firms must also be registered at the Professional Services Firms Registry of the Professional
Association in question.
Guide to business in SpainAppendix I. Company and commercial law27
�• The distribution of income or allocation of loss may be based or modulated according to the
contribution made by each member to the sound running of the firm.
�• Professional services firms must arrange for an insurance policy that covers the liability they may
incur in the course of the activity or activities that make up their corporate purpose.
Guide to business in SpainAppendix I. Company and commercial law28
10. SOLE SHAREHOLDER COMPANIES
Under the Law, which applies in this respect to both S.A.’s and S.L.’s, either form of business entity can
be set up as, or can subsequently become, a company having a sole shareholder (S.A.) or sole
participation unit holder (S.L.), i.e. a wholly-owned subsidiary.
Such companies are subject to a specific regime involving special reporting requirements and
registration requirements. For example, the fact that a company has a single owner has to be
acknowledged on all company correspondence and commercial documentation. Likewise, contracts
between the company and its sole owner need to be recorded in a special company register.
On the whole, such requirements can be deemed mere administrative and reporting requirements,
but adherence to the specific rules is of paramount importance, because otherwise, under certain
circumstances, the company can loose its limited liability status.
10. Sole shareholder companies
Guide to business in SpainAppendix I. Company and commercial law29
11. BRANCHES
11.1 Creation of a branch
In addition to the forms of business enterprise created under Spanish law that constitute separate
legal entities a foreign investor may operate in Spain through a branch.
The formation of a branch requires the execution of a public deed that must be registered at the
Mercantile Register. From the foreign investment legislation viewpoint, the branch must have an
assigned capital, which is not subject to any minimum amount requirement.
The branch must have a legal representative who is empowered by the home office to administer the
affairs of the branch. Apart from this requirement, there are no formal administration or
management bodies.
Except for the obvious differences in terms of internal structure and organization, a branch operates
much like a corporation in its dealings with third parties.
The choice between forming a branch or a legal entity in Spain may be affected by commercial
reasons; for example, a company may be deemed to provide a more “solid” presence than a branch.
There are also other differences which are addressed in different chapters of this publication.
11.2 Branch vs. subsidiary (whether S.A. o S.L.)
From a legal standpoint, the main differences between a branch and a subsidiary are as follow:
11. Branches
Table 3
THE MAIN DIFFERENCES BETWEEN A BRANCH AND A SUBSIDIARY
Corporation Limited liability company Branch
Concept Company of a commercial nature devoted to the developmentof an economic activity, with a capital stock divided into sharesor participation units and consisting of the contributions ofthe members, who, as a general rule, will be personally liablefor company debts only up to the limit of the made orpromised contribution.
Secondary establishment with apermanent representation and certainmanaging independence, by means ofwhich the activities of the head officeare totally or partially developed, andwith no legal personality independentof that of the head office.
Guide to business in SpainAppendix I. Company and commercial law30
Contributions incash and in kind
Cash contributions shall be in national currency, and contributions in kind, in the case ofcorporations, will require a report of an independent expert appointed by the Mercantile Register.
Registration The company will be incorporated by means of a public deedthat shall be filed with the Mercantile Register, becoming alegal entity upon registration.
Together with the public deedcreating the branch thedocuments attesting theexistence of the head office, itsby-laws in force, its Directors andits decision of opening thebranch, duly legalized, shall befiled with the Commercialregistry for registration.
Capital stock Minimum capital requirementof €60,102, divided intoshares, with at least 25% ofthe par value of each sharepaid up.
Minimum capital requirement€3,006, fully paid up.
No capital is required for theestablishment of a branch,although for practical reasons itis advisable to provide capital.
Table 3
THE MAIN DIFFERENCES BETWEEN A BRANCH AND A SUBSIDIARY
Corporation Limited liabitily company Branch
Calls forShareholders’ /Members’Meetings
The Shareholders’ Meetingshall be called by mean ofan announcementpublished in the OfficialGazette of the MercantileRegister and in one of thedaily newspapers withwidest circulation in theprovince, at least one monthbefore the date set for themeeting, and theannouncement shall specifythe date on which themeeting will be held on firstcall as well as all thebusiness to be transacted.
The process is the same than forcorporations, although themeeting can be conveyed only 15days in advance and the dailynewspaper shall be one withwidest circulation in themunicipality where the companyhas its corporate address. The by-laws might establish that the callshall be published in a particulardaily newspaper in themunicipality of the company’scorporate address or by means ofany other method which ensuresreceipt by all members exceptthose which reside in a foreigncounty and have not designated aplace within Spanish territory forreceipt of notices.
N/A
Guide to business in SpainAppendix I. Company and commercial law31
Table 3
THE MAIN DIFFERENCES BETWEEN A BRANCH AND A SUBSIDIARY
Corporation Limited liabitily company Branch
Directors The by-laws shall provide forthe structure of themanaging body, whichmight be a Sole Director,various joint and severalDirectors, two joint Directorsor a Board of Directors.
The by-laws may set forthdifferent types of managingbodies, delegating to theMembers’ Meeting the faculty ofselecting alternatively any ofthem, without modifying the by-laws. The position of Directorshall be not remunerated, unlessthe by-laws provide otherwise anddetermine the method ofremuneration.
The managing body of thehead office shall appoint abranch Director. He will act asan attorney in fact of the headoffice in the branch. ThisDirector (as a general rule andsubject to the limitationsprovided for in the powers ofattorney) might exercise all theactivities of the branchregistered with the MercantileRegister.
Transfer ofshares /participationunits
The transfer is free unlessotherwise indicated in theby-laws.
The transfer shall beeffectuated by a publicdocument executed beforeSpanish notary public. By-laws provisions which wouldallow almost free transfer ofparticipation units areprohibited.
N/A
Annual accountsand distributionsof dividends
The Directors of the company shall, within the maximumterm of three months after the closing of the financial year,prepare the annual accounts, the management report andthe proposal for the allocation of the profits and losses whichshall be approved by the Shareholders’ / Members’ Meetingwithin six months after the closing of the financial year.
Should the profit of the financial year be distributed asdividends, said distribution shall be made to the shareholdersin proportion to the capital they have paid. Payment ofinterim dividends is also possible.
Having the consideration ofpermanent establishments fortax purposes, branches shallhave their own accountingreferred to the transactionsthey make and the assetsassigned to them. Additionally,the branch shall deposit withthe Commercial Register thehead office’ annual accounts, acertification of their deposit inits Commercial Register or, incertain cases, the accountscorresponding to the branchactivity.
Guide to business in SpainAppendix I. Company and commercial law32
12. Representative office
12. REPRESENTATIVE OFFICE
In addition to mercantile entities and branches, foreign investor might establish a business presence
by means of a representative office. Among its main features, the following can be stressed:
��• The representative office has no legal personality independent of that of its head office.
��• No mercantile formalities are required to open a representative office, although for tax, labor
and social security reasons it might be necessary to execute a public deed (or document executed
before a foreign notary public, duly legalized with apostille or any other applicable legalization
system), which will indicate the opening of the representative office, the funds allocated to the
office, the identity of their tax representative, which will be a legal entity or individual resident in
Spain, and his faculties. The opening of the representative office will not be filed with the
Mercantile Register.
��• There are no formal managing bodies, all actions are carried out by the representative by virtue of
the faculties granted to him.
��• In principle, the activities of a representative office are limited, being mainly of coordination,
collaboration, etc.
��• The non-resident company is liable for any and all debts of the representative office.
Prepared by:
Sociedad Estatal para la Promoción y Atracción de las
Inversiones Exteriores, S.A.U. RM: Tomo 21818, libro 0, folio
15, sección 8, hoja M-388683,
Inscripción 1. NIF: A-84479013. Depósito legal: M-3674-2007.
Published 2010
This guide was researched and written by Garrigues on behalf
of INVEST IN SPAIN.
This guide is correct to the best of our knowledge and belief at
the date indicated below. It is, however, written as a general
guide so it is necesary that specific professional advice be
sought before any action is taken.
Madrid, January 2010
IIGuide to business in Spain
Appendix IIThe spanish financialsystem
€Spain has a modern diversified financial system which iscompetitive and fully integrated with the internationalfinancial markets.
With respect to the Spanish loan and credit market, thederegulation of capital movements in the EU has madeit much easier for Spanish companies to obtainfinancing from abroad. It has also driven the process ofasset securitization, in which Spain ranks second afterthe UK.
In turn, the Spanish securities market enjoyed steadygrowth until 2007, due essentially to its harmonizationwith the markets of neighboring countries and to thefact that the technical, operating and organizationalsystems on which it is currently based permitted greatervolumes of investment to be channeled. These factorsgave the Spanish markets greater transparency, liquidityand efficacy. Since 2007, the economic and financialslowdown had a great impact on Spanish stockmarkets. However, in 2009 they have returned togrowth trends and finished the year with similar returnsto the ones obtained in 2007.
As for the money market, this has become increasinglyimportant as a result of the deregulation and greaterflexibility of the Spanish financial system as a whole inthe past few years, with a substantial volume of tradingin money market instruments.
Lastly, more general and stronger protection forfinancial services customers has been provided.
All these and other aspects of interest, such as the taxregime applicable to the main financial productsavailable on the Spanish market are discussed in thischapter.
Guide to business in SpainAppendix II. The Spanish financial system2
1. Introduction
2. Financial institutions
3. Market
4. Safeguards to protect financial services
customers
5. Taxation of financial products
3
4
24
43
46
IIGuide to business in Spain
Appendix IIThe spanish financialsystem
€
Galicia
Asturias Cantabria PaísVasco
La Rioja
Navarra
Castilla y León
Extremadura
Andalucía
Castilla - La Mancha
Comunidad de Madrid
Aragón
Cataluña
Murcia
ComunidadValenciana
Canarias
Baleares
FRANCE
PORTUGAL
MORROCO
La Coruña
Santiago de Compostela Lugo
Orense
OviedoSantander
León
Palencia
Valladolid
Segovia
Ávila
Soria
Logroño
Vitoria
Pamplona
Huesca
Zaragoza
Lérida
Tarragona
Castellón de la Plana
Valencia
Alicante
Murcia
Albacete
Cuenca
Madrid
Toledo
Cáceres
Mérida
Córdoba
Sevilla
Huelva
Cádiz
Ceuta
Málaga
Granada
Jaén
Almería
Melilla
BadajozCiudad Real
Guadalajara
Palma De Mallorca
Barcelona
Gerona
Teruel
BilbaoSan Sebastián
Salamanca
Burgos
Zamora
Pontevedra
Las Palmas de Gran Canaria
Santa Cruz de Tenerife
Guide to business in SpainAppendix II. The Spanish financial system3
1.Introduction
1. INTRODUCTION
From the standpoint of its institutions, a financial system can be defined as the group of entities
which generate, gather, administer and manage savings and investment in a political and economic
system.
Spain has a diversified, modern, and competitive financial system, which is fully integrated within
international financial markets.
The system comprises credit, stock and money markets, and specific markets for derivatives (options
and futures based on different assets, e.g. a share index called IBEX-35).
Guide to business in SpainAppendix II. The Spanish financial system4
2. FINANCIAL INSTITUTIONS
The operators in the Spanish financial system can be classified as follows:
�• The central bank:
— The Bank of Spain.
�• Traditional credit institutions:
— Spanish and foreign banks.
— Savings banks.
— Credit cooperatives - Rural savings banks.
�• Other credit institutions:
— Credit Financial Establishments (introduced by Law 3/94, implementing the Second EC
Directive on Banking Coordination). These are credit institutions specialized in certain asset
products –e.g., leasing, financing, mortgage loans, etc.– which cannot take public deposits.
— Electronic Money Entities (introduced by Law 44/2002 on Measures for the Reform of the
Financial System or Financial Law, and governed by Royal Decree 322/2008 of February 29).
These are credit institutions specialized in issuing electronic money, meaning the monetary
value of credit that may be claimed from its issuer: a) stored on an electronic medium; b)
issued upon the receipt of funds that cannot be worth less than the issued monetary value;
and c) accepted as a means of payment by companies other than the issuer.
— The Spanish Confederation of Savings Banks (Confederación Española de Cajas de Ahorro -
CECA): this association groups together some of the Spanish Savings Banks and is also a credit
institution in its own right.
— Instituto de Crédito Oficial, ICO (acts as the State’s finance agency and investment bank).
— Payment Entities (introduced by Law 16/2009 of Payment Services, 13 November). It shall be
considered as Payment Entities those Legal Entities, different from credit institutions and
electronic money institutions, which has obtained authorization to lend and execute payment
services, that is to say, services that allow the effective deposit in a payment account, those
ones allowing the withdrawal of cash, the execution of payment operations, the issuance and
acquisition of payments means and sending of money. The payment entities shall not be
authorized neither to attract deposits or other reimbursable funds from public nor issue
electronic money.
2. Financial institutions
�• Investment institutions:
— Collective investment institutions:
– Investment companies:
• Open-end investment companies (SICAV).
• Real estate investment companies (SII).
• Quoted Public Limited Companies of Investment in the Real Estate Market (SOCIMI).
– Mutual funds:
• Securities mutual funds (FI).
• Real estate investment trusts (FII).
— Money market assets:
– Mortgage securities.
– Pension plans and funds.
– Other.
— Venture Capital companies and funds.
�• Investment Services Companies:
— Brokers (“Agencias de Valores”) and Broker-Dealers (“Sociedades de Valores”).
— Portfolio Management Companies.
— Financial advisory firms.
— Other management companies:
– Collective Investment Institution Management Companies.
– Securitization Fund Management Companies.
– Pension Fund Management Companies.
– Venture Capital Entities Management Companies.
�• Insurance and reinsurance companies and insurance brokers.
�• Other financial entities:
— Mutual Guarantee Societies.
— Supporting-Guarantee Companies.
Guide to business in SpainAppendix II. The Spanish financial system5
2.1 The main credit institutions
The main credit institutions, i.e. banks, savings banks and credit cooperatives, play a particularly
important role in the financial industry in Spain, because of the volume of their business and
because they are active in all segments of the economy. Credit institutions are authorized to engage
in what is referred to as “universal banking”, i.e. not to confine themselves to traditional banking
activities consisting merely of attracting funds and financing by granting loans and credit facilities,
but also to provide para-banking, securities market services, private banking and investment banking
services.
The functions of the Bank of Spain have been redefined since the European System of Central Banks
(ESCB) and the European Central Bank were set up. It now takes part in the following basic functions
attributed to the ESCB:
�• Defining and implementing the monetary policy in the euro zone monetary policy, with the aim of
maintaining price stability.
�• Conducting foreign currency exchange transactions and holding and managing the Spanish
State’s official foreign exchange reserves.
�• Promoting the sound working of payment systems in the euro zone.
�• Issuing legal tender banknotes.
Also, pursuant to its Law of Autonomy, the Bank of Spain has the following functions:
�• Supervising the solvency and behavior of credit institutions and financial markets.
�• Promoting the sound working and stability of the financial system and of Spain’s payment
systems.
�• Preparing and publishing statistics relating to its functions.
�• Providing treasury services and acting as a financial agent for government debt.
�• Advising the Government and preparing the appropriate reports and studies.
In the past Spanish credit institutions were subject to an excessively high level of interventionism
which affected the performance of their activities, through restrictions on their investment and
limitations on the fees and interest rates they could fix, which forced them to compete through
constant improvement of their efficiency and the quality of services provided to customers.
This circumstance has enabled Spanish credit institutions not only to weather free competition
among European credit institutions since Spain’s entry to what was then the European Economic
Community but also to compete on equal terms and even to expand.
As of January 30, 2010, there are officially registered at the Bank of Spain 64 banks, 46 savings
banks, 83 credit cooperatives, 81 branches of EU credit institutions, 492 EU credit institutions
Guide to business in SpainAppendix II. The Spanish financial system6
operating without an establishment, 8 branches of non EU credit institutions and 55 representative
offices in Spain of foreign credit institutions, together with many subsidiaries, branches,
representative offices and correspondents abroad1.
Savings banks are credit institutions with the same freedoms as and full operational equality with the
other members of the Spanish financial system. They have the legal form of private foundations and
a community-welfare purpose and operate in the open market, although they reinvest a considerable
portion of the earnings obtained by them in community welfare work.
These long-standing institutions with deep roots in Spain attract a substantial portion of private
savings and their lending business characteristically focuses on the private sector (through mortgage
loans, etc.). They are also very active in financing major public works and private-sector projects by
subscribing and purchasing fixed-income securities.
Up until 1988, savings banks could only operate in their autonomous community. Following that year
they began to expand throughout Spain and by 1998 Savings Banks had a more extensive network
than banks.
The network of offices in the banking sector experienced very moderate, constant growth up to 1999.
After that date, however, banks began to reduce their numbers of branches and increase the
personnel at each office in order to offer a more personalized service, and to increase their offering of
financial services of high added value; this process has involved a redistribution of personnel from
head offices to the retail network.
The Spanish savings banks are members of the Spanish Confederation of Savings Banks (CECA), a
credit institution formed in 1928 to act as the national association and financial institution of the
Spanish savings banks and which today is formed by 46 confederated savings banks.
In recent years, savings banks and certain other banks have been involved in a major process aimed
at optimizing their position vis-à-vis the EU single market for banking services. As part of this, an
integration process took place in 1999 involving the largest Spanish banks and the creation of two
banking groups (SCH and BBVA) on a European scale and with a major presence in Latin America.
Also, Banco Zaragozano was merged into Barclays, effective January 1, 2004, creating the sixth
largest banking group in Spain in terms of profits, and, on November 12, 2004, the UK bank Abbey
National Plc. was acquired by SCH. And the Spanish banking system is currently experiencing hitherto
unknown international expansion, as evidenced in the recent purchases in 2008 and 2009, by Banco
Santander of the UK Alliance & Leicester, US Sovereign Bancorp and ABN Amro entity in Brasil.
Following in Banco Santander’s footsteps is its main rival BBVA, which in 2007 finalized the purchase
of the US Compass Bancshares institution. Moreover, in 2009 acquired the bank in Texas (US)
Guaranty Financial Group and increased its participation in the Chinese Bank Citic Bank up to 15%.
Other notable operation to be considered in 2009 was the increase by La Caixa of its participation up
to 9% in the Austrian Bank Erste.
Guide to business in SpainAppendix II. The Spanish financial system7
1 Bank of Spain
Guide to business in SpainAppendix II. The Spanish financial system8
However the current world financial crisis has caused serious difficulties to entities like the Saving
Entities provoking situations like the intervention of Caja Castilla la Mancha by Banco de España. To
that extent, it was issued Royal Decree Law 4/2009, of March 29, which authorized the Spanish
General Administration to grant securities in order to guarantee to Banco de España the economic
obligations coming from the extra financing required by Caja Castilla la Mancha to get over liquidity
difficulties.
The crisis has lead Saving Entities to several merger processes. Among others, the merger between
Caja España and Caja Duero.
Another operation caused by the bad economic situation has been the integration by Banco Popular
of some of its subsidiaries, like Banco Castilla, Vasconia, Galicia and Balear.
All these measures are aimed to try to get over the financial difficulties these entities, in comparison
with the two biggest banks in Spain, are involved in, being obliged to carry out these processes.
A noteworthy development in the area of legislation was Law 26/2003 amending the Securities
Market Law and the Corporations Law with a view to reinforcing the transparency of quoted
corporations.
Under this Law, every year savings banks that issue securities admitted to trading on official securities
markets must publish a corporate governance report, which must be filed with the Spanish National
Securities Market Commission (CNMV) and must address, among other issues:
�• The entity’s management structure with exhaustive information on the compensation of the
managing bodies.
�• Transactions with members of the board and oversight committee of the savings bank and with
political groups.
�• Compensation received by directors and executives for services to the savings bank.
�• Structure of the business and of the relationships within its economic group.
�• Risk control systems.
2.2 Credit financial establishments
The regulations governing these establishments are contained in Royal Decree 692/1996 of April 26,
in which they are classed as credit institutions, which allows them access to inter-bank financing
among other things. As of January 20, 2010, a total 69 financial institutions were registered at the
Bank of Spain.
They engage in banking and para-banking activities, i.e.:
�• Loans and credit facilities, including consumer lending, mortgage loans, and financing for
commercial transactions.
Guide to business in SpainAppendix II. The Spanish financial system9
�• Factoring with or without recourse and related transactions.
�• Leasing transactions.
�• The provision of guarantees and sureties.
Leasings are commercial transactions of a financial nature involving the acquisition of a good
previously chosen by the customer, whereby the customer is leased the equipment for use in
exchange for the payment of regular installments (usually on a monthly basis). At the end of the
term of the agreement, the customer may exercise a call option in respect of the equipment, by
paying its remaining value.
Factoring consists of the assignment by a company of trade receivables from its customers to a credit
institution, in exchange for payment.
There are two types of factoring:
�• Factoring with recourse: the factoring entity does not assume liability for the assigned receivables;
therefore, in the event of non-payment by the debtor, it may compel the customer company to
assume the bad debt.
�• Factoring without recourse: the factoring entity assumes the risk associated with the receivables
assigned by the customer.
Since the Financial Law (Law 44/2002 of November 22 on the Reform of the Financial System), there
have been provisions on the use of factoring to massively assign receivables from public authorities,
the aim being to improve the financing conditions of small and medium-sized companies.
2.3 Collective investment institutions
There have been major changes in saving patterns in Spain. According to INVERCO (the Spanish
Association of Collective Investment Institutions and Pension Funds), financial saving by Spanish
households increased from slightly over 211,000 million euros in 1985 to over 1.9 billion euros in
2007 and fell to 1.69 billion in 2008 and 1.68 billion in 2009.
Moreover, in terms of collective investment, and again based on data provided by INVERCO, in 1985
the majority of financial saving (64.9%) took the form of cash and deposits at credit institutions,
whereas collective investment accounted for only 0.4%. The respective percentages in the first
quarter of 2008, however, were 41.3% and 10.5%.
This change was followed by decisive legislation, starting with the 1984 Law regulating Collective
Investment Institutions, which was followed by the major reform of 1998, and, lastly, the current Law
35/2003 of November 4 on Collective Investments Institutions and its corresponding Regulations,
approved in November 2005 by virtue of Royal Decree 1309/2005 of November 4, partially
amended by Royal Decree 362/2007, of March 16, to provide a more flexible framework for hedge
funds (Instituciones de Inversión Colectiva de inversión libre).
The favorable tax regime in Spain for collective investment institutions has led to a notable increase
in both the number of these institutions (see table 1) and the volume of their investments. The
soundness of the markets in Spain and of the participating entities is evidenced by the fact that in
2006 the funds of families invested in collective investment institutions amounted to 214,117 million
euros, although in the first quarter of 2008 this figure fell to 188,770 million euros, as a result of the
credit crunch that started in mid 20072. The current recovery of the collective investment is being
produced gradually. In Spain, during the last months of 2009, it raised to similar levels as those
obtained at the end of 2008.
There are two types of Spanish collective investment institutions:
�• Financial: Their primary activity is to invest in or manage securities.
They include securities investment companies and funds.
�• Non-financial: real estate investment companies and funds.
It is important to point out the Circular 1/2009, of February 4, of the National Securities Market
Commission (CNMV), which defines the different classification categories of the Funds and of the
Colective Investment Companies taking into account their legal type, risk profile and the assets they
invest in. The objective of said Circular is to reduce the number of investment vocations existing and
grant to the investor a clear and brief information of the investment policy of the Colective
Investment Undertakings.
From the standpoint of the legislation, the Law and Regulations currently in force are giving a further
boost to the Spanish collective investment institutions industry, due, among other reasons, to the
adoption of some of the most common concepts in the international arena, such as umbrella funds,
and the inclusion of an exceptionally flexible regime for alternative investment vehicles or hedge
funds.
The main new features introduced by the new legal regime governing collective investment in Spain
are as follows:
�• The possibility, just mentioned, to create umbrella funds.
�• The possibility to create unit classes and share series, which achieves an effect equivalent to the
master-feeder structure but in a single institution.
�• In order to implement Directive 2001/108, the law has broadened the range of eligible assets for
investment by Spanish collective investment institutions to include deposits with credit institutions
and money market instruments.
�• In addition, the regulations included new eligible assets such as credit derivatives and volatility
derivatives. Also eligible, although for the investment of up to 10% of the assets of Spanish
collective investment institutions, are certain collective investment institutions not harmonized
Guide to business in SpainAppendix II. The Spanish financial system10
2 www.inverco.es
Guide to business in SpainAppendix II. The Spanish financial system11
under Directive 85/611, hedge funds, subject to certain requirements, and shares in venture
capital entities.
�• Collective investment institution management companies will be able to broaden their activities to
include the discretionary management of other kinds of portfolios, and the marketing of both
national and foreign collective investment institutions.
�• The use of omnibus accounts is permitted for the marketing abroad of Spanish collective
investment institutions.
�• The regulations brought in provisions on exchange-traded funds (ETFs) for the first time.
�• They allowed the entry of alternative investment through the creation of hedge funds and
collective investment institutions specialized in hedge funds. In this respect, hedge funds are
conceived in the regulations as institutions reserved for institutional investors, subject to few
restrictions as regards investment in financial assets and with an ample leverage limit of up to five
times the value of their assets.
More specifically, the rules on these financial instruments are to be found in Royal Decree
362/2007, of March 16, amending Royal Decree 1309/2005. The basic aim of this reform is to
bring more flexibility to the rules on these IICs, particularly in relation to redemptions, to enable
them to be implemented fully in Spain. Thus, these IICs are allowed to establish a maximum limit
on the sum that may be redeemed which as a result is distributed equally among all applications.
They can also establish minimum holding period requirements for their shareholders or investors
and more flexible rules on prior notice for subscriptions and redemptions with respect to the
general rules. Furthermore, they are allowed not to provide redemptions on all of their
redemption value computation dates. This flexibility in the way they operate is offset by greater
disclosure requirements in their prospectuses (“folletos”). In addition, hedge funds cannot carry
out such marketing activities targeted at customers who are not qualified investors; they cannot
target their advertising at retail investors, although it does not bar these investors from acquiring
shares in hedge funds. Moreover, it stipulates, in relation to the funds of hedge funds, that in
order for the IIC to use these more flexible options, the planned investments must require the use
of such options and regard must also be had to the fund of hedge fund’s marketing policy.
Funds of hedge funds are aimed at the general public and must be sufficiently diversified.
�• Both the law and the regulations eliminated the obligation which up until then required open-end
investment companies (SICAVs) to be quoted on a Stock Exchange. As a result, Bolsas y Mercados
Españoles (BME)3 promoted the creation of an Organized Trading System (SON), i.e. a non-official
trading market known as the Alternative Securities Market (MAB), to provide open-end investment
companies (SICAVs) with a counterparty system, guaranteeing their liquidity without their having
3 BME is the company that integrates Spanish securities registration,clearing and settlement systems and secondary markets.
Guide to business in SpainAppendix II. The Spanish financial system12
to meet the obligations incumbent upon quoted companies, especially in relation to corporate
governance.
The MAB was approved by the Spanish Board of Ministers on December 30, 2005. By July 31,
2006 there were 293 open-end investment companies (SICAVs) listed on the MAB; the MAB
segment for venture capital companies was launched on June 27, 2007.
Within the group of Investment Companies, it is new the creation of the Quoted Public Limited
Companies of Colective Investment in the Real Estate Market (SOCIMI), through the Act 11/2009,
of October 26. The main activity of these Companies is the acquisition and promotion of urban
real estate for being rented. They are also allowed to participate in the equity of other SOCIMI, or
of other non-residential entities that have the same object as the SOCIMI, and to possess shares
and particpations of Real Estate Collective Investment entities or funds.
SOCIMI are required to invest at least 80% of their assets in real estate to be rented. SOCIMI real
estate must remain rented for at least three years. In case odf real estate promoted by the
company, the term is extended to seven years.
The shares of the SOCIMI shall quote in a Spanish, or any other European Union State, regulated
market and must have a minimum capital equity of 15 millions euros. They shall distribute at least
90 % of their profits not coming from the transmission of real estate and shares or participations,
and at least 50% of the profits resulting from the transmission of real estate or participations,
while the other 50% shall, within three years as from the date of transmission, be reinvested in
other real estate or participations aimed to the fulfillment of the said object.
2.4 Investment Services Companies
Investment Services Companies are enterprises specialized in the provision of services relating to the
securities market.
The Securities Market Law (LMV) (Law 24/1988 of July 28, 1988) was amended in December 2007
for the purpose of incorporating into Spanish Legislation the following European Directives: Directive
2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial
instruments; Commission Directive 2006/73/EC of 10 August 2006 implementing Directive
2004/39/EC of the European Parliament and of the Council as regards organizational requirements
and operating conditions for investment firms and defined terms for the purposes of that Directive;
and Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the
capital adequacy of investment firms and credit institutions.
This latter Directive is partially transposed in the Securities Market Law in respect of investment
services firms and credit institutions which provide investment services. There is continued
recognition of the possibility of investment services being provided by credit institutions, and under
Law 35/2003 of November 4 on Collective Investments Institutions, certain investment and ancillary
services may also be provided by collective investment institution management companies. Both
credit institutions and collective investment institution management companies are subject to the
provisions of the Securities Market Law when providing investment services.
Although the December 2007 amendment had brought into the Securities Market Law a limited
portion of the provisions of Directive 2006/73/EC it was necessary to transpose the whole Directive.
As a result, the basic aim of Royal Decree 217/2008, of February 15, 2008, on the legal regime for
investment services companies and other institutions providing investment services was to finish off
the transposition of that Directive and complete the implementing regulations on the regime for
institutions providing investment services following the changes introduced in the Securities Market
Law, all under the principles that had already inspired the amendment of that Law.
Those principles are as follows: to modernize the financial markets to cater for new needs
(investment services were extended and a new type of investment services company was created:
financial advisory firms), the measures designed to protect investors were strengthened (Royal
Decree 217/2008 brought in a long list of rules to be observed by anyone who provides investment
services); and, lastly, the organizational requirements laid down for institutions providing investment
services were adapted to ensure that, generally speaking, their organization is in line with the
complex range of services they provide.
The amendment of the Securities Market Law at the end of 2007 extended the list of investments
services to cover the following:
a) The reception and transmission of client orders in relation to one or more financial instruments.
b) The execution of such orders on behalf of clients.
c) Dealing on own account.
d) The discretionary and individualized management of investment portfolios in accordance with
client mandates.
e) The placing of financial instruments either on or not on a firm commitment basis.
f) The underwriting of an issue or of a placement of financial instruments.
g) The provision of investment advice.
h) The management of multilateral trading systems.
The latter two services were the most significant changes. Firstly, we have the provision of investment
advice, which is understood to refer to the making of personalized recommendations to a client
regarding financial instruments, i.e. recommendations which take into consideration the particular
circumstances of the recipient (investment objectives, experience, financial capacity). Secondly, there
is the management of multi-lateral trading systems, which may be managed either by investment
services firms or by the governing bodies of official secondary markets or by entities set up for this
purpose by one or more governing bodies.
Guide to business in SpainAppendix II. The Spanish financial system13
Another important change was the appearance of a new investment service among those services
reserved by the Securities Market Law for investment services firms: systematic internalization. In
reality, this is the acceptance of a third alternative form of trading of financial instruments by
investment services firms which already existed in practice, i.e. execution on their own account,
internally and in an organized and systematic manner, of client orders in respect of financial
instruments listed for trading on official secondary markets. This practice is viewed as positive insofar
as it increases competition in financial markets; at the same time, however, it is clear that it needs to
be made subject to certain rules. To avoid the unfair treatment of clients, certain information and
transparency obligations were established in respect of the order execution possibilities offered by
the service, provisions were introduced which guaranteed a non-discriminatory treatment of clients in
accessing this investment service, and rules are laid down in relation to the order execution
procedure.
On the other hand, since the amendment of the Securities Market Law, ancillary services have been
deemed to include the following:
a) Safekeeping and administration of financial instruments for the account of clients.
b) Granting credits or loans to investors to allow them to carry out a transaction in one or more
financial instruments, where the firm granting the credit or loan is involved in the transaction.
c) Advice to companies on capital structure, industrial strategy and related matters and advice and
services relating to mergers and the purchase of undertakings.
d) Services related to operations for the underwriting of issues or placing of financial instruments.
e) The preparation of investment reports and financial analyses or other forms of general
recommendation relating to transactions in financial instruments.
f) Foreign exchange services where these are connected to the provision of investment services.
g) Investment services as well as ancillary services related to the non-financial underlying of certain
financial derivatives when these are connected to the provision of investment services or to ancillary
services.
In terms of the various categories of investment services firm, apart from the traditional types – i.e.
broker-dealers (sociedades de valores), brokers (agencias de valores) and portfolio management
companies - , the Securities Market Law established a new type of investment services firm authorized
to engage exclusively in the provision of investment advice: these are the “financial advisory firms”.
This service can be provided by natural persons or by legal entities in accordance with the
authorization and operational regime established in the same Law. The fact that Directive
2204/39/EC, and hence the Securities Market Law, reserve the provision of investment advisory
services for investment services firms was an important change.
Guide to business in SpainAppendix II. The Spanish financial system14
Broker-dealer companies are investment services firms able to operate professionally on behalf of a
third party or on their own account and which can perform the full range of investment services and
ancillary services.
Broker companies can provide the above investment and ancillary services, except for trading on their
own account, the underwriting of an issue or of a placement of financial instruments, and the
granting of credit facilities or loans to investors.
Portfolio Management Companies are those investment services firms which can only provide
discretionary portfolio management services and investment advisory services and the ancillary
services described under c) and e) above.
Financial advisory firms can provide the same services as Portfolio Management Companies apart
from the discretionary portfolio management services.
It should be mentioned that the Securities Market Law and Royal Decree 217/2008 are most
thorough in relation to the internal organization requirements to be met by investment services
firms. Given that Directive 2004/39/EC grants a Community passport to all Community investment
services firms, an adequate level of harmonization is required to ensure that all such firms are able to
operate in equal competitive competitions.
Finally it must be pointed out that through Act 5/2009, of June 29, the concept of significant share
has changed for the investment companies, insurance entities, managing entities of Collective
Investment Undertakings and Credit Entities. Said Act transponed Directive 2007/44 CE of European
Parliament and the Counsel of 5 September 2007 (Directive of significant share) partially to the
Spanish law. Thus, the regime of significant share for these entities, impose the duty of notification of
the acquisitions exceeding 10% of the capital equity or of the voting rights and when a significant
share is increased over 20%, 30% and 50% of capital equity or the voting rights or the entity may be
controlled, to the relevant authorities for their assessment.
2.5 Venture capital entities
Venture Capital is defined as a financial activity which consists of routing investments to unquoted
non-financial, non-real-estate companies, assuming the risk arising from their activity through the
acquisition of a temporary holdings in their capital stock.
Venture capital is not a reserved activity, i.e. no authorization is required to engage in this activity.
There is nevertheless a specific legal regime for venture capital entities which are subject to the
supervision of the CNMV. Major changes were made to this regime in 2005 through the approval of
Law 25/2005 of November 24 for the regulation of venture capital entities.
As mentioned, the special regime under the new Law is not obligatory, but companies subject to the
law benefit from a favorable tax regime for the treatment of capital gains generated by the
investments characteristic of their activity, which are 99% exempt.
Guide to business in SpainAppendix II. The Spanish financial system15
Guide to business in SpainAppendix II. The Spanish financial system16
Venture capital entities (ECR) can take the legal form of a corporation or a fund and, in addition to
their main corporate purpose, can grant participating loans and provide advisory services.
Venture Capital Entities which take the form of a fund are required to have minimum assets of
1,650,000 euros and entrust their management and administration, necessarily, to a venture capital
entity management company or collective investment institution management company.
Venture capital companies are required to have a minimum capital stock of 1,200,000 euros and
may entrust the management of their portfolio to an entity authorized to provide discretionary
portfolio management services.
Both the current law and the previous law establish certain investments ratios which must be met by
these entities in order to maintain their status as venture capital entities and, therefore, to be
entitled to the privileged tax regime.
The most important changes introduced by the current law are the following:
�• The law introduced a simplified form of venture capital entity intended for institutional investors
and characterized primarily by the fact that administrative formalities with the CNMV are simpler
and faster.
�• It also allows the creation of classes of shares or participations that can only be subscribed by
promoters and founders of simplified venture capital entities that will allow to vehicle the carried
interest.
�• It allows the formation of venture capital entities specialized in investing in other venture capital
entities.
�• It kept the investment ratio of 60% of the assets of the venture capital entities but the range of
eligible assets was broadened, and accordingly they can invest in (i) unquoted shares in non-
financial and non-real-estate companies; (ii) participating loans to the companies to which their
activity relates; (iii) companies whose shares are traded on second markets; (iv) up to 20% of
assets in other venture capital entities domiciled in OECD countries and which do not, in turn,
invest more than 10% of their assets in other venture capital entities; (v) quoted companies,
provided they are excluded from listing for a period of one year.
�• The other assets of a venture capital entity can be invested in (i) fixed-income securities admitted
to trading; (ii) investments in companies unrelated to the characteristic corporate purpose of the
venture capital entity; (iii) collective investment institutions; (iv) other venture capital entities; (v)
cash (vi) participating loans; (vii) financing; (viii) in the case of venture-capital companies, in fixed
assets.
In the view of their type of activity, which makes it difficult to meet the ratios indicated, the law
allowed a period of three years for them to meet some of the ratios.
2.6 Mutual guarantee societies
These companies were first introduced in 1978 and since then have operated in the area of medium-
and long-term financing of small and medium-sized enterprises, to which they provide guarantees.
As of January 30, 2010, there were registered at the Bank of Spain a total 23 mutual guarantee
societies.
Accordingly, in line with Law 1/1994 of March 11, on the legal regime for mutual guarantee societies
their corporate purpose is as follows:
�• To provide their members with access to credit and to credit-related services.
�• To improve the financial conditions of their members.
�• To provide personal guarantees in any lawful form, other than in the form of a surety bond.
�• To provide assistance and financial advice to their members.
�• To take holdings in companies and associations whose sole purpose is to engage in activities for
small and medium-sized companies. To this end, they must have the required reserves and
obligatory provisions.
The following members of mutual guarantee societies should be distinguished:
�• Participating members: Also known as mutual members. They are the individuals or legal entities
eligible to obtain guarantees from the society. Therefore, they are required to belong to the
industry specified in their bylaws, and their establishment must be located within the area defined
in their bylaws.
�• Protector members: These cannot request guarantees from the society and therefore are not
subject to limitations on the industry to which they belong. The protector members are usually
public authorities, public-law entities and the companies majority owned by them.
Working together with these societies are “sociedades de reafianzamiento” (supporting-guarantee
companies), which are financial institutions, for the purposes of Law 1/1994, and adopt the legal
form of an S.A. company (“Sociedad Anónima”), and have an ownership interest held by the State.
Their purpose is to provide sufficient coverage and assurance for the risk assumed by the mutual
guarantee societies and, in addition, furnish the cost of the guarantee for the members.
2.7 Pension plans and insurance companies
In 1987, the Pension Plans and Funds Law introduced a form of saving in Spain that has created a
sound instrument for long-term financing. This legislation envisaged the existence of pension plans
promoted by employers, certain associations and financial entities. The successive modifications and
legal updates taking place since then led to the approval, in 2002, by means of Legislative Royal
Decree 1/2002, of the Consolidated Text of the Pension Plans and Funds Law. This was followed by
the approval of the Pensions Plans and Funds Regulations (Royal Decree 304/2004 of February 20),
Guide to business in SpainAppendix II. The Spanish financial system17
the intention of which was to update, systematize and supplement the adaptation of regulations in
this area in accordance with European Union provisions. These Regulations were subsequently
amended by Royal Decree 439/2007 of March 30, 2007 and, primarily, by Royal Decree 1684/2007
of December 14, 2007 which introduced changes in various areas of the legislation on pension plans:
actuarial issues in connection with pension plans, disclosure obligations to pension plan holders and
beneficiaries, the system for investments by pension funds, internal control rules for pension fund
managers, rules of conduct and regarding the separation of depositaries, and rules on administrative
registers related, in particular, to cross-border activities. Moreover, as a result of the creation in Law
35/2006 of November 28, 2006 of Company Benefits Plans (“Planes de Previsión Social
Empresarial”) which is a new instrument for transferring company’s pension obligations to be
managed externally, a series of changes were made to adapt both the legislation on pension plans
and the legislation on the instruments for pension obligations in order to regulate certain
components of this new additional instrument for companies’ benefit obligations. In addition, Royal
Decree 1299/2009, of July 31, is the last modification of the Pensions Plans and Funds Regulations,
dealing with features like the consolidated rights in case of long term unemployment, and the ability
of the Economy Deparment to issue special laws about the authorization and modification
procedures of the pension funds and the obligation of communication.
Pension plans are collective investment products which invest a principal sum with a view to
obtaining periodic income or capital gains in the future in order to provide for retirement, death or
disability. In no circumstances, however, should they be regarded as taking the place of the pensions
granted under applicable social security regimes.
Pension funds are asset pools set up for the sole purpose of implementing pension plans. A pension
fund may include one or more pension plans. The aim, as indicated in the 2004 Regulations, is to
create a specific supplemental welfare provision instrument, within the framework of private
purpose-saving systems.
The various characteristics of pension plans include, most notably, their favorable tax treatment and
the restrictions on being able to draw out any of the accumulated savings prior to the occurrence of
the event for which they were intended, except in cases of long-term unemployment or serious
illness.
The trend shown by pension plans and funds over recent years has been one of sustained growth.
Since 1987, the date of publication of the law referred to above, investments in pension funds in
Spain have increased year by year, to such a point that they accounted for 14% of the total savings of
Spanish households in 2008, which is still below the European average (32%).
In this connection, the Private Insurance Law (Law 30/1995) required all Spanish companies (except
financial institutions) to instrument before November 15, 2002, their pension commitments to
employees through an external arrangement (pension plan or insurance policy); this had a
significant impact in terms of increasing the funds managed by these entities.
Guide to business in SpainAppendix II. The Spanish financial system18
At the end of 2009 the number of pension plans appearing in the Official Register of the Directorate-
General of Insurance and Pension Funds totaled 4,359 against the 3,293 of the past year, that
represents an increase of 32.32 per cent. The cumulative investors figure reported by pension plans
as of September 30, 2009 totaled 10,559,226, which was up by 60,635 investors or 0.57 percent on
the previous year’s figure. The chart below shows the changes for pension plan investors according to
data from the Official Register of the Directorate-General of Insurance and Pension Funds.
Guide to business in SpainAppendix II. The Spanish financial system19
Table 1
PARTICIPANTS OF THE PENSION PLANS AT DECEMBER 31, 2008
PENSION PLANS PROMOTED BY VARIATION TOTAL
FINANTIAL ENTITIES EMPLOYERS ASSOCIATIONS VARIATION
FINANTIAL ENTITIES EMPLOYERS ASSOCIATIONS TRIM/YEAR TRIM/YEAR TRIM/YEAR TRIM/YEAR TOTAL
31/12/1989 317.777 -- -- -- -- -- -- 317,77731/12/1990 530,551 81,420 15,987 212,774 -- -- 310,181 627,95831/12/1991 710,677 110,315 21,309 180,126 28,895 5,322 214,343 842,30131/12/1992 875,041 166,592 26,358 164,364 56,277 5,049 225,690 1,067,99131/12/1993 1,066,872 212,668 62,791 356,195 102,353 41,482 500,030 1,342,33131/12/1994 1,301,712 222,249 67,759 234,840 9,581 4,968 249,389 1,591,72031/12/1995 1,490,255 234,674 71,155 188,543 12,425 3,396 204,364 1,796,08431/12/1996 1,838,804 267,174 72,669 348,549 32,500 1,514 382,563 2,178,64731/12/1997 2,352,239 292,090 76,459 513,435 24,916 3,790 542,141 2,720,78831/12/1998 2,953,750 316,545 76,497 601,511 24,455 38 626,004 3,346,79231/12/1999 3,623,507 371,648 76,448 669,757 55,103 -49 724,811 4,071,60331/12/2000 4,402,708 463,519 72,601 779,201 91,871 -3,847 867,225 4,938,82831/12/2001 5,168,114 566.885 92,941 765,406 103,366 20,340 889,112 5,827,94031/12/2002 5,829,358 614,996 88,712 661,244 48,111 -4,229 705,126 6,533,06631/12/2003 6,612,317 696,640 88,702 764,463 79,184 521 844,168 7,397,65931/12/2004 7,244,482 1,282,598 83,217 632,165 585,958 -5,485 1,212,638 8,610,29731/12/2005 7,696,560 1,543,715 86,132 452,078 261,117 2,915 716,110 9,326,40731/12/2006 8,164,485 1,624,059 90,056 467,925 80,344 3,924 552,193 9,878,60031/12/2007 8,529,191 1,737,768 89,041 364,706 113,709 -1,015 477,400 10,356,000
31/03/2008 8,491,952 1,783,744 89,293 -37,239 45,976 252 8.989 10,364,98930/06/2008 8,526,221 1,801,045 88,621 34,269 17,301 -672 50.898 10,415,88730/09/2008 8,522,856 1,830,975 87,865 -3,366 29,930 -756 25.808 10,441,695
31/12/2008 8,651,854 1,864,623 82,114 128,999 33,648 -57.51 156.896 10.598.591
Variation year 2008 % 1.44% 7.30% -7.78% 122,663 126,855 -6927 242,591 2,34%
Source: Inverco
All types of pension plans must be included in a pension fund. All of the economic contributions of
the sponsors and investors in the plan must be included immediately in the plan’s position account
(cuenta de posición) in the pension fund, to which all charges are made to comply with the benefits
under the plan. As of December 31, 2009, the number of registered pension funds increased to
1,548, compared to 917 in 2002.
The table below shows the changes in pension funds in Spain by number of registered pension funds
and managed assets.
Guide to business in SpainAppendix II. The Spanish financial system20
1988 94 153.261989 160 516.871990 296 3,214.211991 338 4,898.251992 349 6,384.951993 371 8,792.741994 386 10,517.481995 425 13,200.441996 445 17,530.611997 506 22,136.261998 558 27,487.251999 622 32,260.64
2000 711 38,979.452001 802 44,605.622002 917 49,609.912003 1,054 56,997.342004 1,163 63,786.802005 1,255 74,686.702006 1,340 82,660.502007 1,353 88,022.502008 1,374 80,239.562009 1,412 82,160
Source: DGS, Ministry of Economía
Table 2
VARIATION IN NUMBERS OF PENSION FUNDS
Year Registered funds Assets
(€ million)
As for the investments made by these funds, current regulations are aimed at lending greater legal
certainty to the investment process, by promoting the transparency of investments and the provision
of information to participants. Financial investments currently form the bulk of the assets of pension
funds.
In the insurance industry, since the Revised Text of the Law on the Regulation and Supervision of
Private Insurance, approved by Legislative Royal Decree 6/2004 of October 24, 2004, insurance
companies have been allowed to adopt the form of an S.A. company (“Sociedad Anónima”), mutual
insurance company (“mutua”), cooperative (“cooperativa”) or welfare mutual insurance company
Guide to business in SpainAppendix II. The Spanish financial system21
The return on pension plans as of December 31, 2008, according to INVERCO data, is highly
satisfactory: average weighted returns for the last fifteen, ten, five, and three years and twelve
months were 4.21%, 1.04%, 1.4%, -0.97% and -8.05% respectively, and these figures were badly hit
recently by the turmoil in the financial industry worldwide, as evidenced by the fact that shorter term
returns are the ones that have suffered the most. However, in 2009, in contrast with the tendency of
the prior year, the annual return on pension plans has been 6.74%, a higher amount than previous
year due to the recuperation of stock markets from the minimums obtained in March 2009.
The number of management companies registered as of December 31, 2007 in the Administrative
Register of the Directorate-General of Insurance and Pension Funds totaled 113; of the 94 companies
that carry out actual management of pension funds, 12 are responsible for managing only one
pension fund, this accounts for 12.8 percent of the institutions with activity. At the other end of the
scale, 38 companies manage more than 10 funds each. All of this information is provided in the
following table from the Directorate-General of Insurance and Pension Funds.
Management companies
Number of funds 2003 2004 2005 2006 2007
1 22 18 15 16 12 2 15 9 11 9 8 3 10 13 10 7 7 4 8 6 7 7 7 5 6 7 5 5 5 6 6 6 6 6 7 7 4 1 3 1 2 8 5 5 3 3 1 9 4 6 6 4 6
10 2 2 1 2 1 11 4 1 3 6 7 12 5 1 1 1 2 13 1 3 1 1 2 14 2 5 2 3 2
15 to 20 9 11 5 10 8 More than 20 9 10 21 16 17
TOTAL 112 104 100 97 94
Table 3
PENSION FUNDS MANAGED BY ACTIVE MANAGEMENT COMPANIES.
Guide to business in SpainAppendix II. The Spanish financial system22
(“mutualidad de prevision social”), and specialized reinsurance companies are also in a class of their
own, determined by their corporate purpose.
The following table shows the changes in operating Spanish insurance companies. The figures are
broken down into direct insurance companies and companies engaged exclusively in reinsurance
activities and in the former category, according to the various legal forms they take. There are
currently no insurance cooperatives registered in the Register.
2003 2004 2005 2006 2007 2008 2009
DIRECT INSURANCE COMPANIES- S.A. companies 240 225 215 207 206 206 205- Mutual insurance companies 45 44 40 38 37 35 34- Welfare mutual insurance companies 63 59 55 51 52 56 56
TOTAL DIRECT INSURANCE COMPANIES 348 328 310 296 295 297 295
SPECIALIZED REINSURANCE COMPANIES 2 2 2 2 2 2 2
TOTAL INSURANCE COMPANIES 350 330 312 298 297 299 297
Table 4
EVOLUTION OF SPANISH INSURANCE COMPANIES
The Spanish insurance industry continues to be characterized by the co-existence of a certain degree
of concentration of the volume of business in highly-competitive lines and types of insurance (life,
car, multi-risk) which require considerable size in terms of assets and administration, with the
distribution of a minimum part of such volume of business among a large number of entities
operating in other types of insurance which do not require companies such a size. Indeed, this
characteristic of its structure has become more accentuated over recent years due to the greater level
of competition between companies in the domestic market and the internationalization of such
market.
In 2007 (according to provisional figures) the premiums collected for direct insurance and
reinsurance accepted from insurance companies supervised by the Directorate-General of Insurance
and Pension Funds, excluding welfare mutual insurance companies, totaled €55,078 million, up 3.42
percent on 2006, which was a slightly lower percentage than in previous years.
In non-life insurance growth was higher than in life insurance in 2007 as the drop in consumer
spending took a greater toll on life insurance. The opposite happened in the previous year when life
insurance grew by 1.29 percent (compared to 11.31 percent in 2006) whereas non life insurance grew
by 5.04 percent (6.96 percent in 2006).
Following completion of the process of transferring pension commitments to external management
in 2002, from 2003 the investment in life and non-life insurance remained stable in the industry.
After accounting for 85.5% of the total insurance and financial income figure in 2006, earnings from
the non-life business fell to 59.53% in 2007. A significant volume of the earnings of the non-life
insurance line in 2007 (more than two-thirds) was obtained from mass automobile insurance,
liability insurance, health insurance and comprehensive home insurance, in similar proportions to
the previous year.
In recent years work has been under way on a modification of the regulations governing the
insurance industry, aimed at adapting the current legal framework to the changes which have taken
place in the insurance industry and in the financial industry in general, with the emergence of new
investment alternatives for the coverage of technical reserves, new insurance products or new trends
in terms of internal control requirements. A new Law on private insurance and reinsurance brokerage
(Law 26/2006 of July 17, 2006) was approved in 2006, and 2007 saw the amendment, by means of
Law 13/2007 of July 2, 2007, of the Revised Text of the Law on the Regulation and Supervision of
Private Insurance in relation to the supervision of reinsurance.
Guide to business in SpainAppendix II. The Spanish financial system23
Guide to business in SpainAppendix II. The Spanish financial system24
3. Market
3. MARKET
3.1 Securities market
The Spanish securities market has seen major growth over recent years. This has been primarily due,
on the one hand, to homologation with the markets of neighboring countries through the adoption
of common European rules, and the introduction of new rules designed to streamline requirements
and procedures in relation to public offerings and the subscription of securities and their admission
to trading on organized secondary markets. On the other hand, it is explained by the fact that the
technical, operative and organizational systems which currently support the securities market allow
for greater volumes of investment to be routed. These factors have resulted in greater transparency,
liquidity and efficiency in Spanish markets.
The provisions governing the Spanish securities market are based on the Anglo-Saxon model, aimed
at protecting both small investors and the market itself. This was the aim behind the creation of the
National Securities Market Commission (CNMV)4 . This organization is responsible for the supervision
and inspection of the Spanish securities markets and the activities of all who operate in them,
overseeing the transparency of the markets, protecting investors, and proper price formation.
The CNMV was created under the Securities Market Law (24/1988), which brought about major
reforms in this segment of the Spanish financial system. Laws 37/1998, 44/2002 and the subsequent
Royal Decree Law 5/2005 on Urgent Reforms to Boost Productivity and to Improve Public
Procurement, updated the applicable legal regime, by establishing a regulatory framework adapted
to European Union requirements, appropriate for the development of Spanish securities markets
within the European context, adding new safeguards for the protection of investors.
In exercising its powers, the CNMV receives a large amount of information, both from and about the
market players, and a large part of this information is recorded in its official registers and is publicly
accessible.
The operations of the CNMV are aimed primarily at companies issuing securities, those making
public offerings of securities, the secondary markets, companies providing investment services, and
collective investment institutions.
The CNMV, through the National Agency for the Codification of Securities, also assigns
internationally-valid ISIN and CFI codes to all issues of securities made in Spain.
In relation to the drive for modernization described above, mention should be made of the following
new features brought in by the Securities Market Law and Royal Decree Law 5/2005, with respect to
the regime for the issue of securities and admission to trading on organized secondary markets, all of
which are aimed at speeding up the formalities required for public offerings and admission to
trading:
4 www.cnmv.es
Guide to business in SpainAppendix II. The Spanish financial system25
�• According to the Securities Market Law, the following are not regarded as public offerings and,
accordingly, do not have to meet the requirements of current regulations: (i) offerings aimed
exclusively at qualified investors; (ii) offerings aimed at fewer than 100 individuals or legal entities
in Spain, without taking qualified investors into account; (iii) offerings in which the minimum
investment required is at least 50,000 euros, (iv) offerings in which the unit price of the securities
is at least 50,000 euros, and; (v) offerings for a total sum of less than 2,500,000 euros.
�• The list of cases in which it is not necessary to register a prospectus with the CNMV in the event of
an offering or admission to trading is increased to include the following, among others: (i) shares
issued to replace existing shares where the issue does not imply a capital increase; (ii) securities
offered as payment in relation to a tender offer (iii) securities which are to be allocated in relation
to a merger transaction; (iv) the allocation for no consideration of shares to current shareholders
and dividends paid in the form of shares pertaining to the same class as those in respect of which
such dividends are paid; (v) the allocation of securities to current or former directors or employers
by an issuer whose securities have already been admitted to trading, etc.
�• A prospectus approved by the CNMV is valid for offerings/admissions to trading in any of the
regulated markets of receiving EU member states provided that the CNMV notifies the relevant
recipient member state accordingly. Similarly, prospectuses approved by the competent authority
of a Member State of origin are valid for the purposes of offerings/admissions to trading in Spain.
�• Prospectuses approved by the CNMV for offerings or admissions to trading in Spain are to be
drawn up (at the election of the issuer/applicant for admission) in Spanish or a language
habitually used in international finance, or in any other language which is accepted by the CNMV.
�• Fewer formal requirements for certain fixed-income issues made by quoted companies, among
others. It is no longer necessary to execute a public deed and have it registered at the mercantile
registry in order to issue bonds and debentures etc.
Official secondary markets operate in accordance with established rules on conditions of access,
admission to trading, operational procedures, information and publicity. These rules provide
assurance for the investor and compliance is overseen by the governing company of each market
(which lays down the rules) and by the CNMV.
These rules are aimed at guaranteeing the transparency and integrity of the markets, focusing on
aspects such as the adequate dissemination of significant information (transactions performed,
events which may affect the price of a security), the correct formation of prices, and the monitoring
of irregular conduct by participants, such as the use of privileged information.
The Spanish secondary markets are mainly the equity markets (stock exchanges), the fixed-income
markets (public and private) and futures and options markets.
The issuers whose securities (equity and fixed-income) are quoted in Spanish secondary markets are
primarily ordinary corporations and Spanish credit institutions, as well as the foreign subsidiaries of
Guide to business in SpainAppendix II. The Spanish financial system26
Spanish companies. There are also foreign companies (European, mainly) whose shares are traded
on Spanish stock exchanges.
In relation to the functioning of regulated markets, 2002 saw the formation of Bolsas y Mercados
Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A. (BME)5. This was the response
of Spanish markets to a new international financial environment in which investors, intermediaries
and companies were demanding a growing range of services and products within a secure
framework characterized by transparency, flexibility and competitiveness. BME includes the various
enterprises responsible for directing and managing securities markets and financial systems in Spain.
It groups together, within a single unit in terms of action, decision-making and coordination, the
following members, among others:
�• The Madrid, Barcelona, Valencia and Bilbao Stock Exchanges.6
�• Sociedad de Bolsas, which is the company entrusted with the management and functioning of the
Stock Exchange Interconnection System (SIBE), the technical trading platform used by the Spanish
securities market.7
�• The AIAF Fixed-Income Market, which is the financial debt (or fixed income) market in which assets
issued by industrial-type companies, financial entities and regional public bodies to attract funds
to finance their activity, are quoted and traded8.
�• MEFF, Sociedad Rectora de Productos Financieros Derivados de Renta Variable, S.A. and MEFF,
Sociedad Rectora de Productos Financieros Derivados de Renta Fija, S.A, the companies
responsible for the official Spanish market for futures and options in respect of fixed-income
securities and equities9.
�• SENAF, the Electronic System for the Trading of Financial Assets, which is an electronic platform for
the trading of Spanish Public Debt Debentures, Bills and Bonds10.
��• Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores
(IBERCLEAR), which is the Spanish Central Securities Depository, responsible for recording in the
accounts and for the clearing and settlement of securities admitted to trading on Spanish Stock
Exchanges, the Market for Public Debt represented by book entries, the AIAF Fixed Income Market,
and Latibex (the Latin American Securities Market denominated in Euros). IBERCLEAR uses two
technical platforms: the Securities Clearance and Settlement System (SCLV) and the Bank of
Spain’s Public Debt Book Entry Office (CADE)11.
5 www.bolsasymercados.es 6 www.bolsamadrid.es; www.borsabcn.es; www.bolsavalencia.es; www.bolsabilbao.es 7 www.sbolsas.com 8 www.aiaf.es 9 www.meff.com 10 www.senaf.net 11 www.iberclear.es
Guide to business in SpainAppendix II. The Spanish financial system27
In 2007 the approval of Law 47/2007 of December 19, 2007 brought about a major reform of the
current wording of the Securities Market Law. Changes are to be found in Title I “General provisions”,
Title IV “Official secondary securities markets”, Title V “Investment services firms”, Title VII “Rules of
conduct” and Title VIII “Supervision, inspection and penalty system”. A new Title XI was also added,
entitled “Other trading systems; multilateral trading systems and systematic internalization”.
There are four key principles underlying this reform of the Securities Market Law. These principles –
which were also fundamental to the new EU rules transposed in Law 47/2007 – are: (i)
modernization of Spanish securities markets to adapt them to current needs; (ii) reinforcement of
measures aimed at protecting investors; (iii) adaptation of the organizational requirements
applicable to firms which provide investment services; and (iv) improvement of the supervisory
powers of the Spanish National Securities Market Commission (CNMV), by reinforcing instruments
and mechanisms designed to foster national and international cooperation between supervisors.
3.1.1 Fixed Income
3.1.1.1 The Public Debt Market
The purpose of the Book-Entry Public Debt Market is the trading of fixed-income securities
represented by book entries issued by both national and supra-national public bodies.
The Bank of Spain is responsible for supervision and management of the Book-Entry Public Debt
Market through its Central Public Debt Book Entry Office.
Along with the traditional system of trading over the phone, in 2001 and 2002 the Spanish Council of
Ministers authorized the creation of the Electronic System for the Trading of Financial Assets (SENAF),
and in 2002 the Organized System for the Trading of Fixed-income Securities MTS ESPAÑA SON,
managed by Market for Treasury Securities Spain, S.A. (MTS ESPAÑA). Both are Organized Trading
Systems (SON) and are subject to the supervision of both the CNMV and the Bank of Spain.
The Book-Entry Public Debt Market is particularly important in Spain, and attracts both resident and
non-resident investors. The favorable tax treatment for investments by non-residents in these
securities make it particularly attractive. Mention should also be made of the centralization of money
market operations through a book-entry system and the creation of the options and futures markets,
linked to the book-entry system through which public debt securities are traded.
Since the merger of the Bank of Spain’s Public Debt Book Entry Office (CADE) and the Securities
Clearance and Settlement System (SCLV), the resulting company, Iberclear, has been responsible for
the recording and settlement of transactions involving securities accepted for trading in the Book-
Entry Public Debt Market. Iberclear has links with the central securities depositaries of Germany,
France, Italy and Holland, meaning that Spanish Public Debt securities can be traded in these
countries.
Guide to business in SpainAppendix II. The Spanish financial system28
There was tremendous pressure on interest rates and the bond markets in 2008 caused by a
combination of factors related to the worsening of the worldwide financial crisis, a period of
inflationary pressure followed by deflationary pressure, and a general decline in economic activity
throughout the world.
Trading on the book-entry public debt market in spot transactions totaled more than two billion
(2,000,000,000,000) euros from January to November 2009, keeping the same levels as in the
previous year. In a breakdown by instrument, this year trading in treasury bills doubled with respect
to the previous year, whereas medium- and long-term bonds and debentures fell back considerably in
this period showing the hard times that hit the medium- and long-term fixed-income markets in
2008.
The table below shows the volume (in millions of euros) traded on the book-entry public debt
market.
1997 187,868 1,534,640 - 1,722,5081998 100,545 1,617,689 - 1,718,2341999 79,839 1,752,353 22,412 1,854,604
2000 79,820 1,543,234 16,719 1,639,7732001 58,116 1,968,268 15,374 2,041,7582002 40,096 2,255,219 15,629 2,310,9442003 89,751 2,144,615 12,516 2,246,8822004 114,951 2,012,445 9,302 2,136,6982005 116,087 2,213,934 8,187 2,338,2082006 92,831 2,795,271 14,415 2,902,5172007 57,363 3,102,825 17,197 3,177,3852008 114,611 2,063,699 23,819 2,202,129
Table 5
TRADING ON THE GOVERNMENT DEBT MARKETS (MILLIONS OF EUROS)
Treasury Bills Non-Strippable Bonds
and Debentures
Coupons and Principals
of Stripped DebtTotal
Source: Bank of Spain
Mention should be made of the sharp increase in debt held by non-residents since the introduction of
the single currency. Their debt portfolio is mainly composed of 10 or 15-year products, which may be
strips and have high liquidity. The main countries of origin of these investors are: France, Germany
and the United Kingdom, and as far as non-European countries are concerned, the growing presence
of Japanese investors is particularly noteworthy.
The reasons for the major growth in public debt held by non-residents are indicated below:
�• Spain’s inclusion in Economic and Monetary Union (EMU), with the consequent elimination of the
exchange risk. This made Spanish public debt more attractive.
�• The major role played by non-resident market makers. They first entered the Spanish public debt
market back in 1999, were reformed in 2003, and have moved significant volumes of debt,
contributing to the drive for a more dynamic market.
Meffclear began to operate in 2004. This is a counterparty clearing house for Book-Entry Public Debt
securities managed by MEFF Sociedad Rectora de Productos Financieros de Renta Fija, S.A.
3.1.1.2 AIAF Fixed Income Market
This is the market used for trading all kinds of fixed-income securities of companies and private
institutions, except for those instruments which are convertible into shares (which are only traded on
stock exchanges) and public debt, which is traded through the book-entry public debt market. It is an
organized secondary market specialized in trading in large volumes, meaning that it is geared
towards wholesale investors (i.e. it caters primarily for qualified investors).
The AIAF market has grown rapidly in recent years owing to the expansion of fixed-income securities
in Spain. It was formed in 1987 through an initiative of the Bank of Spain, to put new mechanisms in
place to encourage business innovations which could be carried out by attracting funds through
fixed-income assets. The regulatory and supervisory authorities have provided it with the features
required to be able to compete in its environment.
Its increase in size over recent years makes it comparable with the fixed-income markets of other
countries in our environment. Its special feature is that it is one of the very few Official Organized
Markets in Europe dedicated exclusively to financial assets of this type.
Issuers, in accordance with their fund procurement strategies, place at the disposal of investors
through the AIAF, a variety of assets and products comprising the full range of maturity periods and
financial structures.
The AIAF Market, under the supervision of the CNMV, guarantees the transparency of operations and
promotes the liquidity of assets admitted to trading.
At the beginning of 2009 the AIAF Fixed Income Market had eighty-four members, including the
leading banks, savings banks and stockbroker companies and agencies in the Spanish financial
system. The clearing and settlement of transactions is done through Iberclear.
AIAF recorded a total trading volume amounting to 1,108,233 million euros in 2008 and 2,400,887
million euros in 2008 and 3,372,889 million euros the period between January 2009 and November
2009, up 40.48% on the figure for the previous year in only eleven months.
Guide to business in SpainAppendix II. The Spanish financial system29
Guide to business in SpainAppendix II. The Spanish financial system30
3.1.2 Non-Fixed Income
3.1.2.1 Stock Exchanges
The Stock Exchanges in Spain (Madrid, Bilbao, Barcelona and Valencia) are the official secondary
markets engaged in the exclusive trading of stocks and securities which are convertible or which carry
rights of acquisition or subscription. In practice, equity issuers also use the stock exchanges as a
primary market from which to make offers of sale of shares or capital increases.
The manner in which each Stock Exchange functions and is organized depends on the related stock
exchange governing company.
There are currently two systems for trading in equities :
1. The floor market (i.e. the traditional system). Each of the four Stock exchanges has its own floor
market. Under this system, the players who are members of the Stock exchange in question
actually assemble in the trading room and trading takes place in person. This is currently a
residual market, which accounts for between 1% and 2% of total trading, although it brings
together a large number of companies with low liquidity.
2. The electronic Stock Exchange Interconnection System (Sistema de Interconexión Bursatil, (SIBE)).
This is a trading platform managed by Sociedad de Bolsas which connects up the four Spanish
Stock exchanges. It is a market which responds to orders, offering real-time information on
fluctuations in the price of each security and permitting the issue of orders through computer
terminals to a central computer. In this way, a single Market Order Book is managed for each
security.
Practically all stock exchange trading of shares in Spain takes place through SIBE. All securities
admitted to trading in at least two Stock exchanges can, at the request of the issuer company and
subject to a favorable report by the Sociedad de Bolsas and agreement of the CNMV, be traded
through this system.
The activity of the Spanish securities market can be measured in terms of actual trading volume
through SIBE, which reached a figure of around 1,243,168 million euros at the 2008 year-end, and
814,311 million euros in the period between January and November 2009, and was down by 34.49%
in the first eleven months of the year.
The accumulated volume of capitalization or market value of equities as of November 2009
amounted to 1,058,599 million euros, up 42.85% on the figure at the same date in the previous
(784,942 million euros).
Foreign investment has also made a significant contribution to the growth of Spanish securities
markets. A total of 38.5% of the value of listed Spanish companies is held by foreign investors, which
is the highest figure since 1992, the year in which these statistics began to be calculated, which
makes non-residents the principal owners of shares in Spanish listed companies.
Guide to business in SpainAppendix II. The Spanish financial system31
The proportion of investments by non-residents on the Spanish stock exchange was extraordinarily
high in 2009 despite exceptional market conditions. The proportion that purchases by non-residents
bear to the total trading volume on the Spanish market is still rising with respect to previous years,
and totaled 60% in the first half of 2009, which means that more than half of the total trading
volume on the market has a non-resident trader behind it.
There was a bearish trend on the Spanish stock exchange in 2007 and 2008. The shareholder return
figure relative to the IBEX index stood at minus 41.31% which marked a sharp downturn from the
clearly bullish trend prevailing in the market since 2003, with an average growth rate of around 25%
until 2006. However, in 2009, after a negative beginning of the year, as from February, the Stock
Market has experienced a recovery that is reflected in the significant increases in the IBEX and in the
world main indicators. In terms of profitability, at the end of November 2009 it raised a positive
result of 25%, returning to the upward tendency consolidated until 2007.
The following two tables show the impact of investments in shares in quoted companies, by groups
of investors, the capitalization of the Spanish stock exchange (in millions of euros) by sectors.
Banks and savings banks 12.8 7.3 7.9 7.1 7.7 8.7 8.6 9.3 9.4Insurance companies 3 2.3 2.3 2.2 2.3 2.3 2.4 2.5 2.2Collective investment 5.8 4.8 4.9 5.2 5.6 6.3 6.2 7.2 6Public authorities 0.3 0.2 0.2 0.4 0.3 0.3 0.3 0.3 0.2Non financial firms 10.1 20.3 21.7 22 23 23.1 24.7 24.4 25.4Households 33.6 30.5 28 28.3 26 24.1 23.6 23.8 20.1Non-residents 34.3 34.7 35 34.8 35.1 35.2 34.2 32.6 36.8
Table 6
INVESTMENTS IN SHARES IN QUOTED COMPANIES BY GROUPS OF INVESTORS
1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: BME
2005 868,760.33 114,951.63 57,222.45 40,500.00 47,968.47 187.880,96 103,852.95 - 316,383.85
2006 1,134,137.08 153,580.31 96,203.65 55,069.93 55,567.10 281.242,51 83,854.38 23,705.48 384,913.72
2007 1,384,779.83 212,529.71 89,381.52 61,126.07 48,385.47 264.044,97 110,416.89 31,496.64 567,398.56
2008 784,942 148,809 44,471 33,549 23,628 150.095 77,728 24,648 281,955
2009 1,058,599,06 121,733,58 53,482,68 25,706,57 204,729,2 93,1667,7 26,122,42 492,783,2 105,859,9
Table 7
CAPITALIZATION OF THE SPANISH STOCK EXCHANGE (IN MILLIONS OF EURO) BY SECTORS
Source: BME
Includes: The continuous market, the floor markets of the four Spanish stock exchanges, MAB and Latibex
Total Oil and Energy
Basic Industry
and Construction
Materials
Consumer
Goods
Consumer
Services
Financial and
Real Estate
Services
Technology and
Telecommunications MABForeign
Securities
Guide to business in SpainAppendix II. The Spanish financial system32
Stock market activity is measured in terms of performance indexes, based on share prices as the best
indicator of the market price level. Thus the index shows changes in prices and the market trend at
different points in time.
The IBEX-35 is the Spanish continuous market index. It is prepared in real time and shows the
capitalization of the 35 best companies on the electronic stock market. It is an extremely efficient
information instrument for anyone performing measurement activities, as it is an indicator of the
shares with the greatest liquidity. It is not manipulated in any way. The securities that should be
included are reviewed twice a year.
To be included in the index, certain guidelines must be observed, such as:
�• The company must be traded on the continuous market for at least six months (control period).
�• Companies with a market capitalization of less than 0.3% of the average capitalization of the IBEX-
35 may not be included.
�• The security must have been traded in at least one third of the sessions in the six-month control
period. If this is not the case, this security could still be chosen if it were within the first fifteen
securities by capitalization.
�• Rules on the weighing of companies according to their free float must be observed.
The Chart below shows the performance of this index over the last few years:
Last Year
Chart 1
PERFORMANCE OF IBEX-35PRICES, 2005-2009
Source: Madrid Stock Exchange.
Guide to business in SpainAppendix II. The Spanish financial system33
3.1.2.2 The New Market
The “New Market” (“Nuevo Mercado”), a special trading segment in Spanish stock exchanges, was
created in 2000. It is used to trade securities of companies in leading edge technology sectors in
terms of final product, production processes or the performance of activities with high growth
potential.
The creation of the New Market was essentially due to the presence on the Spanish stock market of
companies associated with new communications technologies, particularly with the Internet, and
was based on experiences of a similar kind in the markets of other countries.
To protect investors, Sociedad de Bolsas laid down specific rules for trading, in view of the higher
volatility and risk of these securities.
Thus, for the specific case of New Market securities, the maximum percentage of price variation for
each session was increased to 25% (it is 15% for traditional securities), and this percentage may be
further increased if advisable in view of the circumstances of the market or of the security.
However, the protection of the investor in relation to these securities was based on disclosure
obligations which extend beyond the traditional requirements (significant events, quarterly, six-
monthly and yearly), since at least once a year these companies had to publish explanatory
information on the evolution of, and outlook for, their businesses.
The New Market currently has 8 quoted companies. The IBEX NM index was created to help monitor
the New Market.
The calculation of this technological index stopped in December 2007, since there were no financial
products associated with this index, coupled with reasons relating to the low number of securities
listed and the economic changes that had taken place.
In November 2007 the New Market had accumulated a decline of 7.4% and despite a bullish trend
since the end of 2002 it never regained the highest figures obtained at the beginning of its existence.
Furthermore, this indicator has typically gone against the trend in the other selective indexes and in
the Spanish market as a whole, and it usually had the opposite plus or minus sign to the figure for
Ibex 35 or the General Index for the Spanish stock exchange.
3.1.2.3 The Latibex Market
The Market for Latin American Securities in Euros ("Latibex”) came into operation towards the end of
1999. The good behaviour of the Latin American economies in 2009 and the expectations of growth
for 2010 has been reflected in the evolution of the price of the shares of the main Quoted Latin
American companies as there has been an increase in the assignment of resources by the main
intenational investors.
This market was formed to provide Latin American quoted companies with a reference for the
formation of prices, in European business hours, supported by the leading role played by the Spanish
Guide to business in SpainAppendix II. The Spanish financial system34
economy in Latin America. This market uses the SIBE as its trading platform, and to increase its
liquidity and improve arbitrage operations, the role of Specialist was introduced in 2001.
Latibex is not classed as an official secondary market, although it operates in a very similar way to a
stock exchange. It is a multilateral market, in which crossed transactions on the market are cleared by
Iberclear in three days. Since it began to operate, 39 securities have been included in Latibex, all of
which are quoted on a Latin American stock exchange.
Table 8
MAIN CHARACTERISTICS
Market authorized by the Spanish government.
Platform for trading and settlement in Europe in relation to the main Latin American companies.
Currency: Euros.
Trading: Through the Stock Exchange Interconnection System (SIBE).
Settlement: In D+3 by book entries.
Connected to the market of origin by Iberclear agreements with the Latin American central depositaries through aliaison institution.
Intermediaries: All of the members of the Spanish stock Exchange currently operate. Operators from the LatinAmerican market have also joined recently.
Specialists: Intermediaries who undertake to offer buying and selling prices at all times.
Indexes:
i) FTSE Latibex All Share, which includes all of the companies listed on Latibex.
ii) FTSE Latibex Top, which brings together the 15 securities with the highest liquidity in the region listed on Latibex.
iii) FTSE Latibex Brazil, which brings together the securities with the highest liquidity in Brazil listed on Latibex.
* The three indexes are produced in conjunction with FTSE, a firm in the Financial Times Group that designs andprepares indexes.
Transparency of information: the listed companies provide the market with the same information they supply to theregulators of the markets where they trade their securities.
Source: BME
Guide to business in SpainAppendix II. The Spanish financial system35
Chart 2
ACTUAL TRADING VOLUME ONLATIBEX
(2001 - 2008)
(euros)
Source: BME. 02001 2002 2003 2004 2005 2006 2007
100.000.000
200.000.000
300.000.000
400.000.000
500.000.000
600.000.000
700.000.000
800.000.000
900.000.000
2008
The chart below shows the changes in volumes of trading on Latibex between when it started and
2008.
3.1.3 The Options and Futures Market
The Options and Futures Markets are derivatives markets, and their role is to allow the risks arising
from adverse fluctuations and in relation to a particular positioning of an economic agent to be
hedged. The Spanish futures and options market is called MEFF (Mercado Español de Futuros
Financieros – The Spanish Financial Futures Market).
MEFF is the official secondary market for financial futures and options, where contracts of this type in
respect of fixed-income and equity are traded. It commenced operations in November 1989 and its
main activity is the trading, clearing and settlement of futures and options contracts on government
bonds and the IBEX-35, S&P Europe 350 indexes and futures and options in respect of shares. It is
fully regulated, controlled and supervised by the relevant authorities (the CNMV and the Ministry of
Economy and Finance), and performs trading functions as well as those relating to a clearing and
settlement house, which are perfectly integrated within the electronic market developed for this
purpose.
MEFF has been recognized internationally by the regulatory authorities of the United Kingdom and
Switzerland as a trading market for entities based in their respective jurisdictions. Similarly, the
marketing in the US of Futures and Options related to indexes and debt instruments traded on MEFF
has been authorized by the CFTC, which has also granted a “Part 30 exemption" to all the market’s
members.
Any individual or legal entity, whether Spanish or foreign, can be a client and trade on the MEFF
Market, buying and/or selling futures and options.
In 2008 the trading volumes of options and futures on shares and equity indexes on the Spanish
market reached record highs, as shown in the table below:
12 www.mfao.es
Guide to business in SpainAppendix II. The Spanish financial system36
At 85 million, the number of contracts traded in 2009 was up 2.4% on the same period in 2008. In
2009 historical maximums have been reached in the trade of MEFF, among others, it is important to
point out the amounts obtained in June, where it was reached the historical monthly maximum
trading for all products, with 13.5 million of contracts, and the historical maximum of futures over
shares with 8.3 million contracts.
The positive figures obtained this year in the derivatives market were the result of continuing with the
strategy followed throughout recent years: growth in the number of members, especially non-
residents; new technological improvements and facilities; and a greater degree of standardization in
procedures. Thus in the first eleven months of 2008 the number of nonresident members increased
up to 68 out of a total of 122 MEFF members.
To bolster the strength and liquidity of the market, and the competitiveness and flexibility of its
members, the ranges of some products were extended, and new monthly maturity dates were
available.
3.1.3.1 Olive Oil Futures Market
Trading in the Olive Oil Futures Market (MFAO)12 commenced in January 2004, managed by its
governing company, the MFAO, Sociedad Rectora del Mercado de Futuros del Aceite de Oliva, S.A.,
which encompasses the Regional Government of Andalucía, various financial institutions and
companies from the olive-growing industry.
It is currently the only market established in Spain for the trading of derivatives on non-financial
assets (olive oil), following the closure of the market for futures and options on citrus fruits.
Olive oil futures contracts have been traded on MFAO since February 6, 2004, the date of its
inauguration. It is the only Futures Market in the World where olive oil is traded.
Chart 3
CONTRACTS TRADED ON THESPANISH OPTIONS AND FUTURESMARKETS (MEFF)
(2001 - 2008)
(figures in millions )
Source: BME. 02001 2002 2003 2004 2005 2006 2007
10
20
30
40
50
60
70
80
90
20082000
Guide to business in SpainAppendix II. The Spanish financial system37
3.1.4 Spanish Registry of CO2 Emission Allowances
The National Registry of Greenhouse Gas Emission Allowances ("Renade"), which is the Spanish
component of the European Union system for the registration of such allowances, came into
operation in June 2005. It pertains to the Ministry for the Environment and its management was
entrusted to Iberclear in November 2004. Following the implementation of EU law in Spanish
legislation (Law 1/2005 of March 9 and Royal Decree 1264 of October 21), basFed on Commission
Regulation (EC) no. 2216/2004 of December 21, the registration began of emission rights, which
have been classed as transferable assets.
3.1.5 Multilateral Trading Systems and Systematic Internalizers
Law 47/2007 of December 19, 2007 added to the Securities Market Law a new Title XI with provisions
on multilateral trading systems and systematic internalizers. These, together with the official
secondary markets, are the various systems for the trading of financial instruments recognized by the
Law. This addition serves to implement one of the main changes introduced by Directive
2004/39/EC, which was to foster competition between the different alternatives for performing
transactions with financial instruments, and this competition shall contribute to the completion of
the single market for investment services, making these services cheaper for end clients. This means
that investment services firms and credit institutions providing investment services could compete
with the stock exchanges and other official secondary markets in the trading of financial instruments.
Multilateral trading systems mean any system operated by an investment services firm or by the
governing body of an official secondary market which bring together, within the system and in
accordance with its non-discretional rules, the buyers and sellers of financial instruments to give rise
to contracts, in accordance with the provisions of the Securities Market Law.
The forerunners of these systems in Spain were the unofficial organized trading systems or markets
recognized by the former Securities Market Law. Law 47/2007 recognizes their existence in the
European context and establishes certain organizational and transparency requirements for the
stages both prior and subsequent to the trading of shares similar to those applicable in official
secondary markets.
Systematic internalization is defined in the aforementioned Law as being another of the investment
services which are reserved for investment services firms. In fact, this implies the acceptance of a
third, alternative, form of trading in financial instruments by investment services firms which already
existed in practice, i.e. the carrying out on their own account, internally and in an organized and
systematic manner, of orders by clients in relation to financial instruments admitted for trading on
official secondary markets.
This is seen as a positive practice insofar as it increases competition in financial markets, although it
clearly needs to be made subject to certain rules. Thus, to avoid the unfair treatment of clients,
certain disclosure and transparency obligations were established in relation to the options for
carrying out orders that are offered by the service, provisions were introduced to guarantee a non-
Guide to business in SpainAppendix II. The Spanish financial system38
discriminatory treatment of clients in gaining access to this investment service, and rules were laid
down in relation to the procedure for carrying out orders.
3.1.6 Tender offers
For the purpose of improving the protection of small investors, the regulatory framework for tender
offers was modified in 2003 in Royal Decree 432/2003, of April 11. This involved the following
changes, among others:
�• It became compulsory to make a tender offer in the following cases:
a) A tender offer for 10% of the capital of the target company, even where it is sought to reach a
percentage lower than 25% of its capital stock, whenever the acquirer intends to reach a
holding of 5% or more in the capital stock of the target company or a holding of a lower
percentage which would enable the acquirer to appoint a number of directors (together with
any the acquirer has already appointed) representing more than one third and less than one
half plus one of the members of the governing body of the target company, and the acquirer
intends to make such appointments.
b) Tender offer for 100% of the capital stock of the target company, even when the intention is to
reach a percentage lower than 50% of its capital stock, whenever the acquirer intends to reach
a holding of 5% or more in the capital of the target company or, a holding of a lower
percentage which would enable the acquirer to appoint a number of directors (together with
any the acquirer has already appointed) representing more than half the members of Board of
Directors of the target company, and the acquirer intends to make such appointments.
�• The reformed regulations expressly permitted conditional tender offers, whereby the effectiveness
of the tender offer is subject to conditions whose fulfillment must be approved by the decision-
making bodies of the target company.
�• Lastly, the reform improved the rules on competing tender offers:
a) It eliminated the requirement for the price to be bettered by at least 5% in competing bids.
b) The period for the submission of competing offers was reduced to 10 calendar days and a single
maximum period of 30 calendar days, from commencement of the period of acceptance of the
initial offer, was established for the submission of any competing bid.
c) Once the period for accepting the last of the authorized competing tender offers has
commenced, an auction period starts. The previous offerors may thus modify the terms of their
offers by bettering the price or widening the scope of their offers to a greater number of
securities. The improved terms must be submitted in a sealed envelope to the CNMV within five
days of the commencement of the period for accepting the last of the authorized competing
offers.
Guide to business in SpainAppendix II. The Spanish financial system39
Two major changes to the legislation on this subject were approved in 2007. On the one hand, Law
6/2007 of April 12, 2007 on the reform of Securities Market Law 24/1988, for modification of the
regime on tender offers and the transparency of issuers, and, on the other hand, Royal Decree
1066/2007 of July 27, 2007 on tender offers.
The aim of Law 6/2007 of April 12 is twofold:
(i) To amend the Securities Market Law, to partially implement two European Directives in Spanish
law: Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on
takeover bids (the Takeover Bids Directive) and Directive 2004/109/EC of the European Parliament
and of the Council of 15 December 2004 on the harmonization of transparency requirements in
relation to information about issuers whose securities are admitted to trading on a regulated
market and amending Directive 2001/34/EC (the Transparency Directive).
(ii) To amend those areas of the regulations to guarantee that tender offers are performed within a
full legal framework and with total legal certainty.
Royal Decree 1066/2007 completed the amendments introduced by Law 6/2007. This Royal Decree
(subject to the exceptions it specifies) requires that any party that gains control of a listed company
must make a tender offer for all the securities and address that offer to all the holders of securities,
for an equitable price. Similarly, when a company resolves to exclude its shares from trading on
Spanish official secondary markets, a tender offer must be made, unless, subject to any of the
requirements envisaged in this Royal Decree, the exclusion offer is not necessary. Lastly, when the
capital of a Spanish listed company is reduced as a result of the company purchasing treasury stock
for redemption, without prejudice to the minimum requirements in Article 170 of the Spanish
Corporations Law, a tender offer is required to be submitted in accordance with the terms of this
Royal Decree.
3.1.7 Securities loans
A “securities loan” is defined as a legal transaction whereby one party, the lender, transfers the
ownership of certain securities to the other party, the borrower, who assumes an obligation to pay
the stipulated return in exchange for the loaned securities and to settle the transaction at maturity by
delivering other securities of the same kind and rating, regardless of the fact that the value of such
securities will differ from their value at the time of the transfer.
In addition to the securities loan to secure the delivery of securities traded on a secondary market at
their settlement date, regulated by Royal Decree 116/1992 on book entries (amended by Royal
Decree 363/2007 of March 16, 2007), Law 62/2003 on Tax, Administrative, Labor and Social
Security Measures establishes the tax regime applicable to certain securities loans, the most
noteworthy aspects of which are as follows:
�• Treatment for the lender:
Guide to business in SpainAppendix II. The Spanish financial system40
— The composition of its assets is not altered, nor does any gain or loss arise on delivery of the
loaned securities or on the return of other securities of the same type upon maturity of the
loan.
— Both the interest on the loan and the amounts paid in respect of the dividends on the loaned
securities will be treated, as a general rule, as a yield obtained from the transfer of own capital
to third parties.
— For purposes of applying the regime on tax credits or exemptions established for legal entities,
the percentage of ownership and the length of time during which the securities have been
held in the portfolio are not deemed to be affected by securities loans.
— If any, the impairment loss related to the account replacing the loaned securities will be
deductible on the same terms as the impairment loss related to the securities in question.
�• Treatment for the borrower:
— Dividends, profit sharing and any other income from the loaned securities will be included in
the borrower’s income.
— The entire amount received from the distribution of additional paid-in capital or from a capital
reduction with a return of contributions affecting the loaned securities or their market value, if
in kind, will be treated as income from movable capital derived from an interest in the equity
of any kind of entity.
— Likewise, in the case of capital increases, the borrower must include in its personal tax returns
the market value of the rights of subscription or free allotment that have been awarded to it.
— The amount payable to the lender for the dividends on the loaned securities will be treated as
a financial expense.
— In its personal tax returns, the borrower will be entitled to apply such exemptions or take such
tax credits as are provided for with respect to the income derived from the loaned securities.
In addition, the Ministerial Order of March 25, 1991 regulates the securities loan linked to a
transaction for the sale of such securities on a stock exchange. This is a financial transaction reserved
for Broker-Dealer companies and credit institutions.
Finally, the same Ministerial Order establishes the required minimum content of the so-called "loan
to lender", or contract whereby the holder of shares allows the depositary to assign them under a
loan agreement for the purpose of increasing the return on its portfolio.
3.2 Lending market
As noted earlier, the Spanish lending market is structured around banks, savings banks and credit
cooperatives, which attract most savings and use their funds to provide financing for the private
sector.
Guide to business in SpainAppendix II. The Spanish financial system41
Credit institutions also operate as investors and subscribers in the stock market, and adjust their
liquidity by inter-bank and money market transactions.
The parallel growth in deposits from, and lending to, the private sector shows the lack of any serious
problems in obtaining business financing.
The liberalization of capital movements in the EU has also made it easier for Spanish companies to
obtain financing from abroad.
As a result of the events that have had an impact on the international financial economy since
August 2007, Europe is in financial turmoil. With the aim to coordinate the acts of the various
Member States and secure the stability of the financial system, the Economic and Financial Affairs
Council of the European Union welcomed the European Commission’s intention to bring forward
urgently an appropriate proposal to promote convergence of deposit guarantee schemes and agreed
to raise the minimum coverage level to 50,000 euros. This decision was implemented in Spain in
Royal Decree 1642/2008, of October 10, in which it was decided to strengthen the Spanish system for
guaranteeing deposits and investments by raising the protection of existing deposits to one hundred
thousand euros (€100,000) per holder and institution, for situations that could arise in the future.
The intention behind this measure is to maintain and increase the confidence of deposit holders and
investors at Spanish credit institutions and Investment Services Companies.
Other measures carried out in 2009 were established in the Royal Decree 97/2009, of February 6,
related to “in mora” payment of the mortgage loans. This Royal Decree modifies the ancient Royal
Decree 1975/2008, of November 28, about urgent measures to adopt in economical, tax,
employment and home obtainig issues. This Royal Decree is important as it describes the “in mora”
of the mortgage loans for unemployees, self-employed persons that stopped their activity and
pensioners. It is a necessary measure to guarantee the payment of the long term loans.
Currently, the first signs of the end of the crisis are arising, however there are not solid and
continuing signs of recovery which guarantee sustainability of the economy. Therefore, it seems that
FED in United States and ECB in Europe shall not decide to increase the interest rate for the moment
as it could put the current economy situation in danger.
The regulation of non-mortgage securitization procedures should also be mentioned. These
contribute to furthering the generation of additional resources by credit institutions, enabling them
to grant new credit facilities.
3.2.1 Asset securitization
Securitization consists basically on the conversion of groups of credit rights into standardized fixed-
income securities for subsequent trading in organized markets, where they can be purchased by
investors.
Two types of securitization can be distinguished:
Guide to business in SpainAppendix II. The Spanish financial system42
�• Mortgage-backed securitization: This is performed through mortgage securitization funds, which
are separate asset pools lacking legal personality whose assets are the mortgage loans pooled by
them (issued by credit institutions and backed by mortgage loans from the portfolio of the
assigner) and whose liabilities are the securities issued, such that their net asset value is zero.
�• Asset-backed securitization: Asset securitization funds are separate asset pools lacking legal
personality whose assets are their financial assets and other collection rights, both present and
future, fixed-income securities issued, loans granted by credit institutions and any contributions
from institutional investors.
The securitization market in Spain has changed spectacularly over recent years, since the publication
of Royal Decree 929/1998 of May 14 on asset securitization funds and securitization fund
management companies, which established the legal framework for asset securitization funds.
Indeed, securitization has recently become one of the most commonly used forms of financing in the
Spanish financial industry. The securitization market in Spain recorded the highest growth in Europe
in recent years which made Spain one of the large competitors worldwide in bonds of this type and it
came under the scrutiny of international pundits.
Law 62/2003 of December 30 on tax, administrative, labor and social security measures gave legal
recognition to what is known as "synthetic securitization", in which the risk associated with
receivables is transferred from certain assets to a securitization fund by trading in credit derivatives
with third parties, without the related rights to payment being assigned.
The publication in November 2005 of Order EHA/3536/2005 determining future rights to payment
eligible to be included into in securitization funds broadened the range of possible rights to payment
for securitization, since although Royal Decree 926/1998 already recognized the possibility of future
rights to payment being assigned to a securitization fund, the prior publication of a Ministerial Order
authorizing such assignment was required (except for motorway toll collection rights relating to
concession holders since these had already been expressly acknowledged in the Royal Decree as
being eligible for securitization). The Order therefore recognized expressly the possible assignment of
various categories of future rights to payment, provided that certain requirements are met.
3.3 Money market
The money market in Spain is based fundamentally on the issuance of short-term securities by the
Bank of Spain, which are taken up by banks, finance entities and money market operators which
subsequently place a portion of them with individuals and businesses.
In a broader sense, the money market is also deemed to encompass inter-bank deposits (the interest rates
for which are used as a reference index for other transactions) and trading in company promissory notes.
The money market has become increasingly important as a result of the liberalization and move towards greater
flexibility of the Spanish financial system as a whole over recent years, given that interest rates are ordinarily higher
than the rate of inflation and given the substantial volume of trading in money market securities.
Guide to business in SpainAppendix II. The Spanish financial system43
4. Safeguards to project financial services customers
4. SAFEGUARDS TO PROTECT FINANCIAL SERVICES CUSTOMERS
The Financial Law generalized and increased the protection afforded to financial services customers
by instituting the following safeguards:
�• The creation of Commissions for the Defense of Customers of Financial Services: bodies reporting
to the Bank of Spain, the CNMV and the Directorate-General of Insurance and Pension Funds set
up expressly to protect the rights of users of financial services, implemented under Royal Decree
303/2004 of February 20, 2004.
The responsibilities of these Commissions include:
— Dealing with complaints and claims directly relating to legally-recognized interests and rights
arising from contracts and from the legislation on transparency and customer protection, as
well as from good financial practices and customs.
— Checking the information required to verify and confirm the importance of the complaints or
claims lodged and collecting the necessary information from supervisory bodies and entities,
for their resolution. They are also responsible for referring to such bodies any cases which they
consider constitute a breach of the rules on transparency and customer protection, and for
disclosing the grounds on which the cases are resolved.
— Advising users of financial services on their rights and informing them of the legal procedures
for exercising such rights.
— Preparing an annual report.
— Proposing such amendments to the law as they see fit to the competent authority, informing
on implementing regulations being processed, and informing on the operating rules of
customer care or customer ombudsman departments or services.
— Acting as a liaison and channel for communication with Spanish and foreign institutions and
bodies, working with financial institutions to publicize activities explaining the functions of the
commissions, and promoting initiatives to raise the users’ awareness of the legislation on
transparency and customer protection, and also of good financial practices and customs.
�• The obligation incumbent upon credit institutions, firms providing investment services and insurers
to deal with and resolve their customers’ complaints and claims relating to their interests and
rights.
For these purposes, such entities must have a customer care department consisting of an
independent entity or expert, whose decisions must be binding.
The purpose of the customer care department or service is to handle and resolve complaints and
claims submitted by customers. This department or service must be separate from the
organization’s other operating services and must act in accordance with the principles of speed,
Guide to business in SpainAppendix II. The Spanish financial system44
security, effectiveness and coordination. It should must also have the human, material, technical
and organizational resources that ensure adequate knowledge of the legislation on transparency
and the protection of financial services customers.
The customer ombudsman is an optional body which may be external to the organization of
financial institutions. Its purpose is to handle and resolve the claims which are submitted to it for a
decision and to promote compliance with the legislation on transparency and customer
protection, and with good financial practices and customs. The customer ombudsman must act as
an independent body and with full autonomy with respect to the criteria and guidelines that are
to be applied in the performance of its duties.
Both bodies were implemented by Ministerial Order ECO/734/2004 of March 11, which regulates
the creation of customer care departments and services and the customer ombudsman for
financial institutions.
��• Financial institutions must prepare and approve a set of Customer Protection Rules to regulate the
work done by the customer care department or service and by the customer ombudsman, where
appropriate, and the relationship between both. Lastly, the customer care department or service
and the customer ombudsman, where appropriate, must issue an annual report or summary
which must be included in the financial entity’s Annual Report.
Law 22/2007 of July 11, 2007, on the distance marketing of consumer financial services was
published in the Official State Gazette on July 12, 2007, thereby completing the implementation in
Spanish legislation of Directive 2002/65/EC of the European Parliament and of the Council of 23
September 2002 concerning the distance marketing of consumer financial services.
The purpose of Law 22/2007 is to establish a specific regime for the protection of users of financial
services which is applicable to contracts offered, negotiated and concluded at a distance. This Law
applies to both contracts and the offers related to them provided that they generate obligations on
the part of the consumer, and their subject matter must be the provision to consumers of all kinds of
financial services, within the framework of a system of sale or provision of services at a distance
organized by the supplier, when such system employs exclusively distance communication
techniques, even in the actual conclusion of the contract.
The most noteworthy aspects of Law 22/2007 are the following:
�• It establishes the obligation for the financial service provider to notify the terms and conditions of
the contracts and provide prior information to the consumer. Any breach by the provider of the
disclosure obligations imposed by Law 22/2007 may result in the contract being rendered null and
void.
�• It recognizes a right of withdrawal: this is the consumer’s right to withdraw from a validly
concluded contract without being required to state the reasons and without incurring any penalty.
This is a kind of “right to repent”. The period for exercising this right is generally 14 calendar days,
although in the case of contracts relating to life insurance it is 30 calendar days.
Guide to business in SpainAppendix II. The Spanish financial system45
�• It provides further guarantees in addition to the two basic consumer protection mechanisms
described above (transparency and withdrawal). These guarantees serve two purposes:
— They protect the consumer from fraudulent or incorrect charges when the financial services
have been paid for by card: the cardholder may request the immediate cancellation of the
charge.
— They protect the consumer from harassment by suppliers in relation to unsolicited services and
communications.
Guide to business in SpainAppendix II. The Spanish financial system46
5. Taxation of financial products
5. TAXATION OF FINANCIAL PRODUCTS
This section addresses the taxation of the main financial products in the Spanish market, with special
reference to those discussed in this Chapter.
To these effects, the income taxation derived from these products, and the gains or losses generated
on their transfer or reimbursement is here considered.
Table 9
TAXATION OF FINANCIAL PRODUCTS
NonResidents without
Permanent Establishment Resident individuals Resident Corporate entities
Bank deposits Interest:• Yield
• Withholding: 19%
• Tax rate: 30% (standard)
Interest:
• Income from movable
capital
• Savings taxable base
• Withholding: 19%
• Tax rate: 19% up to 6,000
euros and 21% the rest
(However, interest
corresponding to the excess
of the amounts lent to a
related entity over the result
of multiplying by 3 the
equity of said related entity,
in the part corresponding to
the holding of the taxpayer,
are taxed according to the
general scale) (*)
Interest:
• Income from movable
capital
• Tax rate:
— EU: Exempt
— Tax treaty: Reduced
rate or exempt (per
tax treaty in question)
— Other countries: 19%
• Withholding at the
corresponding rate (except
EU which is exempt)
• NonResident Bank accounts:
Exempt
Explicit-yield financialassets
Interest:• Yield• Privileged issues: not subject
to withholding
• Withholding: 19%
• Tax rate: 30%
Interest:• Income from movable
capital
• Savings taxable base
Withholding: 19%
• Tax rate: 19% up to 6,000
euros and 21% the rest
(except related parties). See
above(*)
Interest:• Income from movable
capital
• Rates:
— EU: Exempt
— Tax treaty: Reduced rate
or exempt (per tax
treaty in question)
— Other countries: 19%
— Public Debt is exempt
• Withholding at the
corresponding rate (except
EU which is exempt)
Guide to business in SpainAppendix II. The Spanish financial system47
Table 9 (Cont.)
TAXATION OF FINANCIAL PRODUCTS
NonResidents without
Permanent Establishment Resident individuals Resident Corporate entities
Explicit-yield financialassets
Income obtained from transfer
or redemption:
• Yield
• Withholding:
— Privileged issues
subsequent to 1/1/99*:
Not subject to
withholding
— Other issues: 19%
• Tax rate: 30% (standard)
Income obtained from transfer:
• Income from movable
capital
• Savings taxable base
• Withholding:
— Privileged issues: not
subject
— Other issues: 19% See
above (*)
Income obtained from transfer:
• Income from movable
capital
• Rates:
— EU: Exempt
— Tax treaty: Reduced rate
or exempt
— Other countries: 19%
— Public Debt is exempt
• Withholding:
— At the corresponding
rate (except EU which is
exempt)
— Privileged issues: not
subject
Spanish shares (exceptcollective investmentinstitutions)
Dividends:
• Yield
• Tax credit:
— Standard: 50%
— In certain cases: 100%
• Tax rate: 30% (standard)
Dividends:
• Income from movable
capital
• First Euro 1,500 exempt
• Withholding: 19%
• Savings taxable base.
• Tax rate: 19% up to 6,000
euros and 21% the rest.
Dividends:
• Income from movable
capital
• First Euro 1,500 exempt if
the recipient is an individual
and resides in the EU or in a
country with which Spain has
an effective exchange of
information
— EU: 19% save
application of parent-
subsidiary Directive
— Tax treaty: Reduced rate
or exempt (per tax
treaty in question)
— Other countries: 19%
• Withholding at the
corresponding rate (except
EU which is exempt)
Guide to business in SpainAppendix II. The Spanish financial system48
Table 9 (Cont.)
TAXATION OF FINANCIAL PRODUCTS
NonResidents without
Permanent Establishment Resident individuals Resident Corporate entities
Spanish shares (exceptcollective investmentinstitutions)
Capital gain/loss on transfer:
• Income:
• Possibility of tax credit
(reserves) and tax credit for
reinvestment of
extraordinary income
• No withholding
• Tax rate: 30% (Standard)
Capital gain/loss on transfer:
• Capital gain or loss
• Savings taxable base
• Reduction coefficients under
certain conditions (for more
information see chapter 3)
• Tax rate: 19% up to 6,000
euros and 21% the rest.
• No withholding
Capital gain/loss on transfer:
• Capital gain or loss
— Listed companies
– EU: exempt except for
significant and real
estate participations
– Tax treaty: Generally
exempt
– Tax haven: 19%
– Other countries: 19%
– Reduction coefficients
under certain
conditions (for more
information see
chapter 3)
– No withholding
— Unlisted companies
– EU: Exempt except for
significant and real
estate participations
– Tax treaty: Generally
exempt (per tax treaty
in question)
– Tax havens: 19%
– Other countries: 19%
– Reduction coefficients
under certain
conditions (for more
information see
chapter 3)
– No withholding
Guide to business in SpainAppendix II. The Spanish financial system49
Table 9 (Cont.)
TAXATION OF FINANCIAL PRODUCTS
Implicit-yield financialassets (Except Treasurybills)
Income obtained from transfer
or redemption:
• Yield
• Withholding
— Privileged issues
subsequent to 1/1/99*:
Not subject to
withholding
— Other issues: 19%
• Tax rate: 30% (standard)
Income obtained from transfer
or redemption:
• Income from movable
capital
• Withholding: 19%
• Savings taxable base
• Tax rate: 19% up to 6,000
euros and 21% the rest. See
above (*)
Income obtained from transfer
or redemption:
• Income form movable
capital
— EU: Exempt
— Tax treaty: Reduced rate
or exempt (per tax
treaty in question)
— Other countries: 19%
— Public Debt is exempt
• Withholding at the
corresponding rate (except
EU which is exempt)
• Privileged issues: Not subject
NonResidents without
Permanent Establishment Resident individuals Corporate entities
Treasury bills • Yield
• Not subject to withholding
• Tax rate: 30% (standard)
• Income from movable
capital
• Not subject to withholding
• Savings taxable income
• Tax rate: 19%up to 6,000
euros and 21% the rest
• Income from movable
capital
• Not subject to taxation
(*) It will be deemed that income from movable capital paid by the entities listed in Article 1.2 of Legislative Royal Decree 1298/1986,of June 28, 1986, adapting the law in force on credit institutions to the law of the European Communities, does not originate fromentities related to the taxpayer where it does not differ from that which would have been offered to other groups with characteristicssimilar to those of persons who are considered to be related to the payor.
(**) Nonresidents without a permanent establishment will only be taxed in accordance with the rules described in this section withrespect to shares and units in Spanish collective investment institutions. In all other cases, the income is not taxable in Spain.
Guide to business in SpainAppendix II. The Spanish financial system50
Table 9 (Cont.)
TAXATION OF FINANCIAL PRODUCTS
NonResidents without
Permanent Establishment Resident individuals Corporate entities
Shares and units ofcollective investmentinstitutions (Spanish orfrom the EU governed byEU Directive 85/611/CEEand registered at theSpanish NationalSecurities Market) (**)
Dividends:
• Yield
• No Tax credit
• Withholding: 19%
• Tax rate: 30% (standard)
Capital gain/loss on transfer:
• Income
• Withholding: 19%
• Tax rate: 30% (standard)
Dividends:
• Income from movable
capital
• Savings taxable base
• Withholding: 19%
• Tax rate: 19% up to 6,000
euros and 21% the rest.
Capital gain/loss on transfer:
• Capital gain or loss
• Savings taxable base
• Reduction coefficients
under certain conditions
(for more information
see chapter 3)
• Withholding: 19%
• Tax rate: 19% up to 6,000
euros and 21% the rest
• Possibility of differing the
taxation upon reinvestment
under certain conditions (in
such case no withholding)
Dividends:
• Income form movable
capitals
— EU: 19%
— Tax treaty: Reduced rate
or exempt (per tax treaty
in question)
— Other countries: 19%
• Withholding at the
corresponding rate
Capital gain/loss on transfer:
• Capital gain or loss
— EU: Exempt except for
significant and real estate
participations
– Tax treaty: Generally
exempt (per tax treaty
in question)
– Other countries: 19%
– Reduction coefficients
under certain
conditions (for more
information see
chapter 3)
• Withholding at the
corresponding rate (except EU
which is exempt)
Prepared by:
Sociedad Estatal para la Promoción y Atracción de las
Inversiones Exteriores, S.A.U. RM: Tomo 21818, libro 0, folio
15, sección 8, hoja M-388683,
Inscripción 1. NIF: A-84479013. Depósito legal: M-3674-2007.
Published 2010
This guide was researched and written by Garrigues on behalf
of INVEST IN SPAIN.
This guide is correct to the best of our knowledge and belief at
the date indicated below. It is, however, written as a general
guide so it is necesary that specific professional advice be
sought before any action is taken.
Madrid, January 2010
IIIThis chapter contains details of the main accounting,commercial bookkeeping and audit obligations to beobserved by Spanish enterprises.
According to Spanish legislation, all enterprises arerequired to keep orderly accounts, in keeping with theirbusiness, including a book of inventories and balancesheets book and a journal.
Companies must also keep one or more minutes booksin which all the resolutions adopted by the annual andspecial shareholders’ meeting and other collectivebodies of the company must be recorded.
The new Spanish National Chart of Accounts approvedby Royal Decree 1514/2007, of November 16, 2007, hasestablished, in accordance with the European Union'saccounting convergence process, the accountingprinciples that aim to ensure that financial statements,prepared clearly, present fairly a company’s equity,financial position and results of operations,incorporating the accounting criteria contained in theInternational Accounting Standards.
Guide to business in Spain
Appendix IIIAccounting and audit issues
#
Guide to business in SpainAppendix III. Accounting and audit issues2
Guide to business in Spain
Appendix IIIAccounting and audit issues
#III
1. Legal framework
2. Accounting records
3. Financial statements
4. Measurement bases
5. Distributable profit
6. Consolidation
7. Requirements concerning disclosures in
the notes to the financial statements
8. Auditing requirements
9. Financial statement publication
requirements
3
6
7
9
17
18
19
22
24
Galicia
Asturias Cantabria PaísVasco
La Rioja
Navarra
Castilla y León
Extremadura
Andalucía
Castilla - La Mancha
Comunidad de Madrid
Aragón
Cataluña
Murcia
ComunidadValenciana
Canarias
Baleares
FRANCE
PORTUGAL
MORROCO
La Coruña
Santiago de Compostela Lugo
Orense
OviedoSantander
León
Palencia
Valladolid
Segovia
Ávila
Soria
Logroño
Vitoria
Pamplona
Huesca
Zaragoza
Lérida
Tarragona
Castellón de la Plana
Valencia
Alicante
Murcia
Albacete
Cuenca
Madrid
Toledo
Cáceres
Mérida
Córdoba
Sevilla
Huelva
Cádiz
Ceuta
Málaga
Granada
Jaén
Almería
Melilla
BadajozCiudad Real
Guadalajara
Palma De Mallorca
Barcelona
Gerona
Teruel
BilbaoSan Sebastián
Salamanca
Burgos
Zamora
Pontevedra
Las Palmas de Gran Canaria
Santa Cruz de Tenerife
1. Legal framework
1. LEGAL FRAMEWORK
In order to bring Spanish corporate legislation into line with EU Directives, Law 19/1989, of July 25,
partially reforming and adapting Spanish corporate law to the directives of the European Economic
Community relating to companies was adopted.
Thus, Law 19/1989 transposed into Spanish legislation the current Community Directives on
corporate and commercial issues, except for the Eighth Directive (on auditing), which had already
been transposed into Spanish legislation through the other law, i.e. Spanish Audit Law 19/1988, of
July 12, which is currently undergoing an amendment process to adapt it to Directive 2006/43/EC of
the European Parliament and of the Council of 17 May 2006 on statutory audits of annual accounts
and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing
Council Directive 84/253/EEC (see section 8, “Auditing Requirements”).
In this regard, the aforementioned Community legislation had been approved as a result of the need
for international accounting harmonisation, in order to, inter alia, (i) ensure the transparency and
comparability of financial statements, (ii) achieve efficient operation of EU capital markets, (iii) close
the legal vacuums in the somewhat scant regulations for the accounting Directives and their similarly
low level of implementation and (iv) clarify the diversity of legislation.
Subsequently, Law 44/2002, of November 22, on Financial System Reform Measures, which is
currently in force, reformed certain aspects of (i) the aforementioned Audit Law 19/1988, of July 12,
(ii) corporate legislation (Consolidated Spanish Companies Law, Limited Liability Companies Law and
Employee-Owned Companies Law), as well as (iii) other provisions in force prior to its publication.
This Law formed part of an intensive legislative process in various fields aimed at instilling confidence
Guide to business in SpainAppendix III. Accounting and audit issues3
in the markets and promoting the design of codes of good corporate governance with a view to
fostering transparency.
The approval of regulation (CE) no. 1606/2002 of the European Parliament and of the European
Council, of July 19, 2002, in relation to the application of International Accounting Standards (IASs)
in the European Union, and the report on the current situation of accounting in Spain and the basic
lines to undertake its reform, also known as the White Paper on Accounting Reform in Spain,
published by the Spanish Accounting and Audit Institute (ICAC) on June 25, 2002, marked the
starting point for the direction that was to be taken in the accounting reform process as a whole in
Spain.
In this regard, in Spain it was established that the general approach to be adopted should not be to
introduce IASs or IFRSs (International Financial Reporting Standards) in their most recent version, but
rather to adapt Spanish GAAP thereto, solely introducing the accounting treatments that the
aforementioned standards establish on an obligatory basis, and where IFRSs establish different
accounting treatment options, taking the option that the legislature considered to be the most
prudent. Also, a hierarchy of sources was established to distinguish between fundamental legislation,
i.e. the Commercial Code and the Consolidated Spanish Companies Law, approved by Legislative
Royal Decree 1564/1989, of December 22, which must contain basic, stable and lasting principles,
and implementing regulations, i.e. the Spanish National Chart of Accounts, its industry adaptations
and the resolutions of the ICAC, which would contain more detailed rules, the contents of which
could be modified with greater ease.
Also, on January 8, 2003, the Special Commission for the Promotion of Transparency in Markets and
Listed Companies published a report detailing certain measures, proposals and recommendations for
companies aimed at promoting transparency in financial markets. In this regard, Law 26/2003, of
July 17, 2003, amending Securities Market Law 24/1988 and the Consolidated Spanish Companies
Law, introduced the first legislative provisions based on fostering transparency in the conduct of
business at listed corporations.
This point marked the start of a process of reform in Spain, firstly, with the approval of Law 62/2003,
of December 30, 2003, on Tax, Administrative, Labor and Social Security Measures which introduced,
among others, the following amendments:
�• The criteria for the configuration of groups of companies for corporate law purposes contained in
Articles 42 et seq. of the Spanish Commercial Code.
�• Spanish Limited Liability Companies Law 2/1995, of December 23, 1995, introducing the simplified
accounting regime was amended.
�• The consolidated Spanish Companies Law adapting financial statements to IASs was amended.
This process reached its maximum expression in 2007 when important legal provisions were passed,
wrapping up the main areas in the process of adapting Spanish accounting legislation to
international accounting legislation:
Guide to business in SpainAppendix III. Accounting and audit issues4
�• Law 16/2007, of July 4, 2007, reforming and adapting Spanish corporate accounting legislation
for its international harmonization based on European legislation, which made significant
amendments to the Commercial Code, the Consolidated Spanish Companies Law, Limited Liability
Companies Law and other industry-based accounting standards and, lastly, adapted for the first
time the Corporation Tax Law to the new accounting legislation.
�• Royal Decree 1514/2007, of November 16, 2007 approving the Spanish National Chart of Accounts
(new Spanish National Chart of Accounts).
�• Royal Decree 1515/2007, of November 16, 2007 approving the Spanish National Chart of Accounts
for small and medium enterprises (SMEs) and the specific accounting rules for very small
enterprises (VSEs).
As further industry-specific accounting legislation has yet to be adopted, the existing new legislation
is supplemented and construed with the ICAC’s resolutions and responses to requests. Particularly in
relation to the interpretation of accounting legislation, it must be borne in mind that the ICAC stated
in Ruling 1 of its Official Gazette 74/JUNE, 2008, that where the legislation does not provide for a
given matter or there are doubts as to its interpretation, the directors must use their professional
judgment while respecting the framework of the new Spanish National Chart of Accounts and
“generally accepted accounting principles in Spain”. Also, quoting the Government Legal Counsel
Service, the ICAC states that, although IFRSs may serve as an interpretative criterion, their mandatory
application on a supplementary basis is not envisaged.
Guide to business in SpainAppendix III. Accounting and audit issues5
2. Accounting records
2. ACCOUNTING RECORDS
The rules governing the accounting records that have to be kept by companies are contained in the
Commercial Code, which requires all traders to keep orderly books of account that are suitable for
their business and to keep a book of inventories and balance sheets and another journal, without
prejudice to the records required under laws or special provisions.
Companies are also required to keep a book or books of minutes containing, at least, all the
resolutions adopted by the shareholders at the Annual General or Special General Meetings and by
the companies’ other collective bodies.
As regards the formal requirements applicable to the accounting records, the Commercial Code
provides that companies must present their mandatory books of account to the Mercantile Registry
of the place in which they have their registered office in order that they be officially certified and
stamped before they start to be used.
Entries and notes may be made by any suitable procedure on separate sheets that must subsequently
be bound sequentially to form part of the mandatory books of account, which must be legalized
within four months from the end of the related reporting period.
These formal requirements also apply to the share registers of corporations, partnerships limited by
shares and limited liability companies, which may be kept on electronic files.
Guide to business in SpainAppendix III. Accounting and audit issues6
3. Financial statements
3. FINANCIAL STATEMENTS
Both the Commercial Code and Consolidated Spanish Companies Law state that a set of financial
statements comprises a balance sheet, an income statement, a statement reflecting the changes in
equity during the period, a cash flow statement and notes to the financial statements, with these
documents constituting a set of information for these purposes (a directors’ report is also required,
although it is not considered to be a constituent part of the financial statements). However, the cash
flow statement is not obligatory where so established by a legal provision (e.g. in the case of
corporations that are permitted to prepare a balance sheet and statement of changes in equity in
abridged format, as explained below). The requirements of the Consolidated Spanish Companies
Law in connection with financial statements also apply to limited liability companies and
partnerships limited by shares.
Both the Spanish Commercial Code and Consolidated Spanish Companies Law provide for accounting
principles and measurement bases. Also, the Consolidated Spanish Companies Law specifies the
disclosures to be included in the notes to the financial statements.
The new Spanish Chart of Accounts states that its application by all companies is mandatory,
regardless of whether their legal form is that of a sole proprietorship or a company, without prejudice
to such companies as are in a position to apply the Spanish National Chart of Accounts for small and
medium enterprises (SMEs) and constitutes the implementation for accounting purposes of Spanish
corporate and commercial legislation.
The content of the new Spanish National Chart of Accounts is as follows:
�• Part one: conceptual accounting framework.
�• Part two: recognition and measurement bases.
�• Part three: financial statements.
�• Part four: chart of accounts.
�• Part five: accounting definitions and relationships.
The former Spanish National Chart of Accounts had been adapted for companies in certain industries
through the related industry adaptations which, prior to the reform, referred to the following types of
company:
�• Construction companies.
�• Real estate companies.
�• Sports federations.
�• Healthcare companies.
�• Sports corporations.
Guide to business in SpainAppendix III. Accounting and audit issues7
�• Private not-for-profit entities.
�• Toll motorway concession operators.
�• Water catchment and abstraction, treatment and distribution utilities.
�• Electric utilities.
�• Companies in the grape growing and wine producing industry.
�• Insurance companies.
The new Spanish National Chart of Accounts acknowledges the need to revise these industry
adaptations, although it states that until they are adapted the old adaptations will remain in force
except for such provisions as might expressly contravene the new accounting standards.
As discussed earlier, only the Spanish National Chart of Accounts for insurance companies has been
reviewed and drawn up so far (approved by Royal Decree 1317/2008), and, therefore, the previous
industry adaptations continue to be in force for other industries, provided they do not contravene the
new legislation.
Spanish accounting rules coexist with the international accounting rules approved by Regulation (EC)
no. 1606/2002, of July 19, 2002, of the European Parliament and of the Council which established
the obligation to apply the IASs approved by the IASB (International Accounting Standards Board) for
reporting periods beginning on or after January 1, 2005, with respect to the consolidated financial
statements of companies whose securities, at their balance sheet date, are admitted to trading on a
regulated market of any Member State. Also, the Regulation provided the option for Member States
to permit or require the application of the aforementioned Standards to the individual financial
statements of publicly-traded companies, to the consolidated financial statements of non publicly-
traded companies and to the individual financial statements of non publicly-traded companies.
Guide to business in SpainAppendix III. Accounting and audit issues8
4. Measurement bases
4. MEASUREMENT BASES
In relation to the practical application of the Spanish National Chart of Accounts, part two establishes
measurement bases for the various asset, liability and income statement items. Also, ICAC has
implemented certain of these measurement bases in greater detail through resolutions.
Following is a brief summary of the main features of the new Spanish measurement bases
introduced by the Spanish National Chart of Accounts currently in force.
Table 1
FEATURES OF THE NEW VALUATION RULES
Area Spanish National Chart of Accounts (SNCA)
Components of financialstatements
The financial statements comprise a balance sheet, an income statement, a statement of changes in
equity a cash flow statement and notes.
Requirements concerninginformation to beincluded in the financialstatements
The information included in the financial statements must be relevant and reliable. A quality deriving
from reliability is completeness. Also, the financial information must be comparable and clear.
Accounting principles The obligatory accounting principles are: going concern, accrual, consistency, prudence, no offset and
materiality.
Items included in thefinancial statements
The Following items are defined: assets, liabilities, equity, income and expenses, which shall be
recognized when the probability criteria regarding the inflow or outflow of resources embodying
economic benefits are met and their value can be determined reliably.
The SNCA defines the concepts of historical cost or cost, fair value, net realizable value, value in use
and present value, costs to sell, amortized cost, transaction costs, carrying amount and residual value.
Guide to business in SpainAppendix III. Accounting and audit issues9
Table 1 (cont.)
FEATURES OF THE NEW VALUATION RULES
1. Financial statements
Statement of changes inequity and cash flowstatement
These are added as new documents to be included in the financial statements along with the balancesheet, statement of income and the notes. Specifically, in the case of the cash flow statement theSNCA opts for the indirect method. The statement of changes in equity has two parts: the statementof recognized income and expense and the statement of total changes in equity.
Offsetting Except when a standard expressly provides otherwise, the no offset principle shall be applied.
The SNCA defines the conditions for being able to present a financial asset and a financial liability and
tax assets and tax liabilities for their net amount.
Comparative information The balance sheet, income statement, statement of changes in equity and cash flow statement must
disclose the figures for the preceding period. The quantitative information in the notes must also refer
to the preceding period.
Income statement format The SNCA provides a model using a defined and obligatory vertical format. Companies that do not
have a given volume of assets, amount of revenue and number of employees may opt for an abridged
model.
Classification of expensesin the income statement
Classified on the basis of their nature.
Current/Non-currentdistinction in the balancesheet
Obligatory distinction in the balance sheet between current and non-current items.
Presentation, functionaland foreign currencies
Presentation, functional and foreign currencies are defined in a similar way to EU-IFRSs.
Exchange differences –Non-monetary items atfair value
Exchange differences are recognized in equity or in profit or loss depending on where the changes in
value of the item concerned are recognized.
Exchange differences –Monetary items
Exchange gains and losses are recognized in profit or loss for the year in which they arise.
Hyperinflationaryeconomies
The SNCA lists circumstances that are indicative of high levels of inflation. It refers entities to the Rules
for the Preparation of Consolidated Financial Statements, which implement the Commercial Code, for
the applicable accounting treatment.
Guide to business in SpainAppendix III. Accounting and audit issues10
Guide to business in SpainAppendix III. Accounting and audit issues11
Table 1 (cont.)
FEATURES OF THE NEW VALUATION RULES
D. INTANGIBLE ASSETS, PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTY
Property, plant andequipment
Tangible items held for use on a lasting basis in the production or supply of goods or services or for
administrative purposes.
Identifiable non-monetary asset without physical substance.
Non-current property held to earn rentals or for capital appreciation or both.
Costs of dismantling,removing or restoringassets
The initial estimate of the present value of the obligations to dismantle, remove or restore an asset
shall be included in its cost.
Capitalization ofborrowing costs
Certain borrowing costs must be capitalized in the case of non-current assets that will take more than
one year to be ready for their intended use.
Asset swaps Swaps with a commercial substance. The asset received is recognized at the fair value of the asset given up
plus the monetary amounts delivered as consideration, unless there is clearer evidence of the fair value of
the asset received and up to the limit of the latter value.
In swaps without commercial substance or in those in which fair value cannot be reliably measured,
the asset received is measured at the carrying amount of the asset given up plus the monetary
amounts delivered as consideration, up to the limit, if available, of the fair value of the asset received
if this value is lower.
Non-monetary capitalcontributions
The assets received are measured at their fair value at the date of contribution, unless it may be
treated as a swap without commercial substance.
For the contributor, the rules relating to financial instruments shall apply.
Investment property
Intangible assets
1. Property, plant and equipment, intangible assets and investment property
Impairment losses Impairment losses arise when the carrying amount of an asset exceeds its recoverable amount.
Impairment losses are recognized and reversed through profit or loss.
Major repairs to property,plant and equipment
The effect of costs of major repairs is taken into account when determining the carrying amount of property, plant
and equipment. These costs are amortized over the period remaining until the repair is made. When the repair is
made, its cost is recognized as a replacement if the related recognition criteria are met.
Research anddevelopment expenditure
Research expenditure. Period expense, although it may be capitalized in certain circumstances.
Development expenditure. Capitalized when the conditions established for the capitalization of research
expenditure are met.
Start-up costs Period expense.
Guide to business in SpainAppendix III. Accounting and audit issues12
Table 1 (cont.)
FEATURES OF THE NEW VALUATION RULES
Trade and financialdiscounts
Trade discounts, rebates and other similar directly attributable items are deducted in determining the
costs of purchase.
F. INVENTORIES AND NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE
Inventories
Definition Refers expressly to inventories in the rendering of services.
Borrowing costs Borrowing costs are included in the acquisition or production cost of inventories that necessarily take
more than one year to get ready for their sale.
Non-current assets (disposal groups) classified as held for sale
Non-current assetsclassified as held for sale
A non-current asset is classified as held for sale if its carrying amount will be recovered largely through
a sale transaction rather than through continuing use.
Consideration oftemporary differences
These are differences arising from the different values for accounting and tax purposes attributed to
assets, liabilities and certain equity instruments, to the extent that they have a bearing on the tax
charge. Temporary differences include, but are not limited to, timing differences.
Based on the balance sheet liability method.
Classification of pensionplans for the purposes oftheir accountingtreatment
Draws a distinction between long-term defined contribution plans and long-term defined benefit
plans.
Income tax
Long-term employee benefits
Provisions
Measurement Present value of the best possible estimate of the expenditures required to settle or transfer the
obligation, recognizing the adjustments arising from their discounting as a finance cost as incurred. In
the case of provisions maturing at one year or less, no discounting is required, provided that the effect
of the time value of money is not material.
Financial instruments
Loans and receivables –Initial recognition andsubsequent measurement
Loans and receivables are initially recognized at fair value plus directly attributable transaction costs.
They are subsequently measured at amortized cost using the effective interest method.
Available-for-salefinancial assets -Impairment
Difference between cost or amortized cost minus valuation adjustments recognized previously in profit
or loss and the fair value at the measurement date. In the case of investments in equity instruments
measured at cost because their fair value cannot be determined reliably, the provisions concerning the
impairment of investments in Group companies, jointly controlled entities and associates shall apply.
Financial liabilities heldfor trading and otherfinancial liabilities at fairvalue through profit orloss
Initial recognition: fair value. Subsequent measurement: fair value without deducting costs to sell.
Changes in fair value are recognized in profit or loss.
Transactions involvingequity instruments
Recognized in equity as a change therein, and in no case may they be recognized as financial assets.
Guide to business in SpainAppendix III. Accounting and audit issues13
Table 1 (cont.)
FEATURES OF THE NEW VALUATION RULES
Marketable securities(other than investmentsin Group companies andjointly controlled entities)
These items are initially recognized at the fair value of the consideration paid plus, in the case of held-
to-maturity investments and available-for-sale financial assets, the directly attributable transaction
costs.
They are subsequently measured at fair value, except for held-to-maturity investments, which are
measured at amortized cost using the effective interest method. Investments whose fair values cannot
be determined reliably are measured at cost minus valuation adjustments.
Changes in the fair value are recognized in profit or loss, except in the case of available-for-sale
financial assets, changes in the fair value of which are recognized in equity until the asset is disposed
of or it is determined that it has become impaired.
Investments in Groupcompanies, jointlycontrolled entities andassociates
Initially recognized at cost and subsequently measured at cost less any accumulated impairment
losses.
Valuation adjustments are made for the difference between the carrying amount and the recoverable
amount (i.e. the higher of fair value less costs to sell and the present value of the cash flows). Unless
there is better evidence of the recoverable amount, when estimating the impairment an entity shall
take into account the equity of the investee adjusted by the unrealized gains existing at the balance
sheet date that relate to identifiable items in the balance sheet of the investee.
Held-to-maturityinvestments - Impairment
Difference between the carrying amount and the present value of the discounted cash flows or
market value of the instrument.
Gains and losses ontransactions involvingequity instruments
No gain or loss may be recognized in the income statement.
2. Joint ventures
Concepts andclassification of jointventures
A joint venture is an economic activity controlled jointly by two or more natural or legal persons.
The SNCA distinguishes between jointly controlled operations, jointly controlled assets and jointly
controlled entities.
Concept of joint control A by-law established or contractual agreement whereby two or more parties agree to share the power
to govern the financial and operating policies of an economic activity so as to obtain economic
benefits.
Guide to business in SpainAppendix III. Accounting and audit issues14
Table 1 (cont.)
FEATURES OF THE NEW VALUATION RULES
Compound financialinstruments
Their components are recognized, measured and presented separately.
Derivatives Initial recognition: fair value. Subsequent measurement: fair value without deducting costs to sell.
Changes in fair value are recognized in profit or loss.
Preference shares Not expressly addressed.
General consideration ofbusiness combinations
Mergers or spin-offs or business combinations arising from the acquisition of all the assets and
liabilities of a company or of a part of a company that constitutes one or more businesses are
accounted for using the purchase method.
Acquisitions of shares, including those received through non-monetary contributions in the formation
of a company, or other transactions resulting in the acquisition of control without any investment
being made are governed by the rules for measuring financial instruments.
Participating loans Does not address participating loans.
Business combinationsbetween Groupcompanies
In mergers between group companies in which the parent and a directly- or indirectly-owned
subsidiary participate, the businesses acquired are measured at the amount attributed to them, after
the transaction, in the consolidated financial statements of the group or subgroup. In the case of
mergers between other group companies, where there is no relationship of dependence between
them, the assets and liabilities of the business are measured at the amounts at which they had been
carried prior to the transaction in the individual financial statements.
In spin-offs involving companies in the same group, criteria similar to those applied to mergers must
be followed.
Negative differencearising on businesscombinations
If, exceptionally, the value of the identifiable net assets acquired exceeds the cost of the business
combination, such excess shall be recognized as income in the income statement.
Goodwill arising onbusiness combinations
Initially measured as the difference between the cost of the business combination and the value of the
identifiable assets acquired less the amount of the liabilities assumed, including contingent liabilities.
Goodwill is not amortized and instead must be tested for impairment annually, or more frequently if
there are indications that it might be impaired.
Area New SNCA
Trade and financialdiscounts
Revenue is measured at the fair value of the consideration received or receivable, net of discounts and
price reductions.
Sales of goods and rendering of services
Presentation Repayable grants are recognized as liabilities.
In general, non-repayable grants are initially recognized directly in equity and are allocated to profit or
loss in proportion to the related expenses.
Allocation to profit or lossof grants related toassets
Property, plant and equipment, intangible assets and investment property recognized as income over
the periods and in the proportions in which depreciation on those assets is charged or, where
applicable, when the assets are sold, written down for impairment or derecognized.
Inventories and financial assets. the year of the sale, valuation adjustment or derecognition.
Government grants received
Interest included in theface value of receivables
Deducted from the price agreed on, except in the case of trade receivables maturing within no more
than one year for which no contractual interest rate has been established, provided that the effect of
the time value of money is not material.
Swaps of goods andservices
In swaps of goods or services of a similar nature and value in the ordinary course of business no
revenue is recognized.
Guide to business in SpainAppendix III. Accounting and audit issues15
Table 1 (cont.)
FEATURES OF THE NEW VALUATION RULES
Jointly controlled entities The venturer recognizes its interest in accordance with the rules governing investments in Group
companies, jointly controlled entities and associates.
Jointly controlledoperations and assets
The venturer shall recognize the proportional part of the jointly controlled assets and jointly incurred
liabilities and shall recognize in its income statement the assets attributed to the jointly controlled
operation controlled by it and the liabilities incurred as a result of the joint venture. Also, it shall
recognize its share of the income earned and the expenses incurred by the joint venture, together with
the expenses incurred in relation to its interest in the joint venture.
Measurement of non-monetary grants
Measured at the fair value of the asset received at the date of recognition.
Grants provided byshareholders or owners
Must be recognized directly in shareholders’ equity, regardless of the type of grant involved, except for
grants received by public-sector companies from the parent public entity for the performance of
activities in the public or general interest, which are allocated to profit or loss on the basis of their
purpose.
In this connection it should be noted that the new Spanish National Chart of Accounts came into
force on January 1, 2008, and was applied for the first time in the first reporting period that
commenced on or after that date1.
1 As regards such first-time application, Royal Decree 1514/2007, ofNovember 16, approving the Spanish National Chart of Accounts,establishes a transitional regime so that companies may adapt theretoby preparing a corresponding opening balance sheet (TransitionalProvisions One to Six). The regime also has implications in theaforementioned measurement bases in this connection.
Guide to business in SpainAppendix III. Accounting and audit issues16
Table 1 (cont.)
FEATURES OF THE NEW VALUATION RULES
Recognition of equity-settled share-basedpayment transactions
The goods or services received are recognized immediately as an asset or as an expense on the basis
of their nature. Also, an increase in equity is recognized.
When it is necessary to complete a specified period of service, the items will be recognized as the
services are rendered over that period.
Discontinued operations
Concept This is a component of an entity that either has been disposed of, or is classified as held for sale and
represents a separate major line of business or geographical area of operations, is part of a plan to
dispose of a separate major line of business or geographical area of operations or is a subsidiary
acquired exclusively with a view to resale.
Concept Transactions which, in exchange for receiving goods or services, including services provided by
employees, are settled using equity instruments of the entity or an amount based on the price of the
entity’s equity instruments.
Share-based payment
Measurement of equity-settled share-basedpayment transactions
Measured at the fair value of the goods or services received. If that fair value cannot be estimated
reliably, they are measured at the fair value of the equity instruments granted with reference to the
date on which the company receives the goods or the other party renders the services.
Transactions with employees are measured at the fair value of the equity instruments granted at the
date on which the resolution to grant them is adopted.
Measurement of cash-settled share-basedpayment transactions
Measured at the fair value of the liability, referring to the date on which the requirements for
recognition are met. Until the liability is settled, the entity shall remeasure its fair value at each
reporting date, with any changes in fair value recognized in profit or loss.
Guide to business in SpainAppendix III. Accounting and audit issues17
5. Distributable profit
5. DISTRIBUTABLE PROFIT
In the context of the accounting legislation reform process described above, the rules for distributing
company profit contained in Article 213 of the Consolidated Spanish Companies Law have been
amended, and, in general terms, currently provide that:
• The profit taken to equity may not be distributed either directly or indirectly.
• Any distribution of profit is prohibited unless the amount of unrestricted reserves is at least
equal to the amount of research and development expenditure that appears on the asset side of
the balance sheet.
• The Article establishes that a restricted reserve equal to the goodwill recognized on the asset
side of the balance sheet must be set up, earmarking for this purpose a percentage of profit that
represents at least 5% per year of the aforementioned goodwill and, in the absence of profit or
any insufficiency thereof, it provides that unrestricted reserves must be used.
Guide to business in SpainAppendix III. Accounting and audit issues18
6. Consolidation
6. CONSOLIDATION
The new accounting legislation that is to govern the preparation of consolidated financial statements
by groups of companies has not yet been approved. This is due (as explained by the ICAC in a Note in
its official gazette -BOICAC 85- relating to the methods applicable to the preparation of consolidated
financial statements according to the methods in the Commercial Code for the fiscal years
commencing on or after January 1, 2008) to the intention to avoid the approval of accounting
legislation that contains methods that may have become out of date as a result of the specific
adoption to be made by the European Union of the new versions of IFRS 3 and IAS 27, on business
combinations and consolidated financial statements, approved on January 2008.
Therefore, until the new legislation on consolidated financial statements are adopted, the Standards
on the Preparation of Consolidated Financial Statements approved by Royal Decree 1813/1991, of
December 20, 1991, will remain in force in all of its provisions that do not contradict the new Spanish
accounting legislation. For these purposes, the ICAC specified in the Note referred to above the tacit
derogations from the methods contained in those Standards as a result of the reform of Spanish
accounting legislation.
Guide to business in SpainAppendix III. Accounting and audit issues19
7. Requirements concerning disclosures in the notes to the financial statements
7. REQUIREMENTS CONCERNING DISCLOSURES IN THE NOTES TO THE FINANCIALSTATEMENTS
The Spanish Commercial Code states that the notes to the financial statements must complete,
expand upon and discuss the contents of the other documents that make up the financial
statements.
The minimum disclosure requirements are specified in the very wording of the consolidated Spanish
Companies Law and the Spanish National Chart of Accounts, both of which indicate that the notes to
the financial statements form an integral part of the financial statements.
As a result of the relative importance that, in principle, fair presentation acquires under the new
Spanish National Chart of Accounts, the disclosures to be included in the notes to the financial
statements have increased considerably. Among other disclosures, the notes to the financial
statements must at least contain, in addition to the disclosures specifically provided for in the
Commercial Code, the Companies Law and the related implementing legislation, the following
information2:
• The measurement bases applied to the various items in the financial statements and the
methods used for calculating valuation adjustments.
• The name, registered office and legal form of the companies of which the company is a
general partner or in which it holds, directly or indirectly, an ownership interest of not less 20%, or
in which, even if this percentage is lower, it exercises significant influence.
The percentage of ownership of the share capital and the percentage of voting power held must
be indicated, together with the amount of the equity in the investee’s last business year.
• Where there are several classes of shares, the number and par value of each class.
• The existence of “rights” bonds, convertible debentures and similar securities or rights,
indicating the number of each and the scope of the rights that they confer.
2 Also, Transitional Provision Four of the new Spanish National Chart ofAccounts establishes a specific transitional regime relating to theinformation to be included in the financial statements for the first yearcommencing on or after January 1, 2008. Under this regime, acompany may opt to either (i) consider the financial statements for thefirst year commencing from January 1, 2008, onwards as “initialfinancial statements”, without including comparative figures, (ii) orpresent comparative information adapted to the new Spanish NationalChart of Accounts (for which an opening balance sheet for the previousyear prepared in accordance with the rules set out in Section 6 above isrequired).In either case, there are additional obligations with respect todisclosures in the preparation of these initial financial statements inrelation to (i) the financial assets at fair value through profit or loss,and (ii) impairment losses on assets.
Guide to business in SpainAppendix III. Accounting and audit issues20
• The amount of the company’s borrowings with a residual life of more than five years, and the
amount of all the liabilities for which there is a security interest, indicating their form and nature.
These disclosures must be shown separately for each liability item.
• The overall amount of the guarantee commitments to third parties, without prejudice to their
recognition on the liability side of the balance sheet when it is probable that they will give rise to
the effective settlement of an obligation.
• The pension obligations and those relating to group companies must be disclosed with due
clarity and separation.
• The nature and business substance of the company’s agreements that are not included in the
balance sheet and the financial impact thereof, provided that this information is relevant and
necessary for determining the company’s financial position.
• The company’s significant transactions with related third parties, indicating the nature of the
relatedness, the amount of the transactions and any other information concerning the
transactions that might be required in order to determine the company’s financial position.
• The distribution of the company’s revenue by line of business and geographical market, to
the extent that, from the standpoint of the organization of the sale of goods and of the rendering
of services or other revenue of the company, these categories and markets differ significantly from
each other. These disclosures may be omitted by companies that can prepare abridged income
statements.
• The average number of employees in the reporting period, broken down by category, and the
period staff costs, distinguishing between wages and salaries and employee benefits, with
separate disclosure of those covering pensions, when such amounts are not broken down in the
income statement.
• The amount of the salaries, attendance fees and remuneration of all kinds earned during the
year in all connections by senior executives and the members of the managing body, and the
amount of the pension or life insurance premium payment obligations to the former and current
members of the managing body and senior executives. Where the members of the managing
body are legal persons, the aforementioned requirements refer to the natural persons
representing them. These disclosures can be made on an overall basis by type of remuneration.
• The amount of the advances and loans to senior executives and members of the governing
bodies, indicating the applicable interest rate, their essential features and such amounts as might
have been repaid, together with the guarantee obligations assumed on their behalf. Where the
members of the managing body are legal persons, the aforementioned requirements refer to the
natural persons representing them.
• Companies which have issued securities that are publicly traded on a regulated market of any
EU Member State and which, pursuant to current legislation, only publish individual financial
Guide to business in SpainAppendix III. Accounting and audit issues21
statements, are obliged to disclose in the notes to the financial statements the main changes in
equity and profit or loss that would have arisen had EU-IFRSs been applied, indicating the
measurement bases used.
• A breakdown of the fees for financial audit and other services provided by the auditors, together
with those paid to persons or entities related to the auditors, in accordance with Spanish Audit
Law 19/1988, of July 12, 1988.
• The group, if any, to which the company belongs and the Mercantile Registry at which the
consolidated financial statements have been filed or, where applicable, the circumstances
relieving the group from the obligation of presenting consolidated financial statements.
• When the company has the largest volume of assets from among the group of companies
domiciled in Spain forming part of the same decision-making unit, because they are controlled in
any way by one or several natural or legal persons not obliged to consolidate acting jointly, or
because they are under single management due to agreements or clauses in the bylaws, a
description of the companies must be given, indicating the reasons why they form part of the
same decision-making unit, and the aggregate amount of the assets, liabilities, equity, revenue
and profit or loss of those companies must be disclosed.
The company with the largest volume of assets is considered to be that which at the date of its
inclusion in the decision-making unit has the largest figure under the total assets heading in the
balance sheet model.
Guide to business in SpainAppendix III. Accounting and audit issues22
8. Auditing requirements
8. AUDITING REQUIREMENTS
8.1 Spanish Audit Law
Spanish Audit Law 19/1988, of July 12 (the “Spanish Audit Law”) transposed in the Spanish Legal
System Council Directive 84/253/EEC, of 10 April 1984, on the approval of persons responsible for
carrying out the statutory audits of accounting documents, and regulated the audit of financial
statements for the first time in Spain. As a result of the changes that have taken place in the
economic and financial environment, however, and with the aim to achieve a greater degree of
harmonization of the principles to govern the public supervision system and of the requirements laid
down for performing audits in the European Union, besides in the field of accounting, another
reform process, in the field of auditing, is being carried out, which resulted in the approval and
publication of Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006
on statutory audits of annual accounts and consolidated accounts, amending Council Directives
78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC.
A bill aimed at adapting Spanish law to that Directive 2006/43/CEE is currently going through
parliament: the Bill amending Spanish Audit Law 19/1988, of July 12, Spanish Securities Market Law
24/1988, of July 28, and the revised Spanish Corporations Law approved by Legislative Royal Decree
1564/1989, of December 22, to adapt them to Community legislation.
The main amendments that Bill makes to the Spanish Audit Law, subject to any alterations that may
be added in its passage through parliament, are the following:
• It adapts the Spanish Audit Law to the changes that have taken place in Spanish
corporate/commercial and accounting law in recent years.
• It amends the liability system for auditors, who must assume full liability in relation to
consolidated financial statements or accounting documents, meaning that their liability cannot be
restricted to the group companies that had been audited by them.
• It specifies the system of legal sources that must be used in performing the audit, which will
be (i) audit standards, (ii) ethics rules, and (iii) the rules governing the internal quality assurance
system of auditors and audit firms. With respect to audit standards, it introduces the international
audit standards that will be adopted by the European Commission, and keeps the Spanish audit
standards in force until those international standards are adopted.
• It amends the regulations on the Official Auditors’ Register, on which anyone who is
authorized to perform audits must be registered. Audits can be performed by persons authorized
in another EU Member State and by auditors from other countries who are registered. It describes
the public information that the Register must contain on the auditors and audit firms, and
envisages electronic access to the Register. It makes registration in the Official Auditors’ Register
compulsory for auditors and audit firms who issue auditor’s reports in relation to the financial
Guide to business in SpainAppendix III. Accounting and audit issues23
statements of certain companies domiciled outside the European Union, whose shares are
admitted for trading in Spain.
• It reinforces the duties of independence and secrecy that must be observed by auditors in
performing audits. The duty of secrecy extends to anyone taking part in the performance of audits.
• It amends the infringement and penalty rules in the Law, defines new infringements, amends
the definition of certain acts constituting an infringement, and makes the resulting corrections to
the penalty system.
• It sets up the organization of an effective system of public supervision conferred exclusively on
the Spanish Audit and Accounting Institute in which (i) the set of parties on which the Spanish
Audit and Accounting Institute can obtain information and carry out inspection and investigation
activities is extended; and (ii) paves the way for effective Community-wide cooperation among the
supervision activities of the Member States with the aim of securing high and uniform quality in
audits in the European Union.
• It provides for a mechanism to shift administrative liability, to secure the enforcement of
administrative liability that has been or could be held to exist in relation to scenarios where
changes are made to companies with the aim to extinguish that liability.
Currently, in relation to the entities that must be audited, Additional Provision One of the Spanish
Audit Law makes it obligatory for the financial statements of all companies and entities, regardless of
their legal form, in any of the circumstances listed below to be audited.
• Entities publicly traded on a Spanish Stock Market.
• Entities issuing debentures for sale to the public.
• Entities engaging habitually in financial intermediation activities, including those acting as
stock brokers and commission agents (even when they operate as natural persons), and all
financing companies and entities obliged to register themselves in the related Ministry of Economy
and Finance and Bank of Spain registers.
• Entities whose company object includes any of the activities regulated by the Spanish Private
Insurance Law, within the limits provided for in the relevant implementing regulations.
• Entities that receive government grants from the state or public agencies or that perform
work, render services or supply goods thereto, within the limits provided for in the relevant
implementing regulations.
• Companies, including cooperatives and other entities that exceed certain limits defined by
the government.
The limits referred to in the preceding paragraph relate to those established for the purposes of
preparing an abridged balance sheet (see the following section).
Royal Decree 1636/1990, of December 20, approving the Regulations implementing the Audit Law
establishes the same limits for insurance companies and cooperatives as those stipulated in the
Consolidated Spanish Companies Law. However, all life insurance and personal liability insurance
companies must have their financial statements audited.
8.2 Consolidated Spanish Companies Law
The Consolidated Spanish Companies Law (until 1989 the Spanish Companies Law), amended as a
result of the corporate and accounting legislation reform process, states that all corporations, except
for those authorized to present abridged financial statements, must have their financial statements
audited.
Pursuant to the aforementioned Law 16/2007, of July 4, on the reform and adaptation of accounting
legislation to achieve international harmonization based on European Union legislation from
January 1, 2008, onwards, corporations below at least two of the following thresholds for two
consecutive years prior to the balance sheet date may present an abridged balance sheet:
• Total assets of EUR 2,850,000 or less.
• Annual revenue of EUR 5,700,000 or less.
• Average number of employees during the year of 50 or fewer.
Guide to business in SpainAppendix III. Accounting and audit issues24
Guide to business in SpainAppendix III. Accounting and audit issues25
9. FINANCIAL STATEMENT PUBLICATION REQUIREMENTS
The consolidated Spanish Companies Law provides that companies must file their financial
statements at the Mercantile Registry corresponding to the place in which they have their registered
office, within one month from their approval, together with a certificate of the resolutions adopted
by the shareholders at the Annual General Meeting at which they were approved and the proposed
distribution of profit, copies of the financial statements, directors’ report and auditors’ report (if the
company is obliged to have its financial statements audited or if its financial statements were audited
at the request of the minority shareholders).
The Mercantile Registry is public and the corporate documentation filed thereat is publicized through
certificates of the entries made by the registrars or through an uncertified extract, or through the
issuance of copies of the entries made and of the documents filed at the Registry, all in accordance
with the Spanish Commercial Code.
Also, publicly-traded companies must (pursuant to Securities Market Law 24/1988) present copies of
their financial statements and of the related auditors’ report to the Spanish National Securities
Market Commission.
The official registers and other documentation in the possession of the Mercantile Registry and the
Spanish National Securities Market Commission are available to the public for their perusal.
9. Financial statement publication requirements
Guide to business in SpainAppendix III. Accounting and audit issues26
Appendix IModel balance sheets (december 31, 20XX and 20YY)
Appendix I
STANDARD FORMS FOR FINANCIAL STATEMENTS BALANCE SHEET AT YEAR-END 20XX
ACCOUNT NOS.
201, (2801), (2901)
202, (2802), (2902)
203, (2803), (2903)
204
206, (2806), (2906)
205, 209, (2805), (2905)
210, 211, (2811), (2910), (2911)
212, 213, 214, 215, 216, 217, 218,
219, (2812), (2813), (2814), (2815),
(2816), (2817), (2818), (2819),
(2912), (2913), (2914), (2915),
(2916), (2917), (2918), (2919)
23
220 (2920)
221, (282) (2921)
2403, 2404, (2493), (2494), (293)
2423, 2424, (2953), (2954)
2413, 2414, (2943), (2944)
2405, (2495), 250, (259)
2425, 252, 253, 254, (2955),
(298)
2415, 251, (2495) (297)
255
258, 26
474
NOTES 200X 200X-1ASSETS
A) NON-CURRENT ASSETS
I. Intangible assets
1. Research and development
2. Concessions
3. Patents, licenses, trademarks and similar assets
4. Goodwill
5. Computer software
6. Other intangible assets
II. Property, plant and equipment
1. Land and buildings
2. Plant and other tangible fixed assets
3. Fixed assets under construction and advances
III. Investments in fixed assets
1. Land
2. Buildings
IV. Long-term investments in group companies and associates
1. Equity instruments
2. Loans to companies
3. Debt securities
4. Derivatives
5. Other financial assets
V. Investments
1. Equity instruments
2. Loans to third parties
3. Debt securities
4. Derivatives
5. Other financial assets
VI. Deferred tax assets
Guide to business in SpainAppendix III. Accounting and audit issues27
Appendix I
STANDARD FORMS FOR FINANCIAL STATEMENTS BALANCE SHEET AT YEAR-END 20XX
580,581, 582, 583, 584, (599)
30, (390)
31, 32, (391), (392)
33, 34, (393), (394)
35, (395)
36, (396)
407
430, 431, 432, 435, 436, (437),
(490), (4935)
433, 434, (4933), (4934)
44, 5531, 5533
460, 544
4709
4700, 4708, 471, 472
5580
5303, 5304, (5393), (5394), (593)
5323, 5324, 5343, 5344, (5953),
(5954)
5313, 5314, 5333, 5334, (5943),
(5944)
5353, 5354, 5523, 5524
5305, 540, (5395), (549)
5325, 5345, 542, 543, 547, (5955),
(598)
5315, 5335, 541, 546, (5945),
(597)
5590, 5593
5355, 545, 548, 551, 5525, 565,
566
480, 567
570, 571, 572, 573, 574, 575
576
B) CURRENT ASSETS
I. Non-current assets held for sale
II. Inventories
1. Merchandise
2. Raw materials and other supplies
3. Work in process
4. Finished goods
5. Secondary products, by-products and recovered materials
6. Advances to suppliers
III. Trade and other accounts receivables
1. Trade accounts receivable
2. Receivable from customers, group companies and associates
3. Sundry receivables
4. Loans and advances to employees
5. Tax receivable
6. Other tax receivable
7. Called-up share capital (participation units)
IV. Short-term investments in group companies and associates
1. Equity instruments
2. Loans to companies
3. Debt securities
4. Derivatives
5. Other financial assets
V. Short-term investments
1. Equity instruments
2. Loans to companies
3. Debt securities
4. Derivatives
5. Other financial assets
VI. Current prepayments and accrued income
VII. Cash and cash equivalents
1. Cash
2. Cash equivalents
TOTAL ASSETS (A+B)
ACCOUNT NOS. NOTES 200X 200X-1ASSETS
Guide to business in SpainAppendix III. Accounting and audit issues28
100,101,102
(1030), (1040)
110
112,1141
113, 1140, 1142, 1143, 1144, 115, 119
(108), (109)
120
(121)
118
129
(557)
111
133
1340
137
130, 131, 132
A) EQUITY
A-1) Capital and Reserves
I. Capital
1. Registered capital
2. (Uncalled capital)
II. Additional paid-in capital
III. Reserves
1. Legal and statutory reserves
2. Other reserves
IV. (Own shares and participation units held)
V. Retained earnings (accumulated losses)
1. Retained earnings
2. (Accumulated losses)
VI. Other capital contributions
VII. Profit (loss) for the year
VIII. (Interim dividend)
IX. Other equity instruments
A-2) Revaluation adjustments
I. Available-for-sale financial assets
II. Hedging transactions
III. Other
A-3) Subsidies, donations and legacies received
B) NON-CURRENT LIABILITIES
140
145
146
141, 142, 143, 147
177, 178, 179
1605, 170
1625, 174
176
1615, 1635, 171, 172, 173, 175, 180,
185, 189
1603, 1604, 1613, 1614, 1623, 1624,
1633, 1634
479
181
I. Long-term provisions
1. Long-term post-employment obligations
2. Environmental measures
3. Provisions for restructuring
4. Other provisions
II. Long-term debts
1. Debt securities and other marketable securities
2. Liabilities to credit institutions
3. Finance lease liabilities
4. Derivatives
5. Other financial liabilities
III. Long-term debts to group companies and associates
IV. Deferred tax liabilities
V. Non-current accrued expenses and deferred income
Appendix I
STANDARD FORMS FOR FINANCIAL STATEMENTS BALANCE SHEET AT YEAR-END 20XX
ACCOUNT NOS. NOTES 200X 200X-1EQUITY AND LIABILITIES
Guide to business in SpainAppendix III. Accounting and audit issues29
585, 586, 587, 588, 589
499, 529
500, 501, 505, 506
5105, 520, 527
5125, 524
5595, 5598
(1034) (1044) (190), (192), 194,
509, 5115, 5135, 5145, 521, 522,
523, 525, 526, 528, 551, 5525,
5530, 5532, 555, 5565, 5566,
560, 561, 569
5103, 5104, 5113, 5114, 5123, 6124,
5133, 5134, 5143, 5144, 5523,
5524,
5563, 5564
400, 401, 405, (406)
403, 404
41
465, 466
4752
4750, 4751, 4758, 476, 477
438
485, 568
C) CURRENT LIABILITIES
I. Liabilities related to non-current assets held for sale
II. Current provisions
III. Current liabilities
1. Debt securities and other marketable securities
2. Liabilities to credit institutions
3. Finance lease liabilities
4. Derivatives
5. Other financial liabilities
IV. Current liabilities to group companies and associates
V. Trade and other payables
1. Trade accounts payable
2. Payable to suppliers, group companies and associates
3. Sundry creditors
4. Payable to employees (accrued wages and salaries)
5. Current tax liabilities
6. Other tax payable
7. Advances from customers
VI. Current prepayments and accrued income
TOTAL LIABILITIES AND EQUITY (A + B +C)
ACCOUNT NOS. NOTES 200X
Appendix I
STANDARD FORMS FOR FINANCIAL STATEMENTS BALANCE SHEET AT YEAR-END 20XX
200X-1EQUITY AND LIABILITIES
Guide to business in SpainAppendix III. Accounting and audit issues30
Appendix IIModel income statements for the year ended __ 20XX
Appendix II
INCOME STATEMENT FOR THE YEAR ENDED __20XX
ACCOUNT NOS.
700, 701, 702, 703, 704, (706),
(708), (709)
705
(6930), 71*, 7930
73
(600), 6060, 6080, 6090, 610*
(601), (602), 6061, 6062, 6081,
6082, 6091, 6092, 611*, 612*
(607)
(6931), (6932), (6933), 7931,
7932, 7933
75
740, 747
(640), (641), (6450)
(642), (643), (649)
(644), (6457), 7950, 7957
(62)
(631), (634), 636, 639
(650), (694), (695), 794, 7954
(651), (659)
(68)
746
7951, 7952, 7955, 7956
(690), (691), (692), 790, 791, 792
(670), (671), (672), 770, 771, 772
200X 200X
A) CONTINUING OPERATIONS
1. Net turnover
a) From sales
b) From services
2. Increase (decrease) in finished goods and work-in-
process inventory
3. Own work capitalized
4. Supplies
a) Consumption of merchandise
b) Consumption of raw materials and other
consumables
c) Work done by other companies
d) Impairment of merchandise, raw materials and other
supplies
5. Other operating income
a) Ancillary and other current operating income
b) Operating grants transferred to income for the year
6. Staff costs
a) Wages, salaries and similar expenses
b) Social security and other costs
c) Provisions
7. Other operating expenses
a) Outside services
b) Taxes other than income tax
c) Losses, impairment and increase (decrease) in
operating provisions
d) Other current operating expenses
8. Depreciation and amortization of fixed assets
9. Government and other grants related to tangible fixed
assets
10. Excess provisions
11. Impairment and gain (loss) on disposal of fixed assets
a) Asset impairment and losses
b) Gain (loss) on disposals and other
Note
(Debit) Credit
* May be positive or negative.
Guide to business in SpainAppendix III. Accounting and audit issues31
7600,7601
7602, 7603
7610, 7611, 76200, 76201, 76210,
76211
7612, 7613, 76202, 76203, 76212,
76213, 767, 769
(6610), (6611), (6615), (6620),
(6621), (6640), (6641), (6650),
(6651)
(6654), (6655)
(6612), (6613), (6617), (6618),
(6622), (6623)
(6624), (6642), (6643), (6652),
(6653), (6656), (6657), (669)
(660)
(6630), (6631), (6633), 7630,
7631, 7633
(6632), 7632
(668), 768
(696), (697), (698), (699), 796,
797, 798, 799
(666), (667), (673), (675),766,
773, 775
(6300)*, 6301*, (633), 638
A.1) OPERATING PROFIT (1+2+3+4+5+6+7+8+9+10+11)
12. Financial income
a) From equity investments
a1) In group companies and associates
a2) In other companies
b) From marketable securities and other financial instruments
b1) Of group companies and associates
b2) Of other companies
13. Financial expenses
a) For debts to group companies and associates
b) For debts to other companies
c) For updating of provisions
14. Change in fair value of financial instruments
a) Financial assets held for trading and others
b) Credited (charged) to profit (loss) for the year for
available-for-sale financial assets
15. Exchange differences
16. Impairment and gain (loss) on disposal of financial
instruments
a) Impairments and losses
b) Gain (loss) on disposals and others
A.2)Net financial income (expense) (12+13+14+15+16)
A.3)PROFIT (LOSS) BEFORE TAXES (A.1+A.2)
17. Income tax
A.4)PROFIT (LOSS) FOR THE PERIOD FROM CONTINUING
OPERATIONS (A.3+17)
B) DISCONTINUED OPERATIONS
18. Profit (loss) for the year from discontinued operations, net
of taxes
A.5)PROFIT (LOSS) FOR THE YEAR (A.4+18)
Appendix II
INCOME STATEMENT FOR THE YEAR ENDED __20XX
ACCOUNT NOS. 200X 200XNote
(Debit) Credit
* May be positive or negative.
Guide to business in SpainAppendix III. Accounting and audit issues32
Appendix IIIModel statement of changes in equity for the year ended __ 20XX
* May be positive or negative.
Appendix III
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED __20XX
A. STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED __20XX
ACCOUNT NOS.
(800), (89), 900, 991, 992
(810), 910
94
(85), 95
(8300)*, 8301*, (833), 834, 835,
838
(802), 902, 993, 994
(812), 912
(84)
8301*, (836), (837)
A) Result of the income statement
Income and expenses recognised directly in equity
I. From valuation of financial instruments
1. Available-for-sale financial assets
2. Other income/ expenses
II. From cash flow hedges
III. Subsidies, donations and legacies received
IV. For actuarial gains or losses and other adjustments
V. Tax effect
B) Total revenue and expenses recognised directly in equity
(I+II+III+IV+V)
Transferred to profit or loss
VI. For valuation of financial instruments
1. Available-for-sale financial assets
2. Other income/ expenses
VII. For cash flow hedges
VIII. Subsidies, donations and legacies received
IX. Tax effect
C) Total transferred to profit or loss (VI+VII+VIII+IX)
TOTAL RECOGNISED INCOME AND (A + B + C)
Notes
Guide to business in SpainAppendix III. Accounting and audit issues33
Appendix III
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED __20XX
B. TOTAL STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED __20XX
Capi
tal
A. CLOSING BALANCE 200X-2
I. Adjustments for changes of accounting policy 200X-2 and previous years
II. Adjustments for errors 200X-2 and previous years
B. ADJUSTED OPENING BALANCE, 200X-1
I. Total recognised income and expense
II. Transactions with unitholders or shareholders
1. Capital increases
2. ( - ) Capital reductions
3. Conversion of financial liabilities to equity (bond conversions,
debt forgiveness)
4. ( - ) Dividend distribution
5. Transactions with own shares or participation units (net)
6. Increase (decrease) in equity resulting from business
combination
7. Other transactions with unitholders or shareholders
III.Other changes in equity
C. CLOSING BALANCE, 200X-1
Adjustments for changes of accounting policy 200x-1
Adjustments for errors 200x-1
D. ADJUSTED OPENING BALANCE, 200X
I. Total recognised income and expense
II. Transactions with unitholders or shareholders
1. Capital increases
2. ( - ) Capital reductions
3. Conversion of financial liabilities into equity (bond conversions,
debt forgiveness)
4. ( - ) Dividend distribution
5. Transactions with own shares or participation units (net)
6. Increase (decrease) in equity resulting from business combination
7. Other transactions with unitholders or shareholders
III.Other changes in equity
E. CLOSING BALANCE, 200X
Registered
Uncalled
Shar
e pr
emiu
m a
ccou
ntRe
serv
es
(Ow
n sh
ares
and
part
icip
atio
n un
its h
eld)
Reta
ined
ear
ning
s(a
ccum
ulat
ed lo
sses
)O
ther
cap
ital
cont
ribut
ions
Prof
it (lo
ss) f
or th
eye
ar
(Inte
rim d
ivid
end)
Oth
er e
quity
inst
rum
ents
Valu
atio
n ad
just
-m
ents
Subs
idie
s, d
onat
ions
and
lega
cies
rece
ived
TOTA
L
Appendix IV
CASH FLOW STATEMENT FOR THE YEAR ENDED __20XX
NOTES 200X 200X-1
A) CASH FLOWS FROM OPERATING ACTIVITIES
1. PROFIT (LOSS) FOR THE YEAR BEFORE TAXES
2. Adjustments to profit or loss
a. Depreciation and amortization of fixed assets (+)
b. Valuation allowances for impairment (+/-)
c. Valuation of provisions (+/-)
d. Government and other grants (-)
e. Cash flows from retirements and disposals of fixed assets (+/-)
f. Cash flows from retirements and disposals of financial instruments (+/-)
g. Financial income (-)
h. Financial expenses (+)
i. Exchange differences (+/-)
j. Change in fair value of financial instruments (+/-)
k. Other income and expenses (+/-)
3. Changes in working capital
a. Inventories (+/-)
b. Trade and other receivables (+/-)
c. Other current assets (+/-)
d. Trade and other payables (+/-)
e. Other current liabilities (+/-)
f. Other non-current assets and liabilities (+/-)
4. Other cash flows from operating activities
a. Interest paid (-)
b. Dividends received (+)
c. Interest received (+)
d. Corporate income tax received (paid) (+/-)
e. Other amounts received (paid) (+/-)
5. Cash flows from operating activities (+/-1+/-2+/-3+/-4)
B) CASH FLOWS FROM INVESTING ACTIVITIES
6. Payments for investments (-)
a. Group companies and associates
b. Intangible fixed assets
c. Property, plant and equipment
d. Investment property
e. Other financial assets
f. Non-current assets held for sale
g. Other assets
7. Received from divestments (+)
a. Group companies and associates
b. Intangible assets
c. Property, plant and equipment
d. Investment property
Appendix IVModel cash flow statements for the year ended ___ 20XX
Appendix IV
CASH FLOW STATEMENT FOR THE YEAR ENDED __20XX
NOTES 200X 200X-1
e. Other financial assets
f. Non-current assets held for sale
g. Other assets
8. Other cash flows from investing activities (7-6)
C) CASH FLOWS FROM FINANCING ACTIVITIES
9. Receipts and payments for equity instruments
a. Issuance of equity instruments (+)
b. Amortization of equity instruments (-)
c. Purchase of own equity instruments (-)
d. Disposal of own equity instruments (+)
e. Subsidies, donations and legacies received (+)
10. Receipts and payments for financial liabilities
a. Issuance
1. Debt securities and other marketable securities (+)
2. Debts to credit institutions (+)
3. Debts to group companies and associates (+)
4. Other debts (+)
b. Repayment and amortization of
1. Debt securities and other marketable securities (-)
2. Debts to credit institutions (-)
3. Debts to group companies and associates (-)
4. Other debts (-)
11. Payments for dividends and remuneration of other equity instruments
a. Dividends (-)
b. Remuneration of other equity instruments (-)
12. Cash flows from financing activities (+/-9+/-10+/-11)
D) EFFECT OF CHANGES IN EXCHANGE RATES
NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS (+/-5+/-8+/-12+/-D)
Cash or cash equivalents at beginning of year
Cash and cash equivalents at end of year
Guide to business in SpainAppendix III. Accounting and audit issues35
Prepared by:
Sociedad Estatal para la Promoción y Atracción de las
Inversiones Exteriores, S.A.U. RM: Tomo 21818, libro 0, folio
15, sección 8, hoja M-388683,
Inscripción 1. NIF: A-84479013. Depósito legal: M-3674-2007.
Published 2010
This guide was researched and written by Garrigues on behalf
of INVEST IN SPAIN.
This guide is correct to the best of our knowledge and belief at
the date indicated below. It is, however, written as a general
guide so it is necesary that specific professional advice be
sought before any action is taken.
Madrid, January 2010