Spain: Legal Highlights Of Doing Business In Spain By A Foreign Investor - Part 8 of 17

Last Updated: 1 September 1995

3.4.1.5 If, irrespective of the actual amount of the investment, branches or establishments are set up or enhanced by a company or an individual with residence or domicile in any of the countries and territories which by regulation are deemed to be tax havens (see list in footnote 44);

The administrative procedure known as "verification" is subject to the following rules: once the application has been filed, the Administration will scrutiny the investment project and will notify its conformity or disapproval in 30 days time. If no reply is given within such period of time, the project is deemed to have been approved. The 30-day term is deemed to be interrupted if the authorities request more information about the transaction. E.g., in the event of acquisitions of shares and/or participations in Spanish companies, the authorities may request the agreement negotiated by the parties.

The Administration may suspend the liberalisation regime if the investment project is deemed to be harmful to the national economy. The latter cause for rejecting an investment project does not apply to investments made by residents of EC countries. For these purposes EC companies controlled by non-EC residents are not deemed to be EC residents.

In a few cases the foreign investment may not exceed 25% of the capital of the Spanish company participating in certain companies limited by shares (45).

In the event of investments in any of the special sectors that have a specific regulation (gambling, radio and T.V. stations, airlines and National Defence) prior approval of the Council of Ministers rather than the more flexible verification procedure described above is required. The foreign investment in companies engaged in the operation of end and carrier telecommunications services is free up to 25% of the equity, thereafter the approval of the Council of Ministers is required although the Council of Ministers may authorise higher investment ceilings. Except for activities related to the manufacturing or trade of arms, ammunition, explosives and war material, or operation of end and carrier telecommunications services, this restriction does not apply to residents of EC countries. Special rules exist for the creation of subsidiaries, branches and representative offices of foreign banks and of insurance companies.

3.4.2 Portfolio investments: Generally portfolio investments are free and require no prior verification; there are however certain qualifications for the issue and placing of Spanish securities outside Spain.

3.4.3 Real estate investments: generally speaking investments are free and require no prior verification except in two cases: (i) if the actual investment exceeds 500,000,000 pesetas; and (ii) if, irrespective of the actual amount, the investment comes from countries and territories which by regulation are deemed to be tax havens (see list in footnote 44).

3.4.4 Other forms of investment: investments are free and require no prior verification except in two cases: (i) where the actual amount of the investment exceeds 500,000,000 pesetas; and (ii) if, irrespective of the actual amount, the investment comes from countries and territories which by regulation are deemed to be tax havens (see list in footnote 44).

3.5 Rights of the Foreign Investor.

Foreign investors have the right to transfer outside Spain the profits they might earn as well as the proceeds of the sale of their shares in Spanish companies or of the liquidation of the same, including capital gains, without limit. The transfer of funds abroad refers to the net sum remaining after relevant taxes and expenses in Spain have been duly paid.

To enjoy the rights attached to foreign investments, the foreign investor must declare, as a condition precedent, the investment on the appropriate form to the Foreign Investments Register. The declaration must be filed within 30 calendar days following the transaction (investment) in question. There are special rules for the declaration of investments made by non-residents in negotiable securities that are regarded as "portfolio investment", in shares listed or in the process of being listed that are regarded as "direct investment" and in certain other negotiable securities(46). This should be understood notwithstanding any other applicable requirements in order to transfer in due course the proceeds of the foreign investment.

3.6 Exchange Control Regulations.

Generally, all acts, transactions and operations of all kinds between residents and non- residents which entail, or from the performance of which, payments or collections to and from Spain are derived or could be derived, may be subjected to exchange control restrictions. Failure to comply with these regulations may in very few cases be considered a criminal offence.

Nevertheless, beginning on 1 February 1992 exchange controls are extremely flexible and virtually all transactions and related payments and collections have been liberalised provided they are channelled through so called "registered entities" (commercial banks which are authorised by the Bank of Spain). The new system is based as a general rule on the declaration and exceptionally on the approval of the transactions to the Authorities(47). Certain safeguards (prohibition and/or approval of certain transactions), may be imposed by the Spanish authorities where the Spanish interest is gravely threatened, but those measures affecting EC citizens must be adopted pursuant to EC rules on movement of capital.

Residents are also allowed to open and keep accounts in foreign currency both in Spain and abroad, whether with registered entities or other Spanish and foreign banks, and make transfers, payments and collections to residents or non-residents. They must, however, file a declaration within 30 days from opening and provide periodical information on the movement of the accounts. Payments and collections between residents and non-residents in coins, bank notes and bearer cashier cheques whether in pesetas or in foreign currency and whether in Spain or abroad are free, although subject to declaration. Non-residents are also allowed to open checking and savings accounts and time deposits both in pesetas or in foreign currency, and move them freely, although subject to declaration. The so called foreign accounts in ordinary pesetas and foreign accounts in convertible pesetas disappeared and are unified in one single non-residents pesetas accounts.

There are a few exceptions to the relaxation of controls which are linked to the import and export of bullion, gold coins, coins, bank notes and bearer cashier cheques whether in pesetas or in foreign currency. Imports for more than 1,000,000 pesetas are subject to declaration. Exports of up to 1,000,000 pesetas per person and trip are free, from 1,000,000 pesetas to 5,000,000 per person and trip are subject to declaration and for more of 5,000,000 pesetas are subject to prior authorisation (see footnote 47).

Other transactions that must be declared to the Bank of Spain are: (i) commercial financing and repayment terms in excess of one year; (ii) offset of commercial credits; (iii) offset of financial credits, and (iv) financial loans between residents and non- residents, including the acquisition of debt instruments (promissory notes, bonds, etc.) which are not traded in the Stock market or in any other organised market, as well as the issue and placing in foreign markets of negotiable securities representing debt issued by resident private or public entities whether of implied or explicit yield, and of financial instruments issued by residents whether offered publicly or placed privately.

With regard to foreign financial loans, the parties are now free to agree the conditions and covenants they may deem appropriate. Administrative intervention is limited to the registration of the loan at the special Register provided for this purpose by the Banco de Espana, the so called NOF (numero de operacion financiera or financial transaction number). The borrower may not draw on the funds before such number has been allocated. The NOF is allocated directly by the Bank of Spain if the principal of the loan exceeds 250,000,000 pesetas or the loan comes from one of the countries and territories which by Regulation are deemed to be tax havens (see list in footnote 44). The NOF is allocated directly by the registered entity involved in the transaction if the principal of the loan does not exceed 250,000,000 pesetas.

Long term (more than five years) loans to Spanish companies aiming at creating or strengthening long lasting commercial, economic or financial ties are treated as direct foreign investment and are subject to the "verification" procedure described in paragraph 3.4.1 above if they exceed 500,000,000 pesetas or come from countries and territories which by regulation are deemed to be tax havens (see list in footnote 44).

There are no restrictions on domestic loans to foreign owned Spanish companies and branches of foreign companies.

(45) E.g.: Sports clubs organised as companies limited by shares, pursuant to article 22.1 of the Law 10/1990 of 15 October, published on 17 October, regulating sports.
(46) Resolution 25 October 1990, published on 7.11.90.
(47) A recent judgement from the European Court has invalidated Spain's right to subject certain transactions to prior approval.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstance.

For further information contact Mr. Jorge Angell, L. C. Rodrigo Abogados, Madrid (Spain) Fax:010 341 576 6716, or enter text search 'L.C. Rodrigo Abogados' and 'Business Monitor'.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions