Investing

Spain: Investing

FDI in Figures

After falling as a result of the financial crisis, Spanish FDIs recovered in recent years due to an increase in competitiveness and investor confidence in the country. Following the outbreak of the Covid-19 pandemic that hit the Iberian state hard, FDI inflows totalled USD 9.7 billion in 2021: although increasing compared to one year earlier (+72%), they were still much lower than the pre-crisis level (USD 17.4 billion in 2019 – UNCTAD’s 2022 World Investment Report). In the same year, FDI stock reached USD 819.7 billion. The industry attracting the most foreign investment in 2021 was ‘electricity, gas, steam and air conditioning supply’, followed by investment in ‘specialised construction activities’, ‘programming, consultancy and related activities’, and ‘retail trade, except motor vehicles’. As for the countries where this investment came from, this list was led by Luxembourg, France, the Netherlands, the United Kingdom, the U.S. and Germany (data by the State Secretariat for Trade at the Spanish Ministry of Industry, Trade and Tourism). The Region of Madrid posted the highest investment volume over the year, ahead of Catalonia, the Basque Country, Andalusia, and the Region of Valencia. Overall, Spain was the fourth country in the world in 2021 in terms of the most greenfield projects received from foreign direct investment (fDi Intelligence). According to the latest figures from OECD, FDI inflows to Spain reached USD 21.3 billion in the first half of 2022, compared to USD 14.4 billion in the same period one year earlier (+47.9%). Between January and November 2022, Spain attracted FDI projects worth an estimated USD 32.8 billion, up by 23.9% from the same period of 2021, according to the latest figures from fDi Markets.

The country’s strengths in terms of FDI attractiveness include a restructured financial sector, the boom in tourism, its highly efficient transport network, its development of renewable energies and the cultural proximity to Latin America, with the presence of a number of Spanish multinational companies. Spain also aspires to become one of the world's key research actors. On the other hand, the country has high levels of private and public debt, a very negative net external position and a high level of structural unemployment. However, Spain suspended the FDI liberalisation regime and government authorisation is now required for direct investments of more than 10% of a Spanish company's capital made by residents of non-EU or EFTA countries (including the UK) in certain sectors, including critical infrastructure and technologies, media and food safety. Spain ranks 63rd out of 82 countries in the Economist Business Environment ranking and 36th out of 63 in the World Competitiveness Ranking. Furthermore, it is ranked 51st out of 176 economies in the 2023 Index of Economic Freedom.

Foreign Direct Investment	2019	2020	2021
FDI Inward Flow (million USD)	17,417	5,678	9,777
FDI Stock (million USD)	769,277	864,807	819,725
Number of Greenfield Investments*	813	548	827
Value of Greenfield Investments (million USD)	21,454	13,420	28,742

Source: UNCTAD, Latest available data.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

FDI FLOWS BY COUNTRY AND BY INDUSTRY

Main Investing Countries	2020, in %
Switzerland	16.3
USA	16.2
United Kingdom	12.6
France	10.7
Germany	6.5
Sweden	6.0
Qatar	5.1
China	4.0
Japan	3.1
Netherlands	2.5

Main Invested Sectors	2020, in %
Financial and insurance services	23.2
Information and Communication	22.8
Manufacturing	14.4
Construction	7.8
Transportation and storage	7.0
Wholesale and retail trade	6.8
Energy supply	5.8
Real estate	5.1

Source: Ministry of Industry, Commerce and Tourism - Latest available data.

Form of Company Preferred By Foreign Investors: Public Limited (Sociedad Anónima) or Limited Liability Corporation (Sociedad Limitada (S.L.))
Form of Establishment Preferred By Foreign Investors: Subsidiary company
Main Foreign Companies: There are around 5,500 foreign companies set up in Spain, of which 54% in Catalonia.
To browse through news about foreign companies who invest in Spain, visit the website of ICEX (Invest in Spain).
Sources of Statistics: Spanish Institute of Statistics
Bank of Spain
Ministry of Economy, Industry and Competitiveness

What to consider if you invest in Spain

Strong Points

The country's main strong points are:

Flexibility and adaptability of economic operators
The cultural proximity to Latin American countries, making Spain a bridgehead to those countries
A developed infrastructure network
A diversified economy that welcomes big international companies
A government pursuing reform policies
Improved financial state of enterprises
An important tourism sector
Quality of life

Weak Points

The country's weak points are

State unity threaten by the secession movement in Catalonia
High unemployment rate
Low productivity of certain enterprises
High indebtedness (public, private and exterior)
A growing trade balance deficit
The complexity of the regulation system with regard to the 17 Autonomous Communities

Government Measures to Motivate or Restrict FDI

Spain applies the principle of free establishment and non-discrimination of foreign investors. Foreign investors can operate any type of business under the same conditions as a local investor. The CEE Council Directive no. 88/361/CEE from 1988, concerning the free movement of capital between the residents of member States was adopted in the Spanish legislation by Law no. 18/1992 and by Royal Decree no. 1816/1991 on Foreign Economic Transactions. The gaming, television, radio and air transport sectors are protected by restrictions on investors residing outside an EU member country; it is the same for businesses manufacturing and selling arms. In the latter case, these restrictions also applies to investors within the European Community.

The Government provides various incentives for investors, such as grants, tax benefits, professional training, preferential access to credit, etc. For more information consult this link. ICEX Spain Trade and Investment is a public corporation at the national level whose mission involves promoting the internationalization of Spanish companies, to support their competitiveness and add value to the economy as a whole, as well as attracting foreign investment to Spain. Moreover, since Spain is an EU Member State, potential investors can benefit from European aid programs, which make investment in Spain even more attractive.

The Re-industrialization Aid and Industrial Competitiveness Program 2019 is intended to encourage new industrial plants either by transfer of productive activity from another previously existing site or creating a new establishment, as well as increasing production capacity through the introduction of new lines of production in existing facilities. It aims also at developing the “Connected Industry 4.0 technologies”.

Protection of Foreign Investment

Bilateral Investment Conventions Signed By Spain: Spain has signed bilateral agreements with almost 90 countries. Click here to download these agreements from the UNCTAD website. They define the framework for foreign investment protection in Spain for each of the signatory countries.
International Controversies Registered By UNCTAD: The ISDS Navigator contains information about known international arbitration cases initiated by investors against States pursuant to international investment agreements. Spain is involved in 57 cases as Home State of claimant and in 52 cases as Respondent State.
Organizations Offering Their Assistance in Case of Disagreement: ICCWBO , International Chamber of Commerce
ICSID , International Centre for Settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency: Spain has signed the MIGA convention.

Country Comparison For the Protection of Investors	Spain	OECD	United States	Germany
Index of Transaction Transparency*	7.0	6.5	7.0	5.0
Index of Manager’s Responsibility**	6.0	5.3	9.0	5.0
Index of Shareholders’ Power***	6.0	7.3	9.0	5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

Procedures Relative to Foreign Investment

Freedom of Establishment

Yes. Although, the new regulation (Royal Decree-Law 8/2020, Royal Decree-Law 11/2020) restricts the liberalization regime for certain foreign direct investments in Spain, specifically those that are carried out in sectors that affect public order, public safety and public health.

Acquisition of Holdings

The acquisition of majority interest by a foreign company in a Spanish company is authorised. The Spanish government issued new regulations on foreign investment in March 2020. In Royal Decree-Law 8/2020, subsequently modified by Royal Decree 11/2020, the government prohibited the acquisition by foreign investors of 10 percent or more of companies active in critical sectors. Purchases of less than 10 percent are also subject to authorization if they result in participation in the control/management of the company. Under the new regulation on FDI, the sectors which are targeted by the restrictions on foreign direct investment rules in Spain include: critical infrastructures, whether physical or virtual; critical technologies and dual-use items as defined in article 2(1) of Council Regulation (EC) No 428/2009, supply of essential inputs, such as energy; sectors with access to sensitive information and media.

Obligation to Declare

Investment portfolios from an EU member state are exempt from all declarations whatever their amount. For transactions in non-target sectors by the new screening mechanism of FDI, the foreign investor must send its administrative authorization request to the General Director of Commercial Policy and Foreign Investment, in accordance with the procedure set out in Royal Decree 664/1999, 23 April 1999, regarding foreign investments and the Order dated 28 May 2001 related to the procedures applicable to foreign investment declarations and their liquidation.

Competent Organisation For the Declaration

Ministry of industry, trade and tourism

Requests For Specific Authorisations

Although the Spanish system is liberalised for foreign investment, certain sectors require prior authorisation from the corresponding competent public governmental body for investment activity to start, including in relation to:

Banking.
The stock market.
Investment services companies.
Collective investment institutions.
Insurance companies.
The energy sector.
Television and radio.
Telecommunications.
Weapons and national security.
Air transport.

Office Real Estate and Land Ownership

Possible Temporary Solutions: There are several of them: the domiciliation of the company in the private residence of the manager, domiciliation in a business center, hosting in shift workshops, company backbones as well as renting of professional sites.
The Possibility of Buying Land and Industrial and Commercial Buildings: There are no specific restrictions on the acquisition of real estate by a foreign national or foreign entity, except for certain restrictions or conditions that may apply in certain strategic sectors such as defense or energy. Foreign investors must therefore comply with the same requirements as any Spanish individual or legal entity.
Risk of Expropriation: Public authorities can expropriate real estate for reasons of public use or general interest, including to achieve goals in planning regulations, following the legal expropriation procedure.

Investment Aid

Forms of Aid: The national government provides financial aid and tax benefits for activities pursued in certain industries that are considered priority industries, given these industries’ potential effect on the nation’s overall economy. The aid can be a non-refundable subsidy; a loan with the various conditions that this type of funding require; or a combination of the two as in partially refundable grants; the provision of funds implemented through the company’s capital shareholdings with the joint and several decision rights involved; repayable advances that are intended to advance part of the payment of a grant; guarantees, understood as the security provided by a third party in the obligation for the payment of the debt; leasing whereby a company may get the right to use a fixed asset by paying a regular amount set by contract; or third-party financing, in which the entity responsible finds funding through private individuals or other entities and which is normally implemented using one of the modalities mentioned above.
Privileged Domains: Job creation, training, research and development, renewable energies, tourism sector, broadcasting sector. The preferred sectors are ICT, renewable energies and environment, life sciences, chemical sector, automotive and aerospace.
Privileged Geographical Zones: Special aids are granted to companies investing in regions which are lagging behind in economic development. There are community aids as in support provided by the European Union in the least favored regions. The regions concerned by the European Regional Development Fund.
The province of the Canary Islands is a Special Economic Zone (SEZ), which grants tax advantages including a reduced rate of corporation tax, a reduced rate of value added tax (VAT) and exemptions for transfer taxes and stamp duties. The Spanish territories of Ceuta and Melilla also provide unique tax incentives; they do not impose VAT but tax imports, production and services at a reduced rate. Furthermore, Spanish customs legislation allows companies to have their own free trade areas. Duties and taxes are only payable on items imported for use in Spain. These companies must comply with Spanish labour laws.
Free-trade zones: Spain’s seven free zone ports are located in Vigo, Cadiz, Barcelona, Santander, Seville, Tenerife, and the Canary Islands—all of which fall under the EU Customs Union, permitting the free circulation of goods within the EU.
Public aid and funding organisations: To learn about all the aids for investment, search the database of the investment promotion agency.
The EU via FEDER.
The Official Credits Institute (ICO),
Le Ministry of Economy, Industry and Competitiveness.
The governments of the regions and municipalities also finance the incentives for foreign investments.

Investment Opportunities

The Key Sectors of the National Economy: Real estate, Energy, Finance and insurance, Telecommunications, Wholesale trade and retail trade, Manufacturing of non-metallic minerals, Construction, Civil engineering, Business consultancy, Transportation and storage.
High Potential Sectors: The website Invest in Spain suggests a range of investment opportunities related to the industrial sectors (aerospace, life sciences, chemical sector, automotive and ITC) and to the Spanish regions.
In the energy sector, the government plan for renewable energies represents an opportunity for investments in technological innovation. The biotechnology sector is developing faster in Spain than in other EU countries. The investments in this sector are growing at a rate of more than 25% per year, making Spain the fourth biggest contributor in the world in scientific production in the biotechnology sector. According to the Spanish Institute for External Trade, the chemical, pharmaceutical and plastics industry represent great investment opportunities.

In the agrarian sector, Spain has become the largest European producer of organic foodstuff. It is one of the top markets in the EU for legumes, nuts and sea products.

Spain has become one of the most attractive destinations for call centres. It has attracted several multinationals (Avis, Hewlett-Packard, Citigroup, etc.) thanks to a labour cost 30% less expensive than in other European countries. R&D in the Information Technology (IT) and data processing (software development, artificial intelligence, supercomputers, etc.) is also one of the spearheads of Spain. Finally, numerous investments in property for development of tourism infrastructure are possible, even though some tourist areas are saturated.
Privatization Programmes: No privatisation has been announced.
Tenders, Projects and Public Procurement: Ted - Tenders Electronic daily, Business opportunities in EU 27
Globaltenders, Tenders & Projects from Spain
Tenders Info, Tenders in Spain
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors

The Spanish government retains control in the following sectors:

Energy. The government retains a controlling stake (that is, more than 51% ownership, including 100%) in Ensa, Grupo Enusa and Grupo Hunosa. It retains a minority stake (that is, less than 50% ownership) in Enagás, Enresa and Red Eléctrica Corporación.
Foreign trade and finance. The government retains a controlling stake in Grupo Cofivacasa, Defex (in liquidation) and Grupo Navantia. It retains a minority stake in Hispasat and Indra.
Food environment and leisure. The government retains a controlling stake in CETARSA, Hipódromo de la Zarzuela, MAYASA, Grupo Mercasa, SAECA and Grupo Tragsa. It retains a minority stake in Ebro Foods.
Communications and transport. The government retains a controlling stake in, among others, Agencia EFE, Grupo Correos and Grupo SEPIDES. It retains a minority stake in International Airlines Group (IAG), Airbus Group and Alestis Aerospace.

Finding Assistance For Further Information

Investment Aid Agency: Invest in Spain (ICEX Spain Trade & Investment)
Doing Business Guides: Spain country profile (KPMG)
Establishing a business in Spain (Thomson Reuters Practical Law)
Spain - Market Overview (U.S. Department of Commerce)

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