Foreign Direct Investments in Spain

In principle, there were no restrictions on foreign investments in Spain, except for very special cases (i.e. investments from those countries qualified as “tax holiday countries” and certain sensitive or strategic business sectors), where prior declaration or authorisation of the investment should be obtained from the General Directorate of Foreign Investments, depending on the Ministry of Economy (the “Ministry”), However, in March 17, 2020, as a consequence of the EU Regulation 2019/452 and the Covid-19 crises, this regime has been amended (“suspended”), requesting prior authorisation for a much larger list of foreign investments.

The operations which now are subject to prior clearance according to Royal Decree-Law 8/2020 are those which fulfil several requirements referring to:

• The characteristics of the investor
• The amount of the investment
• The business sector of the target company
  

An investment is considered as “foreign” if it comes from abroad the EU or the EFTA countries (Norway, Switzerland, Iceland and Liechtenstein). Therefore, investments from the EU or EFTA countries (and the UK until December 31st, 2020) continue to be free, just subject to a communication after the investment has been executed, provided the investing company’s last beneficial owner (any individual holding more than a 25% directly or indirectly) is also resident in any EU or EFTA countries.

Besides, investments are subject to clearance in these cases:

• If the investor is controlled directly or indirectly by the government, including public entities and the army, of a foreign country. In order to ascertain if there is such control, article 42 of the Spanish Commercial Code is applied.
• If the investor has made investments or participated in activities in sectors affecting security, public order and public health in another (EU) member country.
• If a government or court proceedings has been started against the investor in any other country because of developing criminal or illegal activities.
  

Investments which imply the transfer of 10% or more of the Spanish target company, or when, as a consequence of the investment, the foreign investor controls or effectively manages the target company.

A special procedure is applicable to investments under € 5 million, and investment under € 1 million may be considered as exempt from previous clearance.

• Critical infrastructures, whether physical or virtual (including energy, transportations, water, health, communications, media, data processing or storage, aerospace, defence, electoral and financial infrastructures and sensitive facilities), and the real estate properties which are key for the use of such infrastructures.
• Critical technologies and dual use products as defined by CE Regulation 428/2009, including A.I., robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies, nanotechnologies and biotechnologies.
• Supply of critical inputs, specially energy and hydrocarbons, and those referring to raw materials and food security.
• Sectors with access to sensitive information, especially personal data or having the abilty to control such information, according to the Data Protection Act (L.O. 3/2018).
• Media

More business sectors could be added by the Government if they affect public security, order or health.

Royal Decree-Law 8/2020 says “until the suspension is removed by the Government”.

It is necessary to apply before the Spanish Government, who can issue its decision within 6 months, and if no decision is issued, the application is considered rejected (and in this case, it is possible to file an appeal before the Courts of Justice).

Investments done without the prior clearance/authorisation are considered void and without legal effects.

Obtaining a tax ID number (NIE)

All foreign individuals and companies should obtain a Spanish tax ID number before granting any public deed in Spain or operating a bank account. The procedure is not complex, but it may take some time, as the following documents are necessary, each of them legalized and apostilled: Power of Attorney and full copy of the applicant’s passport, in case of individuals, and a sworn translated good standing certificate for companies, plus the power of attorney granted by its legal representative. Individuals may also apply for the NIE before the Spanish Consulate nearest to their domicile, and the speed for the granting depends on each Consulate.

Opening a bank account

Due to the “Know your Client” protocols and anti-money laundering regulations, Spanish banks (and in general, all banks in EU countries) will request the personal appearance of the client before the bank at least once before the bank account is operative. The client will have to proof the legal origin of its funds (i.e. through tax returns, excerpts from a bank in the origin country) and providing the deed regarding the last beneficial owner (they are the individuals directly or indirectly holding more than 25% of the company or exerting control over it).

Becoming a Director of a Spanish company

Any individual (and companies as well) could become a Director of a Spanish company, without any limitation as regards the country of nationality or residency. It is not necessary to become a Spanish resident in order to be a Director, nor it is necessary to have a residency or work permit. However, for practical purposes, the Social Security would request operative companies that at least one person having work permit is registered and the correspondent contributions are paid.

Can a foreign investor or entrepreneur obtain a residency and work permit in Spain?

Yes, and there are several ways to apply for such permit, being the fastest one the investors’ visa (“golden visa”) and the non-lucrative residency permit, which does not allow to work but to manage the investors’ businesses. The investors’ spouse, dependent children and parents are included in the residence permit, provided certain conditions are met.

Employees rights

In asset deals, the employees of the target company should be informed on the proposed transaction with “time enough”, and the new employer will have to assume all the previous past conditions of each and all labour relationships, including the employees’ seniority, which is an essential element in order to calculate the redundancy compensation.