Legal Outside the Box

In this article I will briefly explain what are the steps that need to be followed in order to invest in Spain from abroad. Thus, it represents an analysis which draws general lines for direct foreign investments in Spain. Further details, alongside with the advantages and/or disadvantages as well as the analysis of the sectors and legal business structures which should be used will make the subject to future articles.

To begin with, it must be noted that there are different formalities depending on the format/structure chosen to realise the investment: (1) Joint Venture; (2) founding a company; (3) purchasing 100% of the shares of a company (M&A); (4) entering as a partner/associate in an already firm; or (5) buying real-estate in Spain.

As earlier mentioned, I will not go into the different means of investment as this will be done in forthcoming articles. However, it should be noted that for all these investments there is a series of common formalities which should be either punctually or periodically completed. These main formalities are:

• In accordance with anti-money laundering norms, the investor needs to supply his service providers (notary, accountant, lawyer etc) with information about the real owner (‘titular real’) of the company making the investment. Who is the real owner? This is an already well known concept in Spain and Europe, which refers to who actually controls a company or an investment. A real owner is the natural person which owns or controls, directly or indirectly, at least 25% of a company’s capital. For example, given company X, which has as associates firms A and B controlling 50-50%, we cannot say that A and B are the real owners. The owners of firms A and B need to be checked. If A has as unique partner Mr XXX (own 100% of firms) then one real owner of company X is Mr XXX. If B has 15 natural persons as partners and none has 25%, then company X has no other real owner. Thus, company X will need to provide identification data of Mr XXX to its service providers. These are: name, copy of national ID card and place or residence. Furthermore, if the investment is carried out by a company, it’s registration details need to be supplied, alongside documentation that attests the mandate of its legal representative. With regards to the real owner, there is however an exception: its identification is not necessary when the company is listed on the stock exchange;
• It’s also important to keep in mind that in Spain cash payments of over 500€ cannot be made. That is, if a good/service totalling 10.000€ is acquired in Spain, it does not matter whether the two parties agree to reconcile the payment in 5 instalments of 2.000€. What matters is the total amount. That is why, if the cost exceeds 2.500€, the payment cannot be made in cash. What is considered as in cash? This includes payments with: (a) physical national or foreign currencies; (b) bearer cheques; (c) any other bearer means.
• Foreign commercial enterprises and natural persons that wish to invest in Spain also need to obtain a fiscal identification number ‘FIN’ (forthcoming articles will detail the steps necessary to obtained it);
• After obtaining the FIN the investment can commence. Depending on the means chosen to realise the investments a further legalisation by a Spanish notary may or may not be required. If required, the investor may: (a) come before a notary and issue the public document („escritura pública”) or (b) empower a legal representative with Spanish residence to come before the notary on his behalf;
• Declaring the foreign investment: colloquially knowns as ‘D’ forms. Once the investment is finalised, a notice must be issued towards the Spanish Ministry of Commerce. Based on this, a notice is taken of the investment and the involved parties are identified. IMPORTANT: the above is valid with the exception of investments coming from countries that are fiscal havens. In those cases, a pre-notification to the corresponding ministries is needed.
• Depending on whether certain determinate thresholds stipulated by the legal acts in force are met, an annual declaration of investments made in the previous fiscal year may be required;
• If the foreign investment and/or transactions exceed certain thresholds indicated by the National Bank of Spain, then the company also needs to notify it, on a case by case annually, quarterly or monthly.

Without going into detail, these are practically the main steps that need to be considered before investing in Spain. My upcoming articles will analyse in more depth the fiscal aspects, corporate structures, legal formalities corresponding to each etc.

Regards,