Foreign investments

New regime for certain types of foreign investments in Spain – Government, public sector

Spain: New regime for certain types of foreign investments in Spain

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Spain has strengthened its legal regime for certain types of foreign investments in order to protect its most vulnerable economic sectors, introducing changes in Law 19/2003 of July 4 on the legal regime of capital movements and economic transactions abroad.

The origin of the changes lies in Regulation (EU) 2019/452, of the European Parliament and of the Council, of 19 March, which allowed Member States to establish a system of prior checking for investments from abroad of the EU.

The outbreak of the pandemic due to Covid-19 gave rise to the approval of the measures which suspended the liberalized regime of certain foreign investments in Spain by Royal Decree 8/2020, of March 17, and Royal Decree 11/2020 , from March 31.

In other words, if previously foreign investments from outside the EU were declared post factum before the Spanish authorities, it is now necessary, in certain cases, to obtain an express authorization before proceeding with the transaction. ‘investment.

The new regime applies only to the following foreign direct investments:

  • They concern a participation equal to or greater than 10% of the share capital of a Spanish company, or
  • When, as a result of the transaction, deed or company agreement, the investor effectively participates in the management or control of a Spanish company.

In addition, investments must be greater than one million euros and meet one of the following legal requirements:

1. Subjective criteria – investments are made by the following categories of foreigners:

  • Residents of countries outside the EU and the European Free Trade Association.
  • Residents of EU or European Free Trade Association countries whose beneficial owners correspond to residents of non-EU countries and of the European Free Trade Association.

2. Objective criteria – investments are made in the following sectors:

  • Critical infrastructure, for example, energy, transport, water, health, communications, aerospace, defense, finance, etc.
  • Critical technologies and dual-use goods, e.g. artificial intelligence, robotics, aerospace technologies, nanotechnologies, etc.
  • Supply of basic necessities, particularly energy, or so-called raw materials, as well as food security.
  • Sectors having access to sensitive data, in particular personal data.
  • Media.

3. Special cases – investments are made under the following conditions:

  • The foreign investor is controlled directly or indirectly by the government of a third country.
  • The foreign investor has made investments or participated in activities in certain sectors determined by law.
  • Administrative or legal proceedings are in progress against the foreign investor.

The powers of granting authorizations for these foreign investments belong to the Council of Ministers.

The general deadline for obtaining authorization is 6 months. However, there is a simplified procedure applicable to investments between 1 and 5 million euros, the duration of which is 30 days.

It is important to stress that foreign investments which do not comply with the new legal regime will have no validity or legal effect.

Finally, it will be interesting to see in the near future whether the measures described will be transitory because they were put in place due to the health crisis, or whether they will become permanent, extending their application to other sectors.

From Martí & Associats, we will keep you informed of the latest developments and we will be happy to offer you our professional advice on foreign investments, of any kind, that you may be interested in making in Spain.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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