1. Applicable regulation:

• Law 10/2010 of 28 April, on the prevention of money laundering and terrorist financing.
• Royal Decree 664/1999, of 23 April on foreign investment.
• Order of 28 May 2001
• Resolution of 31 May 2001, of the Directorate General of Trade and Investment.

 

2. Foreign investments in Spain

Both legal persons (companies), as well as the foreign physical persons who intend to establish a business activity in Spain or to make an investment in Spain, have to meet a series of requirements demanded by current regulation. Foreign investments are considered to be those made in Spain by:

• Physical persons not resident in Spain; understood as Spaniards or foreigners domiciled outside the national territory that have their primary residence there.
• Legal persons domiciled abroad, as well as public entities.

 

• Preliminary declaration (mandatory for investments from tax havens).

The preliminary declaration shall be without prejudice to that carried out subsequent to the completion of such an investment.

The purpose of this declaration covers all investment projects from tax havens, whatever the kind of investment and their amount, except the following that are expressly excluded:

• Investments in marketable securities, as well as shareholdings in investment funds registered in the Registries of the National Securities Market Commission.
• When the foreign shareholding does not exceed 50 % of the capital of the Spanish company recipient of the investment.

 

The validity period for this declaration shall be 6 months.

The preliminary declaration forms to be presented in the case of a draft investment in unlisted companies, branches, and other forms of investment will be:

• DP1 and DP2 (in the case of an investment project in real estate).
  • Subsequent declaration.

Foreign Investments in Spain can be carried out, through the following operations:

• Shareholding in Spanish companies.
• The setting up and extension of the provision of branches.
• The subscription and acquisition of negotiable securities representative of loans granted by residents.
• Shareholding in investment funds, registered in the Registries of the National Securities Market Commission.
• The acquisition of real estate (in the same way usufruct, bare ownership, undivided share or “Time sharing”) located in Spain, whose total amount exceeds 3,005,060.52 euros, or when, regardless of the amount, it comes from tax havens.
• The incorporation, formalisation or participation in contracts for shared accounts, foundations, economic interest groups, cooperatives and community estates, the same as above.

 

 

In general, the investment shall be declared by the non-resident holder. Specifically, to that provided for in the regulation.

• Administrative authorisation prior to the investment.

Spanish legislation requires the preliminary authorisation for two types of investments:

• Acquisitions of immovable property of a diplomatic posting of non-member States of the European Union.
• Activities directly related to national defence

 

• Investments in special sectors.

There are certain sectors in which foreign investment is subject to its specific sectoral legislation. These sectors are: Gaming; Television, Radio; Air Transport; Manufacturing; distribution and trade of weapons and explosives for civilian use and individual licences for telecommunications.

• Settlements of foreign investments.

Foreign investment in Spain must be declared and in the same way, their settlement. The purpose of the settlement declaration is the same as the foreign investment declaration, that is to say, it is a matter of statistical, economic and administrative purposes.

• Declaration forms.

• A1: “Declaration of foreign investments in negotiable securities. Monthly or annual summary”.
• A2: “Declaration of foreign investments in negotiable securities. List of monthly operations or annual deposits”.
• DP-1. Preliminary declaration of foreign investments from tax havens in non-listed companies, branches and other forms of investment
• DP-2. “Preliminary declaration of foreign investment from tax havens in real estate”.
• D-1A: Declaration of foreign investments in non-listed companies, branches and other forms of investment
• D-1B: Declaration of settlement of foreign investments in non-listed companies, branches and other forms of investment
• D-2A: “Declaration of foreign investments in real estate.
• D-2B.: “Declaration of settlement of foreign investments in real estate.”
• D-4: “Annual report on the development of investment in Spanish companies with foreign shareholding in their capital and branches”.

 

3. Spanish investments abroad.

   • Titleholders/Liable parties

Spanish investments abroad can be carried out, through the following operations:

• The same as foreign investment in Spain, except:
• The acquisition of real estate, whose amount becomes 1,502,530.26 euros.
• The incorporation, formalisation or participation in contracts for shared accounts etc., whose amount becomes 1,502,530.26 euros.
  • Preliminary and subsequent declaration.

Spanish investments abroad and their settlement shall be declared to the Investments Registry of the Ministry of Economy and Finance, and such declaration shall conform to the following rules:

• In general, it must be carried out directly by the holder of the investment,
• In particular, investments made in negotiable securities channelled through investment firms, credit institutions or other resident entities that perform some of the activities belonging to those and acting on behalf of and at the risk of the investor, will be declared to the Investments Registry by that entity.

 

The resident holders of investments abroad may be required, generally or specifically, to submit an annual report on the development of the investment to the Directorate General for Foreign Trade and Investments.

• Declaration forms.

• D-5A: Declaration of Spanish investments in non-listed foreign companies, branches and other forms of investment
• D-5B: Declaration of Spanish settlement in non-listed foreign companies, branches and other forms of investment
• D-6: Declaration of holders of Spanish investment abroad in negotiable securities.
• D-7A: Declaration of Spanish investments in real estate.
• D-7B: Declaration of settlement of Spanish investments in real estate.
• D-8: Annual report on the development of the investment abroad.
• DP-3: Preliminary declaration of Spanish investments in tax havens in non-listed companies, branches and other forms of investment
• DP-4: Preliminary declaration of Spanish investment in tax havens in real estate.

 

• Special reporting obligations

In relation to investments abroad, we find the following reporting obligations:

• Declaration on economic transactions and balances of assets and liabilities abroad -Form ETE, to be submitted to the Bank of Spain.
• Declarations of foreign investments, among others, that of Spanish investment in unlisted foreign companies – Form D-5, that of the holders of Spanish investment abroad in negotiable securities – Form D-6, that of Spanish investment in real estate – Form D-7 and the Report on the development of investment abroad – Form D-8 to be submitted to the Directorate General of International Trade and Investment.
• Informative declaration on assets and rights located abroad – Form 720, to be submitted to the Tax Agency.

 

All of these obligations fall on tax residents in Spain, whether natural or legal persons and failure to do so will lead to significant fines.

4. Summary Table

FOREIGN INVESTMENTS IN SPAIN
Preliminary Declaration	–       Obligation for investments from tax havens. –       Validity period of 6 months. –       Form DP1. –       Form DP2 in the case of real estate.
Subsequent declaration.	–       Informative nature of the investment made. –       Obligation for all investments, regardless of the country or the nature of this. –       Forms: A1, A2, D1A, D1B, D2A, D2B
Annual report	–       Form: D-4
SPANISH INVESTMENTS ABROAD.
Preliminary Declaration		–       Nature, obligation and validity the same as that above. –       Forms D-5ª, D5B, D6, D7A, D7B.
Subsequent declaration.		–       Nature and obligation the same as that above. –       Form DP3. –       Form DP4 in the case of real estate.
Annual report		–       Form D-8.
Special Declarations		–       Form ETE – Bank of Spain. –       Forms D5, D6, D7. –       Report D8. –       Form 720 Tax Agency.