The foreign investment landscape in Spain has undergone significant changes with the entry into force of Royal Decree 571/2023, of July 4, on foreign investment, and the subsequent approval of Order ECM/57/2024, of January 29. These regulations have brought with them a series of modifications and procedures that affect both foreign and domestic investors. In this article, we will explore the main novelties and the investment reporting process under these regulations.
New features of Royal Decree 571/2023
The main new features of the Foreign Investment Regulations are:
- Reduction of the resolution period for authorization applications from 6 to 3 months.
- Introduction of the voluntary consultation procedure, with confidential and binding resolution in a maximum of 30 days.
- Elimination of the simplified procedure of 30 working days. The possibility of using the simplified procedure of the 7bis Control Mechanism for transactions under 5 million euros is eliminated. Since the entry into force of the RD for Foreign Investments, all applications submitted will have the same three-month resolution period, although the competent body to resolve will vary depending on the amount of the operation.
- Establishment of rules to analyze the characteristics of the investor, applying the concept of “control” of article 7.2 of the Antitrust Law.
- A new exemption system is established for the 7 bis Control Mechanism. Previously, investments of less than one million euros were exempted. This generic threshold disappears, and the exemptions vary depending on the sector of the company in which the investment is made.
Order ECM/57/2024: Procedures and Sanctioning Regime
Order ECM/57/2024 of January 29 (effective as of February 1, 2024) establishing the procedures applicable to foreign investment declarations has now been approved to implement the Royal Decree.
The Order regulates the procedures for:
- Preliminary Investment Declaration;
- Declaration of investment;
- Divestiture statement.
In view of the above, the main novelties of the Order are described below:
- Declaration of financing operations: Financing operations to companies or branches within a business group that exceed 1,000,000 euros and have an amortization period of more than one year must be declared to the Investment Register.
- Contributions to shareholders’ equity: It continues to be obligatory to report these contributions to the equity of companies that do not increase their capital stock by shareholders with an interest of 10% or more of the capital.
- Information in annual reports: It is required to include information on reinvestment of profits in companies by investors with a 10% or more interest in their capital.
- Deadlines for submission of annual reports: The deadline for submission of annual reports is moved forward to July 31 of each year for companies that close their fiscal year on December 31.
- Electronic filing: All returns must be filed electronically, even for individual investors.
- Declaration of changes of domicile: A period of one month is established to declare any change of registered office or transfer of residence that affects the investor’s status as resident or non-resident.
The sanctioning regime established in the Order refers to Law 19/2003, of July 4, 2003, with fines that vary according to the seriousness of the infraction and the amount of the transaction.
Explanatory guide to the foreign investment declaration system
These new regulations represent an effort to strengthen the control and transparency mechanisms for foreign investments in Spain. While they impose certain additional obligations on investors, they also seek to simplify procedures and ensure regulatory compliance.
To facilitate adaptation to these changes, an explanatory guide to the foreign investment declaration regime, prepared by the Foreign Investment Registry, has been provided.
This publication does not constitute legal advice.
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