Guia para Inversion China en España Deloitte - 1319643084956

Investing in Spain
A guide for Chinese

Businesses
In collaboration with the Chinese Embassy in Spain
A journey of ten thousand miles begins with just
one step
Chinese proverb
Investing in Spain - A guide for Chinese Businesses 3
Contents
Letter of Endorsements 8
Chinese Embassy in Spain 8
ICBC 9
Foreword 10
1. Introduction to Spain 11
1.1. Location 11
1.2. Population and language 11
1.3. Government 12
1.4. Business environment 12
1.5. Financial centre 12
1.6. Benets to business 13
1.7. Currency 13
1.8. Foreign investment 14
1.9. Operating costs 14
2. Spain China economic and trade relations 16
2.1. Institutional framework 16
2.2. Commercial exchange 17
2.3. Trends and future development 19
3. Chinese investment into Spain 20
3.1. Chinese overview 20
3.2. The appeal of Spain 21
3.3. Deal rationale 22
4. Main business structures 23
4.1. The incorporated company 23
4.2. Branch or representative ofce of an incorporated foreign company 31
4.3. Business regulation 36
4.3.1. Reorganisation process: national and international mergers
and acquisitions 36
4.3.2. Foreign investments in Spain 41
5. Corporate Governance 44
5.1. Overview 44
5.2. Appliance and compliance 44
6. Accounting and auditing 46
6.1. Overview 46
6.2. Reporting requirements 46
6.3. Accounting principles and standards 48
6.4. Audit requirements and standards 48
6.5. Frequently asked questions 49
7. Taxation 51
7.1. Overview of Spanish taxation 52
7.2. Principal direct taxes 52
7.2.1. Corporate income tax 52
7.2.2. Personal income tax 63
7.2.3. Non-resident income tax 66
7.2.4. Inheritance and gift tax 68

7.3. Principal indirect taxes 68
7.3.1. VAT 68
7.3.2. Transfer tax 69
7.3.3. Capital duty 70
7.3.4. Stamp tax 70
7.3.5. Property tax 70
7.3.6. Customs and excise duties 70
7.3.7. Tax on certain means of transport 71
7.3.8. Other taxes 72
7.4. Avoidance of double taxation 72
7.4.1. Foreign tax credits/ Exempt income 72
7.4.2. Tax treaties 72
7.4.3. Republic of China Spain tax treaty 75
7.4.4. Hong Kong Spain tax treaty 76
8. Labour environment 76
8.1. Overview 76
8.2. Employment of foreigners 77
8.3. Employment and remuneration 77
8.4. Social Security and benets 78
8.5. Termination of employment 78
9. Banking sector in Spain 79
9.1. Entering the Spanish banking market 79
9.1.1. Formalities for setting up a bank in Spain 79
9.1.2. Branch of an EU bank in Spain 80
9.1.3. Branch of a foreign non EU bank in Spain 80
9.2. Regulation of the banking Business 80
9.2.1. Spanish supervisory authorities 80
9.2.2. Mergers and acquisitions of Spanish banks 80
9.3. Corporate income tax 81
9.3.1. Attribution of prots 81
9.3.2. Minimum amount of free capital for Spanish tax purposes 81
9.3.3. Specic tax computation considerations for branches
of Chinese banks 82
9.4. VAT 84
9.4.1. Output VAT: the VAT exemption on nancial services 84
9.4.2. Input VAT recovery 84
9.5. Withholding taxes 86
9.5.1. Withholding tax on interest income 86
9.5.2. Withholding tax on interest payments 86
9.6. Reporting obligations 87
9.7. Leasing and asset nance 87
9.7.1. Legal requirements 87
9.7.2. Types of leases recognised (by law) 88
9.7.3. Finance leases 88
9.7.4. Financial regulations / supervisory requirements 89
9.7.5. Regulatory requirements for lease transactions 89
10. Institutional framework for attracting foreign investment to Spain 90
10.1. Spanish Government Institutions 90
10.2. Support framework in regions and relevant cities 91
10.3. Grants and subsidies to attract foreign investment 96
Appendix 101
I. Chinas 12th Five Year Plan 101
A) Introduction 101
B) Strategic Priorities of the 12th FYP 101
C) Strategic Emerging Industries Plan 101
D) What economic measures will the government be likely to take? 102
E) Major issues and implications 103
II. How Can ICBC Help? 105
III. How can Deloitte help? 109
IV. Deloitte International Tax Source 114
V. Ofce locations 115
VI. Deloitte team involved in this edition 118
8
Letter of Endorsements
China established the diplomatic ties with Spain in 1973 and upgraded
the relations to comprehensive strategic partnership in 2005. In recent
years, both countries have joined hands together to meet the nancial
crisis, which helped increase political mutual trust, expand cooperation in
elds like culture and education and bring economic & trade relations into
a spotlight for both societies.
In 2010, the growth in Spains exports to China surpassed that in its imports from China and
the bilateral trade amounted to US$ 24.4 billion. Spain and China have become each other's
most important trading partner, and the bilateral goods trade, in particular, has reached a
relatively mature stage of development. The number of Chinese tourists to Spain is expected
to total 300,000 in 2013.
As more and more commodities and people go global, the pace of international allocation of
Chinas capital speeds up as well. In 2010, China reported nearly US$ 60 billion of outward
investment in non-nancial sectors, one of the hugest among the developing countries. In the
future, Chinas inward investment and outward investment will tend to be more balanced and
China will soon become a global investment giant.
Spain is among the most developed countries of the world. With close ties with EU and
Latin America markets, it boasts a high degree of market openness, advanced infrastructures
and complete investment promotion systems, thus being an investment destination which
the Chinese businesses cannot ignore. Chinas aggregate investment in Spain is not huge at
present, but the operation is generally good and well on a stage featuring accelerated rise.
Either investing in Spain or jointly carrying out global strategic cooperation with Spanish
businesses is of great signicance to the sustainable development of both economies.
The Chinese government encourages businesses to earnestly study and actively adapt to local
investment environment, observe laws and rules, follow local customs and merge into local
society. Mutual understanding is the rst step for future cooperation. Therefore, we hope the
cooperative publishing of the guide for investing in Spain can play a positive role in promoting
the investment by Chinese businesses in Spain.

Zhu Bangzao
Ambassador of the Peoples Republic of China in Spain
Going Global has become a strategically important policy for China
to deepen its opening up and proactively participate to international
economic cooperation. With greater exposure to the world economy,
China has built up enormous overseas economic interest with vast of
enterprises and overseas Chinese around the globe. The huge needs for
nancial service of overseas Chinese enterprises and individuals have laid
a solid foundation for Chinese banks to follow their globalized customers to provide support
worldwide.
ICBC has been playing an active role in support of Chinese enterprises going globalization
in recent years. By the end of 2010, ICBC had 203 overseas branches and subsidiaries in 28
countries and regions, thus the global nancial service network covering Asia, Europe, Africa,
America and Australia has been basically established. ICBC has contributed to so many aspects
of overseas Chinese enterprises daily operations such as nancing, merge and acquisition,
capital raising and wealth management, that has greatly propelled our clients business
booming.
Spain is one of the major destination countries for foreign direct investment. The recent years
have seen a remarkable increase of Chinese investment ow into Spain. The establishment
of ICBCs new branch in Madrid is the most recent highlight of the achievement of Sino-
Spanish economic cooperation and development. ICBC becomes the rst Chinese bank to set
its footprint in Spain, a meaningful move for the Chinese enterprises exploring the Spanish
market. We strive to provide excellent nancial services to Chinese and Spanish customers and
aim to be a nancial bridge between China and Spain to boost bilateral economic and trade
relationship.
As such, we feel really honored to have the chance of being part of the editor team of this
Investment Guide in Spain. I hope this book will be a useful tool for Chinese enterprises to
better understand the investment environment of Spain. ICBC Spanish Branch will always
be ready to partner our customers to make contribution to the enhancement of economic
relationship between China and Spain.

Liu Gang
General Manager of ICBC Spain Branch
10
It is an honour for me to introduce the rst edition of the Investing in Spain guide.
This guide couldnt come at a better time, at a moment when Spain has been
declared as Chinas best friend in Europe; Spain - China economic relations are
getting stronger by the day, and Chinese investment into Spain is growing faster than
ever.
China is already Spains principal commercial partner from outside the European Union. Spains imports
from China have more than quadrupled in the last ten years and our exports are also growing at healthy
rates. Furthermore, all signs point to the fact that this relationship will continue to grow in the future. The
number of Chinese companies in Spain is steadily increasing, and the setting up of the rst Chinese nancial
institutions will make Spain an even more attractive destination for them.
As we can see in the 12th Five Year Plan approved in March 2011, it is clear that Chinas Government will
continue to push for a rapid development of the country. Economic growth targets are set to continue
at high single digits during the 2011-2015 period. The main driver of this outstanding growth will be an
increase in private consumption. According to the 12th FYP, Chinas development model will undergo major
change from an exports driven economy to a consumption driven one. Domestic demand will grow faster
than the economy, and its contribution to Chinas GDP will also increase signicantly.
In order to achieve these targets, Chinas consumption of natural resources from abroad will continue to
increase, and the import to China of western brands and technologies will rise dramatically, as Chinese
companies use them to satisfy their customers needs. In this context, Spain will strengthen its position as a
benchmark destination for Chinese investors.
Deloitte and its Chinese Services Group (CSG) are committed to developing long-term partnerships with
the Chinese business community and to support the entrance of Chinese companies in Spain. We are
convinced there are considerable opportunities to strengthen our mutual trade and investment relationships,
and will do our utmost to promote them. Our professionals, with extensive experience and knowledge of
the Spanish market, are in a unique position to help any Chinese investors understand the Spanish market
and bridge any cultural gap that would otherwise pose a major challenge for them. The CSG, at all times
in cooperation with the China rm, serves as the unifying force to market, facilitate and deliver Deloitte
professional services to our Chinese clients in Spain.
Both China and Spain have much to offer each other. I hope this guide, coordinated and tailored for
Chinese investors, with the full support of the Chinese Embassy in Spain and ICBC, will become the tool
of reference when targeting Spain. I am condent it will help you make the right choices when deciding
whether to invest in Spain and it will be a pleasure for me to offer you all our help when doing business in
Spain.
Fernando Ruiz
CEO of Deloitte Spain
Foreword
1. Introduction to Spain
1.1. Location
Spain is one of the fty largest countries in the world, with an area of 505,955 square
kilometres.
Most of its territory is the Iberian Peninsula, while the rest is composed of the Balearics and
the Canary Islands plus the cities of Ceuta and Melilla -situated on the coast of Africa.
Because of its privileged geographical situation -the Iberian Peninsula is located in the extreme
south west of Europe and only 14 kilometres away from Africa- Spain has great strategic
value: it acts as a bridge between the Mediterranean on one side and Africa and America on
the other. The Spanish coastline runs along the Mediterranean Sea and the Atlantic Ocean.
The climate in the different parts of Spain can vary greatly:
- In the North, the weather is temperate. Often with little change from summer to winter, and
rain is common year round.
- The Centre is characterised by hot summers and cold winters. In this area it does not rain
very often, but when it does, it rains heavily.
- In southern Spain, the summers are hot and winters range from cool to cold.
1.2. Population and language
In 2011 the Spanish population is estimated to stand at around 47 million, some 5.7 million of
whom are foreign residents.
The population of Spain is concentrated mainly in large cities.
Madrid, the capital city of Spain, has more than 3 million inhabitants -more than 6 million if
we take into account the outlying area. Barcelona, with an ofcial population of 1.6 million,
is the second largest city in Spain. They are followed by Valencia (809,267 inhabitants), Seville
(704,198 inhabitants), Zaragoza (675,121 inhabitants), Malaga (568,507 inhabitants) and
Bilbao (353,187 inhabitants).
The ofcial language of Spain is Castilian Spanish. However, Spanish is not the only language
spoken in Spain. There are many other ofcially-recognised languages in the following
Autonomous Communities: Catalonia, Galicia, the Basque Country, Valencia and the Balearic
Islands.
12
1.3. Government
Spains political regime is a constitutional monarchy, with a hereditary monarch and a
parliament based on a two-House system. The maximum institution is the Spanish Crown.
Juan Carlos I is both the King and the Head of State. He is in charge of moderating the regular
functioning of the institutions, as well as being the highest representative of the Spanish state
in international relations.
The Spanish Constitution is the legal framework of the political organisation of the Spanish
nation. According to the Constitution, the powers of the state are separated into three
branches: legislative, executive and judicial. Legislative power is held by parliament, while
executive power is represented by the government. The head of the government is proposed
by the King and elected after the renewal of parliament.
Spain is divided into provinces and into other larger units the Autonomous Communities.
There are 17 Autonomous Communities: Andalusia, Aragon, Asturias, the Balearic Islands, the
Canary Islands, Cantabria, Castilla-Len, Castilla-La Mancha, Catalonia, Extremadura, Galicia,
Madrid, Murcia, Navarre, Basque Country, La Rioja and Valencia. There are also two cities
Ceuta and Melilla each with a Statute of Autonomy. Each Autonomous Community has its
own parliament and regional government.
The Constitutional Court must safeguard the constitutionality of the laws and resolves any
conict arising between the Autonomous Communities and the state.
Spain is a democracy based on the supreme values of its legal system which are the concepts
of freedom, justice, equality and political pluralism.
1.4. Business environment
Spain is an EU member state and a member of the OECD.
Spain is a large economy and a popular destination for foreign investment. The services sector
dominates the economy, with retail, tourism, banking and telecommunications accounting
for a signicant proportion of economic activity. The tourism industry is particularly important
and Spain is one of the most popular tourist destinations in the world. The most prominent
manufacturing industry is vehicle production. The bulk of Spanish trade is with the EU,
although trade with Latin America and Asia has grown in recent years.
1.5. Financial centre
The city of Madrid is considered to be the nancial centre of Spain. In this regard, the two
largest banks in Spain Santander and BBVA- have established their headquarters in Madrid.
The prestigious business schools Instituto de Empresa and IESE are also located in Madrid.
The regulation and supervision of the Bank of Spain safeguards the soundness of the Spanish
banking system. This system has been acknowledged by news agencies such as the Dow
Jones International News, multilateral institutions such as the European Central Bank and
other central banks like the Bank of England.
The Spanish stock index is a leader in contracted xed-income products and has been growing
at a rate far above the international average.
1.6. Benets to business
Currently, Spain is one of the most internationally-oriented countries in the world. With regard
to the trading of goods, Spain is ranked 16th in the world as an exporter and 13th as an
importer; while in the trading of services it occupies 7th place as an exporter and 9th place as
an importer (WTO International Trade Statistics 2010 report.)
Spains human and technological resources make it a very attractive country for the
international business community. Spain has a highly developed infrastructure network and
it is very well communicated by road, train highly developed network of high-speed trains:
AVE-, air - two of the biggest airports in Europe- and sea.
The Spanish market is one of the biggest in Europe with 47 million consumers and spending
power above the European average.
As a member of the EU, Spain is directly connected to the members of the European Union.
Spain has the highest number of double taxation and investment protection agreements
signed with Latin America. Moreover, many Spanish companies are leaders in the Latin
American markets.
Because of its geographical proximity to North Africa, Spain is an important connection point
between Europe and the African market.
The Spanish language is also a key factor as there are currently more than 450 million Spanish
speakers and it is the ofcial language of 22 countries.
1.7. Currency
As Spain is a member of the European Union, its ofcial currency has been the euro since
2002.
14
Exchanges rates in June 2011:
1: June 2011
China () 9.3
UK () 0.8
United States (US$) 1.4
Hong Kong (HK$) 11.1
Japan (Yen) 116.8
Switzerland (SFr) 1.2
1.8. Foreign investment
Spain has liberalised its foreign investment rules to attract foreign capital and to bring
domestic rules into line with the principles of the Treaty on the Functioning of the European
Union.
Foreign investments generally only have to be reported after they have been made, except
in the case of investments from tax havens, which as a general rule must be reported to the
Investments Registry of the Ministry of Economy and Finance in advance; the same applies
to foreign investment in activities directly related to public order, national security and public
health systems, and real property investments for diplomatic missions by states that are not EU
member states.
The Spanish government protects strategic sectors of the economy, and industry-specic
legislation restricts foreign investment in the following sectors: air transport and radio
industries; areas relating to raw materials of strategic interest; private security and television;
industries linked to manufacturing, marketing or distributing arms and explosives; and
activities related to national security. In addition, special rules govern investments in certain
sectors (e.g. the pharmaceutical industry and mining).
1.9. Operating costs
The main factors that a company must take into account when deciding on a suitable location
include the recurring expenses related to the operation of a business, or to the operation of a
device, component, piece of equipment or facility.
The tables below show electricity and natural gas prices for industrial use in Spain:
Electricity prices in Spain
(euro per Kilowatt-hour, VAT excluded)
Comsumption price
Less than 10 KW 0.14
More than 15 KW 0.16
On the other hand, the price of water depends on variables such as the consumption or the
season. In this regard, the price in Madrid for 2011 varies between 0.38 /m3 and 1.39 /m3.
Another major cost that must be analysed is that relating to the rental of ofce space that a
business occupies. It is important to stress that rentals in Spain vary notably depending on the
region. In this regard, the following gure shows the average price for 2010 depending on
the area of Madrid (as a reference of a rst tier city):
Natural gas prices in Spain
(euro per Kilowatt-year, VAT excluded)
Comsumption price
5,000 KWh or less 0.14
5,000 KWh-50,000 KWh 0.16
50,000 KWh-100,000 KWh 0.39
More than 100,000 KWh 0.36
70
370
270
170
/m
2
/Year
Max Avg Min
C
B
D
C
i
t
y

c
e
n
t
r
e
r
P
e
r
i
p
h
e
r
y
N
o

c
i
t
y

c
e
n
t
r
e
r
Source: BNP Paribas Real Estate Research
16
2. Spain China economic and trade relations
2.1. Institutional framework
In the modern era, diplomatic relations were established by both the Chinese and Spanish
Governments in 1973.
Furthermore, a few years ago in 2005-, the two economies decided to embark on a new
project in which they would become strategic partners and provide mutual aid through
the signing of the Strategic Association Agreement. For the purpose of clarication, said
agreement recognised the ongoing commercial relationship established between China and
Spain under the same conditions that others, such as France, the UK and Germany, also
enjoyed at that time.
Institutional relations have been notably strengthened in recent years. To mark the recent
opening ceremony of Expo Shanghai 2010, numerous dignitaries such as the Minister of
Industry, Tourism and Trade, the Director General of the Public Treasury, the Prime Minister and
others had the opportunity to visit China. In addition, Spain was visited by the Deputy Minister
of the Chinese National Committee for Development and Reforms (NDRC), the main economic
advisor to the Prime Minister, Zhu Zhixin, the deputy minister for trade, Zhong Shan, the
Deputy Minister of the Ministry for Railways, An Limin, and the Deputy Chairman of the CCPIT,
Zhang Wei (in a ceremony with the Spanish Employers Confederation -CEOE-, its Spanish
counterpart).
Recently, in 2011 the Spanish Prime Minister along with the Ministry of Industry, Tourism and
Trade and the State Secretary for the Economy visited China. Furthermore, in January 2011 the
deputy Prime Minister Li Keqiang visited Spain.
Among the most signicant projects and agreements recently signed between both nations,
the following should be mentioned:
- Economic and industrial cooperation treaty (1984).
- Scientic and technical cooperation agreement (signed 1985).
- Double tax treaty (in force since 1992).
- Mutual investment protection and promotion agreement (in force since 2008).
2.2. Commercial exchange
Spanish exports
The total volume of Spanish exports to China in 2009 amounted to nearly 2,000 M whereas
those registered in 2010, amounted to 2,650 M a rate of growth of 33.13%.
The total volume of exports in 2010 related mainly to the sale of:
- Raw materials and semi-nished plastic products (10.46%)
- Automotive accessories (9.49%)
- Steel products (4.48%)
The data for 2009 and 2010 is as follows:
Main Spanish Export Products
(millon Euros)
2009 2010 Growth
Amount % Amount % %
Raw materials and semi-nished plastic products 231.87 11.67% 277.11 10.46% 19.51%
Automotive equipment, components and accesories 102.33 5.15% 251.25 9.49% 145.53%
Iron and steel products 114.00 5.74% 118.72 4.48% 4.14%
Pharmachemicals products 80.27 4.04% 102.62 3.88% 27.85%
Organic chemicals 115.60 5.82% 102.41 3.87% -11.41%
Marble and related goods for construction 59.99 3.02% 87.60 3.31% 46.01%
Copper and its alloys 60.00 3.02% 86.51 3.27% 44.19%
Semi-nished copper products and the related alloys 33.98 1.71% 84.53 3.19% 148.78%
Metal and non-metal ores (except copper and zinc) 63.86 3.22% 71.59 2.70% 12.11%
Raw and tanned hide and leather 43.15 2.17% 71.47 2.70% 65.63%
Source: Spanish Customs Authorities
Spanish Imports
The total volume of Spanish imports from China in 2009 amounted to nearly 14,500 M
whereas those registered in 2010, amounted to 18,870 M a rate of growth of 33.13%.
The total volume of imports in 2010 related mainly to the purchase of:
- vomen's c|oth|ng (10.22%)
- Computer herdwere (8.2b%)
- e|ecom perts d equ|pment (b.88%)
- L|ectron|c dev|ces (4.b1%)
18
The data for 2009 and 2010 are as follows:
(millon Euros)
2009 2010 Growth
Amount % Amount % %
Womens clothing 1,688.16 11.68% 1,927.48 10.22% 14.18%
Computer hardware 964.99 6.67% 1,557.14 8.25% 61.36%
Telecomunications equipment 926.87 6.41% 1,108.45 5.88% 19.59%
Electronic parts 484.93 3.35% 851.76 4.51% 75.65%
Footwear 569.98 3.94% 764.40 4.05% 34.11%
Organic chemicals 430.01 2.97% 556.54 2.95% 29.42%
Mens clothing 506.74 3.51% 553.53 2.93% 9.23%
Iron and steel products 357.00 2.47% 537.14 2.85% 50.46%
Toys 402.26 2.78% 505.23 2.68% 25.60%
Leathers goods 381.41 2.64% 492.36 2.61% 29.09%
Source: Spanish Customs Authorities
Evolution of Spains balance of trade
Spains balance of trade is usually marked by severe decits due to the low volume of Spanish
exports entering the Chinese market. However, it has been observed that Spanish sales have
begun to increase slightly over the last two years.
In fact, in 2010 the Spanish trade decit reached 16,219 M. Also, the foreign trade coverage
rate has improved to the extent that in 2010 it reached 14% pointing to greater growth in the
volume of exports than in imports.
Foreign capital companies represent half of Chinese imports, with approximately one third
of the imports relating to the manufacturing trade. Foreign direct investment (FDI) in China
constitutes the main source of Chinese imports.
In principal, it could be argued that the current weak level of industrial placement and
positioning of Spanish companies in the Chinese economy could have a signicant impact
on the access of Spanish exports, together with other factors such as access barriers and the
prole of the Spanish export companies.
The data for 2008, 2009 and 2010 are as follows:
(millon Euros)
2008 2009 2010
Amount % Amount % Amount %
Spanish Exports 2,152.60 1.2% 1,989.40 -7.6% 2,648.09 33.1%
Spanish Imports 20,492.60 10.8% 14,454.20 29.5% 18,867.09 30.5%
Trade Balance 18,339.80 12.1% 12,464.90 32.0% 16,219.02 30.1%
Trade Coverage Rate 10.5% - 13.8% - 14.0%
Source: Compiled by Deloitte Spain based on previous charts.
Chinese investment in Spain may appear to be still relatively low and although certain Chinese
corporations, such as ICBC bank (since January 2011), HNA (which acquired 20% of NH
Hoteles in May of this year), CITIC, ZTE, Huawei and Air China all have a presence in Spain, it
has yet to become a signicant destination for outward Foreign Direct Investment ("FDI") in
comparison with other large economies located in the European Union.
In 2007, Chinese investment in Spain surpassed 2.15 M but in 2008 it dropped signicantly
to 1.05 M. Although the highest level of investment (2.76 M) was recorded in 2009, it
subsequently fell to 2.2 M in 2010.
2.3. Trends and future development
Several wealthy Chinese territories have recently been faced with a decrease in their
competitive advantage based on low salaries. Rich areas have witnessed a signicant degree
of relocation of labour-intensive and consumer-goods industries (toys, clothing, footwear.
etc.) to other Asian economies. As a consequence, the former competitive pressure exerted
by these territories on the European Union market has tended to become less price-orientated
and based more on the range, quality and innovation of the products.
Furthermore, the population of these territories is acquiring a pattern of consumption and
investment which is increasingly similar to that of Europe, a factor that indirectly allows for
an increase in the volume of EU products to be traded. Previously, exports were based mainly
on the sale of high-quality equipment and luxury goods, which would tend to become less
limited as new more basic products gained access to the Chinese economy. Accordingly,
those competitors that focused their main competitive advantage on the price-factor should
gradually adjust to their new scenario.
In this light, the indicators for 2010 and this current year 2011 so far show an increase in
the bilateral trade ows between both economies. It must therefore be emphasized that the
Chinese development priorities could give rise to opportunities for Spanish companies, in two
different ways:
20
- As an advantage for technological-intensive sectors (e.g. renewable energies, water
treatment and biomed) before Chinese companies operating in these sectors develop the
subsequent technologies in their own right.
- As a more stable form for medium and high-range consumer goods (fashion, food and
beverages).
Nevertheless, in the medium and long term horizon, the development and growth of bilateral
relations would be determined by factors such as the growth of current modest Spanish
production investment in China.
Most importantly, the future of Spains bilateral relations with China would signicantly
depend on (i) the capacity of China to continue to open up and the growth of its economy
(ii) growth of household disposable income above the actual GDP and promotion of
personal consumption, as the main element to drive demand, (iii) an in-depth analysis of
the intervention procedures adopted by the public sector in the economy through public
enterprises and highly active nancial and industrial policies.
3. Chinese investment into Spain
3.1. Chinese overview
The strengthening of the Chinese economy, growing at 11.9% and 10.3% during the rst
two quarters of 2010, is behind the rise in outbound investment that we are seeing from
China. Such a rapid rate of development has resulted in further M&As, as Chinese investors
are becoming victims of their own success. Chinas economy is rapidly moving up the value
chain, as Chinese consumers are seeing their purchasing power increase. Therefore, Chinese
manufacturers are being pushed to seek more cost effective centres of production and are
facing increasing challenges to meet the demands of their customers for higher quality
and design. Chinese investors are now looking to diversify their operations away from the
mainland and are looking for reputed brands, technology and resources. Spain is a good
target that meets their requirements.
In the near future, Chinese banks will play a very important role in facilitating Chinese
outbound investments. Over the past few years Chinese nancial institutions have opened
a large number of branches around the world, including Spain, and we expect this trend to
continue as Chinese companies and investors will continue to focus on overseas markets to
diversify their investments.
Spain offers a number of benets to a potential investor, which is why many Chinese
companies chose to establish their operations here, and many others are considering Spain
as their target country for investments. Benets such as incentives for foreign investors, the
broadest network of double taxation and investment protection agreements, and strong
government commitment to attracting foreign investment are oriented towards helping
foreign companies to set up in Spain and take advantage of the market for their individual
needs.
Spain is the third largest recipient of Chinese FDI in Europe, and according to ofcial data,
Chinese FDI into Spain grew at a Compound Annual Growth Rate (CAGR) of 44.3% between
2003 and 2009. The overall stock of Chinese FDI in Spain is already over 8 million. Although
the gure might not seem too big, the underlying trend is outstanding, meaning that Spain
is becoming an increasingly attractive destination for Chinese investment. As proof of this
afrmation, and according to several reports, the number of Chinese companies in Spain is
forecast to double by 2013.
Since Spain started receiving FDI from China, the sector pattern of Chinese investment
appeared to be in intermediate commercial goods, real estate and textiles; nowadays the
investment focus is changing and the Spanish renewables and electronic components sectors
are gaining appeal as investment targets. Spain is becoming a very attractive location for
Chinese investors looking to start their European and Mediterranean operations. The fact that
Spanish multinationals have a strong position and experience in Latin American markets is also
an attractive point for Chinese companies seeking to prot from their experience.
Following the implementation of the 12th Five-Year Plan, we expect a surge in Chinese
investment entering Spain, not only with the aim of entering the Spanish or European
markets, but also as a way of acquiring renowned brand and world-class technologies to
import them back to their home markets. Foreign brands acquisition and importing to their
domestic markets by Chinese investors have become the new way for Chinese companies
to gain a competitive advantage over their counterparts, especially in those sectors where
Chinese domestic markets are already saturated such as retail, food and beverage or aviation
spaces.
3.2. The appeal of Spain
As China develops and its domestic consumption markets start to gain speed, Chinese
companies are starting to feel increasing pressure from both foreign and Chinese competitors.
This trend will not only continue in the coming years, but will become even stronger, putting
pressure on companies margins and market share. Therefore, Chinese companies have had to
look at foreign markets in search of the competitive advantages that they are losing at home.
Furthermore, Chinese companies wish to become the leaders in their home markets and to
achieve this objective it will not be enough to try to outpace their domestic competitors, they
will also need to beat multinational competition from abroad to become global leaders.
In their search for competitiveness and new markets Spain has much to offer Chinese
investors. According to the World Bank, Spain is the 49th country in the world, and 10th
in Europe, in terms of ease of doing business in the country. The country is the fth biggest
economy in Europe with a GDP per capita of US$ 31.946, and historically it has been among
the biggest consumer markets of the European Union, with average per capita spending
above the EU average. Additionally, Spain was ranked as the most popular and friendly
destination for expatriates in Europe.
22
When targeting European and Latin American markets, Spanish companies can be the perfect
partner for Chinese companies. Our companies already have vast experience, deep knowledge
and a good reputation in both markets. Therefore, cooperating with a Spanish company
would place any Chinese company in a much better position when entering these markets,
and would enable them to benet from our companies reputation and knowledge of the
target market.
In terms of the countrys resources and infrastructures, Spain offers a pool of highly qualied
workers at a very competitive cost, lower than their European peers; some of the best
infrastructures in Europe, including the best high-speed train network; two of Europes biggest
airports and the busiest ports in southern Europe. Spains extensive logistics network has
direct connections with Europe, Latin America and the entire Mediterranean area.
As an investment opportunity for Chinese investors, Spain offers a range of high potential
brands and companies with European level standards of design, technology and management.
Spanish brands and technologies are acknowledged around the world for their top quality
and high level of design, placing them in an unbeatable position to be exported abroad.
The countrys strategic geographical location, with access to North Africa, Europe and Latin
America, together with its economic openness and competitiveness, makes it a very attractive
location for foreign investors.
Spain is not only a big consumer market with a high degree of purchasing power, but also
offers a range of domestic high quality brands easily exportable to and marketable on the
Chinese market. Spains renewable energies such as wind and solar power generators are
amongst the most advanced technologies in the world. Brand acquisitions, as well as the
purchase of advanced technologies are also crucial for Chinese outbound appeal and in this
sense, Spain has a lot to offer Chinese corporate investors looking to strengthen their position
and expand market shares not only in the international, but also in their domestic markets.
3.3. Deal rationale
Are earliest matches the best matches? This is a good question that should be raised before
any overseas investment.
Indeed, one of the main risks that Chinese acquirers have traditionally faced was their
inexperience in the eld of cross-border purchases.
Ensuring that the reasons for acquiring any foreign target are duly checked from a professional
perspective is a key driver for a successful investment strategy.
Being surrounded by good quality advice, especially by teams with solid international
background, is the best guarantee to avoid succumbing to the so-called window shopper
mentality where the inexperience of Chinese acquirers can lead them to take wrong decisions
based on unreal synergies.
The process of searching for outbound investment goes from target origination through to
post-merger integration, including detailed valuation exercises or tax structuring support in
order to close the acquisition under a complete long-term strategic vision.
Fluent communication with the counterparts and the development of soft skills at the time of
running the deal process are excellent ingredients to reach a win-win situation for all.
Lastly, understanding the importance of cultural barriers when transacting is a paramount
concern in the outbound investment process.
Chinese investors need to realise that their international growth should be based on in-depth
knowledge of the cultural framework of each jurisdiction involved.
Involving a professional team with extensive experience at international and local level is an
excellent approach to be able to bridge any cultural gaps.
Although it is true that over the years Chinese investors have improved their ability in the art
of deal-making when buying foreign assets, addressing all of these concerns remains a must
in any potential foreign acquisition.
4. Main business structures.
4.1. The incorporated company.
The incorporation of companies in Spain is mainly governed by the Consolidated Spanish
Limited Liability Companies Law 1/2010 of July 2nd (Texto Refundido de la Ley de Sociedades
de Capital). It recently adapted Spanish legislation to incorporate European Community
company law directives and substantially amends the former Companies Law of 1989 and
Limited Liability Companies Law of 1995.
Chinese companies setting up a company in Spain may do so by creating a wholly-owned
subsidiary (a company whose shares are 100% owned by the Chinese parent company, or
may join others in establishing a company that is jointly owned by various shareholders).
This chapter explains the most common types of companies / joint ventures that can be
registered in Spain as well as their differences and advantages/ disadvantages.
Accordingly, set out below is a brief explanation of the principal forms of Company in Spain:
the Public Limited Liability Company (Sociedad Annima S.A.), Private Limited Liability
Company (Sociedad de Responsabilidad Limitada S.L.), New Enterprise Limited Company
(Sociedad Limitada Nueva Empresa- S.L.N.E.), General and Limited Partnerships (Sociedad
Colectiva and Sociedad Comanditaria), Joint Ventures, and European Public Limited-Liability
Company (Societas Europaea SE).
24
A. Public Limited Liability Company (Sociedad Annima - S.A.)
As in other countries, an S.A. in Spain is distinct from its members. It provides limited liability
for its members and the possibility of unrestricted transfer of shares without its own continuity
being affected. Nevertheless, in certain circumstances, a sole shareholder and / or the
directors may become liable in respect of the companys debts.
1. Shareholders
An S.A. may be listed on a stock exchange or it may be owned by only a few shareholders;
it may also be a wholly owned subsidiary of another entity (sole shareholder entity). If the
company has only one shareholder, the following further requirements must be met to comply
with Spanish regulation:
i. The identity of the sole shareholder must be led at the Mercantile Registry ("Registro
Mercantil").
ii. A Register of Agreements entered into between the sole shareholder and the company
must be legalised at the Mercantile Registry in a similar way to the Register of Minutes.
These agreements must be transcribed into this Register.
iii. The fact that the company has one shareholder must be stated on all documentation,
correspondence, orders, invoices and in all publications which must be made in
accordance with the law or the of the company by-laws.
iv. The Notes to the nancial statements ("Memoria") should make express and individual
reference to agreements between the sole shareholder and the company indicating their
nature and terms and conditions.
The founder-shareholders may be Spanish nationals or foreigners, individuals or legal
entities. There are no residence or nationality requirements. However, the foreign legal entity
shareholders must obtain a taxpayer identication number, for statistical purposes only. If the
shareholders are foreign individuals, they must obtain a resident alien identication number
(NIE) in order to register the company with the Spanish tax authorities. The procedure to
obtain a NIE may take over one month. The NIE must be applied for at a Spanish consulate or
by someone (i.e. Deloitte lawyers) in Spain with a power of attorney.
2. Share capital
An S.A.'s share capital must be at least 60,000. There is no maximum share capital
established by law for an S.A. All shares must have a par value and shares may not be issued
for less than that par value, although they may be issued at a premium (paid-in surplus).
Shares must be nominative (registered) until they are fully paid in; thereafter, they may be
bearer shares.
In order to establish the par value of the shares representing the share capital correctly, it is
advisable to set an exact amount of euros as share capital which can be divided into the entire
number of shares (i.e. 60,000 of share capital divided into 6,000 shares of a par value of
10).
The initial share capital with which the S.A. proposes to be incorporated (its authorised
capital) must be stated in the by-laws and, therefore, in the public deed of incorporation and
registered at the Mercantile Registry. Any change to the capital involves an amendment to the
by-laws and must be registered at the Mercantile Registry.
An S.A. cannot be set up unless its share capital is fully subscribed and at least 25% of the par
value of each share is paid. As for the remaining 75%, any disbursement of that percentage to
be made in the form of non-cash assets must be paid in within ve years following the initial
subscription; if the disbursement is in cash, the maximum term during which the 75% balance
must be paid in is established by the by-laws.
Cash contributions must be made in euros; if made in a foreign currency, the euro equivalent
must be determined in accordance with the law. Cash contributions must be evidenced by
bank deposit receipts issued by the bank, in which the cash contribution has been made,
delivered to the Notary Public concerned when the deed of incorporation is executed.
Contributions may also be made in a form other than in cash, as long as certain conditions are
met (i.e. report of an independent expert).
An S.A. may acquire its own fully paid-in shares, amounting to up to 20% of its authorised
capital, provided that various formalities are complied with, but (i) such an acquisition cannot
entail that the net equity be reduced to less than the amount resulting from the sum of share
capital plus legal or by-law restricted reserves; and (ii) it must then constitute a restricted
reserve of an amount equal to the value of the controlling companys shares recognised on
the asset side of the balance sheet. If the S.A. is listed on the stock exchange, this 20% limit is
reduced to 10%.
The shareholders' liability to third parties is limited to the par value of the shares that they
have subscribed.
3. Shareholders' rights:
Shareholders' rights include a share in prot distribution, preferential right of subscription
in capital increases (except for contributions in kind) and participation in the allocated share
capital in the event that the company is wound up.
Shareholders' general rights include attendance at the Annual General Meetings and the
exercise of the right to vote as per capital participations rather than as per person.
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Main differences between an S.L. and an S.A.:
4. Directors liability:
The provisions in respect of directors liability have become much more stringent under
Spanish law in recent years. Directors of both S.A.s and S.L.s may incur civil liability when the
company, shareholders or creditors have suffered damage due to an unlawful act or omission
of the Directors or one carried out without due diligence. Under company legislation,
directors may also become jointly and severally liable for all the companys debts where, in
circumstances in which the company ought to be wound-up (in practice, particularly when
losses reduce the net worth to below half the value of the share capital), they do not take the
necessary steps. However, in such cases the directors shall only be held jointly and severally
liable for the debts incurred after the legal grounds for dissolution have arisen.
Directors may also be held liable in relation to the taxes. They may be held criminally liable and
failure to comply with Labour Law and Social Security obligations may also lead to directors
being held liable when their conduct has been unlawful or negligent.
Directors liability may extend not only to directors who have been legally appointed as such,
but also to de facto directors.
B. Private limited liability company (Sociedad De Responsabilidad Limitada - S.L.)
An S.L., like an S.A., may be founded by only one shareholder. The additional requirements in
this case are the same as detailed above (point A. Shareholders. points i - iv) in respect of sole
shareholder status.
As with an S.A., the shareholders' liability is limited to their contribution to the share capital.
Minimum initial capital of 3,000 is required, which must be paid in full on the companys
incorporation. The capital is divided not into shares but into equal quotas ("participaciones
sociales"). Each quota carries one vote and must be fully paid before the company can
commence trading. There is no minimum size for a quota and there is no maximum share
capital established by law for an S.L. Quotas must be in registered form.
In order to establish the par value of the quotas representing the share capital, it is advisable
to set an exact amount of euros as share capital which can be divided into the entire number
of quotas, (i.e. 3,000 of share capital divided into 300 quotas of par value of 10 Euros).
Public Limited Liability Company (S.A.) Private Limited Liability Company (S.L.)
An S.A.s capital is divided into shares. An S.L.s capital is divided not into shares
but into equal quotas.
An S.A.s share capital may not be less than 60,000. An S.L.s capital may not be less than
3,000.
Public Limited Liability Company (S.A.) Private Limited Liability Company (S.L.)
An S.A. can be set up with at least 25% of its share capital
paid (minimum 15,000, for a 60,000 share capital).
An S.L.s capital must be fully paid up on
incorporation (3,000).
An S.A. may issue bonds or other marketable securities. An S.L. may not issue bonds or other
marketable securities.
Any contributions made by the shareholders in non-cash
assets must be veried by an independent expert
appointed by the Mercantile Registry.
Contributions in non-cash assets do not
require verication by an expert.
Purchases that do not form part of the ordinary course
of business and which amount to more than 10% of the
share capital within the two rst years after incorporation
must be approved by the shareholders at the General
Meeting and be checked by an expert.
Such purchases do not require the approval
of the shareholders at the General Meeting
or verication by an expert.
The shares may be in registered or bearer form. The quotas must be in registered form.
The transfer of shares is essentially free, although it is
possible to state limitations in the by-laws if the shares are
in registered form.
The transfer of quotas to third parties is
essentially limited.
The calling of a General Meeting requires several formalities
(publicity, etc.).
The calling of General Meetings is not so
formal.
There is no maximum number of members of the Board of
Directors, the minimum being three members.
The maximum number of members of
the Board of Directors is twelve, and the
minimum three.
The duration of the term of appointment of the directors
must not exceed six years, unless renewed.
The duration of the appointment of the
directors has no limit unless stated in the
by-laws.
Only one type of governing body can be chosen in the
by-laws, (there are four possibilities: sole director, joint and
several directors, joint directors and Board of Directors).
If it is intended to change the governing body, the by-laws
must be amended and executed in a public deed prior to
the new director / s appointment / s, which must then be
led at the Mercantile Registry.
The four possibilities can be included in the
by-laws.
If it is intended to change the governing
body, the by-laws do not need to be
amended but the change from one to
another must be executed in a public deed
before a Notary Public and led at the
Mercantile Registry.
Certain amendments to the by-laws (change of name,
registered ofce, objects clause) require publications to be
made on the companys website or, should the latter not
exist, in two newspapers of the related province.
In most cases, no publications are
necessary.
In order to amend the by-laws a report must be prepared
supporting the amendment.
In most cases, no report is required to
amend the by-laws.
There is less shareholder control at an S.A. than at an S.L. There is more shareholder control at an S.L.
than at an S.A.
The shares may be listed on the stock exchange and the
procedure to transfer the shares is easier than at an S.L.
The quotas cannot be listed on the stock
exchange and the procedure to transfer
them is more complex.
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C. New Enterprise Limited Company (Sociedad Limitada Nueva Empresa- S.L.N.E.)
This corporate entity is a special type of limited liability company.
As with an S.A. and an S.L., the S.L.N.E. must be set up by public deed, which must be
registered at the corresponding Mercantile Registry. However, the procedure is simplied and
the use of new technologies is permitted with the aim of expediting the process of setting up
companies of this type.
There are, however, a number of characteristics of the S.L.N.E. which make it unlikely to be
of interest, in principle, to foreign investors; for example, the founder shareholders must be
individuals and on incorporation they may not exceed ve. Subsequent transfers may only be
to individuals (although after incorporation, transfers of shares may result in there being more
than ve shareholders).
The name of the S.L.N.E. must be the name and surnames of one of the founders, followed
by an alphanumerical code and the indication Sociedad Limitada Nueva Empresa or its
abbreviation SLNE. The share capital may not be less than 3,012, or more than 120,202.
The S.L.N.E. cannot have a Board of Directors and it is necessary to be a shareholder to be a
director.
Legal steps to set up a company (S.A./S.L.)
i. In general terms, the legal steps in order to set up a company are very similar for an
S.A. and an S.L.:
ii. Make a prior declaration to the Directorate-General of Commerce and Investments,
should the shareholder of the Spanish company be a company from a tax haven
country.
iii. Obtain a certicate on behalf of one of the shareholders from the Central
Mercantile Registry to the effect that the proposed name of the company has not
already been entered in the Register.
iv. Draft the company's by-laws (Estatutos Sociales).
v. Draft powers of attorney appointing any person in Spain, who will appear before
a Notary Public in Spain to incorporate the company acting for and on behalf of
the shareholder(s). Such power of attorney must bear the Apostille of The Hague
Convention of 5 October 1961, abolishing the requirement for legalisation for
foreign public documents, in order to have legal effects in Spain.
vi. Liaise with the chosen Bank regarding the preparation of the bank certicate
evidencing that the funds have been remitted from overseas and credited in the
company's account.
vii. Prepare the companys public deed of incorporation, which must be signed in the
presence of a Notary Public by the shareholder(s) or by their attorneys, as the case
may be.
viii. Declare the foreign investment at the Directorate-General of Commerce and
Investments so that it may be recorded for statistical purposes.
ix. Obtain a taxpayer identication number for each of the shareholders in the
company (Nmero de Identicacin Fiscal - NIF) for statistical purposes only.
x. Obtain the provisional taxpayer identication number card for the company (Tarjeta
Provisional de Nmero de Identicacin Fiscal - NIF).
xi. File a capital duty return (1% on the share capital). Said tax is currently exempt.
xii. File the public deed of incorporation of the company at the provincial Mercantile
Registry.
xiii. Legalisation of the Register of Shareholders, Register of Minutes and Register of
Agreements entered into between the Company and its sole shareholder (the latter
only if it is a sole-shareholder company).
It usually takes approximately one week to set up the S.A. / S.L. once all the information and
documents are gathered plus a further three to four weeks to register it at the Mercantile
Registry.
Lastly, it must be noted that the Spanish tax authorities currently require that the non-Spanish
resident directors or individual shareholders of Spanish companies obtain a resident alien
identication number (NIE) in order to register the company with the tax authorities.
D. General And Limited Partnerships (Sociedad Colectiva and Sociedad Comanditaria)
Spanish commercial law allows for both general and limited partnerships. In a general
partnership, the members are normally jointly and severally liable for all the debts and
obligations of the partnership, whereas a limited partnership is created by one or more
general partners (socios colectivos), who are jointly and severally liable without limit for the
partnerships debts and one or more limited partners (socios comanditarios), who are liable
only up to the amount of their respective capital contributions.
Limited partnerships in which the limited partners interests are in the form of transferable
shares are called share partnerships (Sociedad Comanditaria por acciones).
E. Joint Ventures
Spanish legislation envisages several types of co-operation companies:
Unincorporated Temporary Joint Ventures (Uniones Temporales de Empresas): entity
created by several companies when setting up a sort of temporary association which is to
exist only for a limited period of time and to undertake a specic project. These types of
associations do not have separate legal personality and are not corporations.
30
Economic interest grouping (EIG) (Agrupacin de Inters Econmico AIE): is a vehicle
for a joint venture between Spanish participants. It is similar in concept to a partnership, its
participants having joint and several liability for its debts.
To form an AIE, the participants must execute a public deed, incorporating the by-laws. This
deed must be led at the Mercantile Registry. The internal operation of an AIE is similar to
that of an S.A.
European economic interest grouping (Agrupacin Europea de Inters Econmico- AEIE):
is a cross-border version of the AIE. A Spanish AEIE is a separate legal entity and must have
its registered ofce in Spain. It must be registered at the Mercantile Registry, and in almost
all respects it is similar in constitution and operation to an AIE.
However, S.A. and / or S.L. companies may also form joint-ventures.
F. European Public Limited Liability Company (Societas Europaea SE)
The introduction of the SE is an important company law development in the EU and may
provide easier cross-border mergers and changes of registered ofce and cost savings.
However, as many issues affecting the SE are subject to national law, it is not an entirely
uniform new entity. Although this type of company has been included in Spanish law since
2005, very few entities have opted for this type of corporation.
Some of the basic characteristics of the SE are: the minimum share capital is 120,000; the
registered ofce of the SE must be located in the same Member State as its head ofce; there
is no central registration and an SE shall be registered in the Member State in which it has its
registered ofce at the registry designated by its law.
The formation of an SE requires involvement of entities of at least two different Member
States. There are four ways in which an SE may be formed: merger; formation of a holding SE;
incorporation of a subsidiary SE and conversion of an existing company into an SE. An SE may
itself set up one or more subsidiaries in the form of SEs.
The Regulation also provides for the possibility of an SE transferring its registered ofce from
one Member State to another.
As regards the structure and management of the SE, the Regulation provides that the SE shall
comprise:
i. A general meeting of shareholders; and
ii. Either a supervisory body and a management body (two-tier system) or a governing body
(one-tier system).
Directive 2001/86/EC is designed to ensure that employees have a right of involvement in
issues and decisions affecting the life of their SE.
4.2. Branch or representative ofce of an incorporated foreign company
Chinese companies wishing to expand their business activities into new territories will often
consider establishing a branch or even a representative ofce instead of incorporating a new
company.
A. Branches Of Foreign Companies (Sucursal Extranjera)
From a tax point of view, branches are permanent establishments of non-resident entities.
It is important to take into account that a branch in Spain is not a separate legal entity from its
parent company. Nevertheless, the branch has certain autonomy of operation. As with an S.A.
and an S.L., any type of activity can be performed by a branch although the parent company
is fully liable for the debts of the branch.
The branch must have the same name as the parent company plus the words "Sucursal en
Espaa" ("Branch in Spain").
It is important to note that for scal and foreign transactions, the arms length principle
applies to operations between the parent company and the branch. Separate accounts must
be kept.
A branch of a non-resident company must appoint a resident individual or legal entity
to represent it. The representative appointed will be the person who deals with the tax
authorities before the expiry of the deadline for ling the declaration of income earned in
Spain. The appointment of a representative to act as tax representative must be reported
to the local tax administration ofce within 2 months of the date of the appointment. This
representative is normally one of the branchs legal representatives, as registered in the
Mercantile Register, but if those legal representatives are themselves non-resident, a resident
individual or legal entity must be appointed instead.
32
The representatives may be held jointly and severally liable for the tax debts of the permanent
establishments of the non-resident entities they represent.
If the parent company's nancial statements are not led at the Mercantile Registry of its
country of origin (or if they are so led but do not comply with the requirements of Spanish
law, the nancial statements of the branch itself must be led at the Mercantile Registry
in Spain. When led in Spain, the nancial statements of the branch are open to public
inspection.
1. Main advantages and disadvantages:
Advantages Disadvantages
There is no minimum working capital
requirement.
More risk, because branches are liable to third
parties up to the full amount of the parent
company's equity (in the case of a Spanish
company, only the equity in that company is at
risk).
It is an inexpensive way to break into an
unknown market.
It is not the ideal vehicle for substantial projects,
because the parent company runs the entire
risk and there is no division between the
activities of the parent company and those of
the branch.
It is an appropriate vehicle for low cost
projects and those with a low turnover.
The fact that it is a foreign company could
make some clients or creditors less willing to
do business with it, thus making it difcult to
obtain loans, contracts, etc.
Possibility for the parent company of
offsetting the branch's losses for tax
purposes in the same nancial year in
which they are incurred.
Corporate income tax payable by the
branch is normally deductible by the
parent company, as well as the transfer
of working capital.
The branch is more solvent, because the
parent company is liable to third parties
up to the full amount of its equity.
Spanish law does not allow the simple
conversion of a branch into a subsidiary
company.
2. Main differences between a branch and a public limited liability company (S.A.) and a
private limited liability company (S.L.):
i. Public and private limited liability companies must be wound up if their accumulated losses
reduce their net worth to less than the 50% of their share capital, unless that capital is
reduced or increased, or if the capital is reduced below the legal minimum. Moreover, the
share capital of public limited liability companies must be formally reduced when losses have
reduced net assets to less than two-thirds of the share capital and equilibrium is not restored
in the following nancial year.
ii. Public and private limited liability companies must transfer 10% of net prot for each year to
the legal reserve until the balance of this reserve reaches at least 20% of the share capital.
Until the legal reserve exceeds 20% of share capital, it can only be used to offset losses,
provided that sufcient other reserves are not available for this purpose.
iii.S.A and S.L. companies are taxed in the same way. Branches are considered to be
Permanent Establishments (PE) and, in general terms, they are taxed in Spain applying the
same rules as those applicable to subsidiaries, with certain exceptions.
The main difference between subsidiaries and branches is that, in order to determine taxable
income, the payments which the PE makes to its Head Ofce (or any other PE the Head
Ofce may have) for royalties, interest, commissions, or in exchange for technical assistance
or for the use or assignment of other assets or rights, are not deductible in the calculation of
non-resident income tax.
On the other hand, management and general administrative expenses incurred by the Head
Ofce are deductible to the extent that they are allocated to the branch, they are provided for
in the accounts of the PE, that the amounts, criteria and method of distributing the costs are
set out in a document led with the tax return, and the costs are allocated on a rational and
continuous basis.
A Spanish subsidiary, on the other hand, may claim as deductible expenses any payments
made to the parent company in respect of management fees, technical assistance, interest
and royalties, the cost of which must be xed on an arm's length basis since the companies
are related. Specic formal requirements have to be met for certain expenses.
Nonetheless, please bear in mind that the tax deductibility of expenses on transactions carried
out between related entities (applicable to certain types of entity, i.e., subsidiaries, branches,
representative ofces, etc) would depend on whether these transactions represent a real
advantage or use for their recipient.
34
Moreover, it should be highlighted that Royal Decree 1793/2008, of 3 November amending
the Corporate Income Tax Regulations, was published on 18 November 2008. Mainly
Articles 18 to 20 of that Royal Decree regulate the documentation obligations affecting (i)
transactions between related entities; (ii) the group to which the tax payer belongs; and (iii)
the tax payer itself. In accordance with Transitional Provision Three of the Royal Decree, these
obligations have had to be complied with since 19 November, 2008, three months after the
entry into force of the Royal Decree. Please note that pursuant to Article 18.3 of Royal Decree
1793/2008, transactions between entities in the same tax consolidation group are exempt
from the above-mentioned documentation obligations.
3. Legal steps to set up a branch
A branch must be set up in the presence of a Spanish notary public who will require the
following documents:
i. A certicate from a bank in Spain to the effect that the working capital, if any, of the
branch has been transferred and credited to a current account opened in the branch's
name.
ii. A certicate issued by a notary public stating that the parent company has been duly
incorporated, that the Memorandum and By-laws have been duly approved and that the
directors have been duly appointed.
iii. A certicate of the minutes of the General Meeting or Board Meeting of the parent
company at which it is resolved to set up the branch, detailing the allocated capital, if
any, the objects, registered ofce and nancial year of the branch. Representatives of
the branch should be appointed and their powers dened and an individual must be
empowered to appear before a notary public in Spain to execute the public deed setting
up the branch. A tax representative should also be appointed.
iv. A sworn translation into Spanish of the parent company's Memorandum and By-laws.
It will also be necessary to:
a. Make a prior declaration to the Directorate-General of Commerce and Investments
should the parent company be resident in a tax haven.
b. Record the foreign investment at the Directorate-General of Commerce and
Investments so that it may be recorded for statistical purposes only.
c. Obtain a non-resident taxpayer identication number (Nmero de Identicacin Fiscal -
N.I.F.) for the foreign company
d. Obtain a provisional taxpayer identication number (Nmero de Identicacin Fiscal
provisional - N.I.F.) for the branch.
e. File the public deed setting up the branch at the corresponding Mercantile Registry.
f. File a capital transfer tax return.
4. Main disbursements:
i. Fees of the notary public (the amount will depend on the working capital, if any);
ii. Mercantile Registry fees (the amount will depend on the working capital, if any);
iii. Translation costs for obtaining a sworn translation of the parent companys Memorandum
and By-laws.
It usually takes approximately 1 week to set up the branch plus a further 3 to 4 weeks to
register it at the Mercantile Registry.
B. Representative Ofce (Ocina De Representacin)
A representative ofce is one that, unlike a branch or a company, has no power to conclude
contracts with customers of any type in Spain.
It is very important to stress that if the idea is to conduct business activities in Spain, the
representative ofce would not be the most appropriate vehicle. Therefore, since the nal
purpose of these entities is very different, it is crucial to determine the exact type of structure
required in Spain. Although representative ofces are very simple in principle, they should
only be used for certain activities.
1. Legal steps to set up a representative ofce
As with a branch, a representative ofce must be set up in the presence of a Spanish notary
public who will require the following documents:
i. A certicate from a bank in Spain to the effect that the capital of the representative
ofce, if any, has been transferred and credited to a current account opened in the
representative ofce's name.
ii. A certicate issued by a notary public stating that the parent company has been duly
incorporated, that the Memorandum and By-laws have been duly approved and that the
directors have been duly appointed.
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iii. A certicate of the minutes of the General Meeting or Board Meeting of the parent
company at which it is resolved to set up the representative ofce, detailing the
allocated capital, if any, the objects and the registered ofce of the representative ofce.
Representatives should be appointed and their powers dened and someone must be
empowered to appear before a notary public in Spain to execute the public deed setting
up the representative ofce. A tax representative should also be appointed.
iv. A sworn translation into Spanish of the parent company's Memorandum and By-laws.
It will also be necessary to:
a. Sign the public deed opening the representative ofce in the presence of a notary public.
b. Obtain a non-resident taxpayer identication number (Nmero de Identicacin Fiscal -
N.I.F.) for the foreign company.
c. Obtain a provisional taxpayer identication number (Nmero de Identicacin Fiscal
provisional - N.I.F.) for the representative ofce.
d. Appoint a tax representative for non-resident income tax purposes.
e. File a capital transfer tax return.
2. The main disbursements will include:
i. Fees of the notary public.
ii. Translation costs for obtaining a sworn translation of the parent companys Memorandum
and By-laws.
It is not necessary to le the public deed opening the registered ofce at the Mercantile
Registry.
It usually takes approximately 1 week to open the representative ofce once all the
information and documents have been gathered.
4.3 Business regulation
4.3.1 Reorganisation process: national and international mergers and acquisitions
A. Overview
Mergers and acquisitions are partnering strategies used by businesses to meet current
challenges and to take advantage of the opportunities afforded by the new European
framework.
The Law on structural changes to companies (March 2009) unies Spanish law on the subject
of mergers and, in certain aspects, it differs from European Union regulations, since the
Spanish law envisages new methods and simplies certain procedures.
It introduces a new regulatory framework for structural changes to companies (alterations of
a companys legal form, mergers and spin-offs; transfers en bloc of assets and liabilities; the
transfer of the registered ofce abroad), and establishes a common legal framework for all
companies in Spain.
Likewise, it regulates cross-border mergers for the rst time, by transposing Directive 2005/56/
EC into Spanish law and, specically, regulates mergers between Spanish and non-EU
companies.
B. National and international mergers and other structural changes to companies
Structural changes are those alterations of a company that go beyond the basic amendments
of the companys by-laws and affect the equity structure or corporate form of the company.
These structural changes which Spanish companies are able to undertake are, mainly, the
alteration of a companys legal form, mergers and spin-offs; transfers en bloc of assets and
liabilities and the transfer of the registered ofce abroad.
1. Alteration of a companys legal form.
The alteration of a companys legal form is a structural modication whereby a company
adopts a different legal structure while preserving its legal status.
In addition to further legal requirements, the alteration of a companys legal form requires
a resolution of the General Meeting. This resolution has to be published in the Ofcial
Gazette of the Mercantile Registry and in an important newspaper (however, the resolution
does not have to be published if an individual notication of the resolution is sent to all the
shareholders and creditors).
Afterwards, the resolution is executed as a public deed and must be recorded at the
appropriate Mercantile Registry.
2. Mergers.
There are a number of ways to acquire a company, other than simply purchasing it, one of
which is a merger with another company.
There are two main types of merger: merger by absorption, and merger by setting up a new
company. The merger by absorption entails the acquisition of one company by another. In
this case, the company that is taken over is wound up and its assets become the property of
the company that takes it over.
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On the other hand, two or more companies may join forces to establish a new company.
The original companies are wound up and their assets become the property of the newly-
created company.
Mergers between companies quoted on the stock market are sometimes carried out by
means of a public takeover bid, whereby a company publicly announces its intention to
acquire a number of shares in another company, allowing it to take control of that company.
Depending on the industry or activity in which the companies are involved, mergers may
be horizontal (between companies competing in the same industry), vertical (a company
merges with the company which supplies its raw materials, for example, or with the
company that distributes its nal products) or conglomerates (merger between companies
which do not have any connection with each other, with the aim of sharing services such as
management, accounting, etc.).
In order for a merger to take place, the boards of directors of all the companies involved
must approve the corresponding draft terms of merger . After the required time has elapsed
to allow creditors to express their right of objection (one month), only two procedures need
be carried out to make the merger ofcial:
formalising the merger resolutions in a public deed before a notary public, and
registering the said public deed at the corresponding Mercantile Registry.
Finally, it should be highlighted that not only intra-EU cross-border mergers but also
international cross-border mergers are regulated for the rst time in the Spanish Law on
structural changes to companies.
3. Spin-offs.
The spin-off of a company is a structural change by means of which a part of a company (or
the whole company) is divided into two or more parts and these parts are transferred to a
new company or to an existing company. The shareholders of the company carrying out the
spin-off would receive a number of shares of the beneciary company in proportion to the
number of shares they own in the original company.
4. Transfers en bloc of assets and liabilities.
Through a transfer en bloc of assets and liabilities, a company may transfer all of its assets to
a partner or to a third party, for a fee which must not include stocks, shares or membership
fees of the assignee.
5. Transfer of the registered ofce abroad.
The transfer of the registered ofce of a Spanish company abroad is possible and, likewise, a
foreign company may transfer its registered ofce to Spain.
C. Acquisition of companies
Another alternative to be considered when deciding to wind up a business is the sale or the
transfer of the business. This type of transaction allows the seller to receive a nancial return
on the investment and work put in, while maintaining economic activity and saving jobs. The
buyer, on the other hand, acquires a business that is up and running.
The sale and transfer could be performed through a sale of the shares of the company or
through the sale of the assets and goodwill comprising the business (thus attempting to leave
the debts with the company).
The sale of shares is a way to indirectly acquire all the components of the business of a
company (assets and liabilities, rights and obligations). On the other hand, through the
purchase of assets, the purchaser acquires all or a portion of the elements that make up
the business of the company (assets and rights), whereas, where possible, the liabilities and
obligations are excluded.
The acquisition of the business assets and goodwill entails peculiarities that, under certain
circumstances, make this transaction more complex than the acquisition of the companys
shares:
- The acquisition of certain rights, such as the rights assigned by the seller under certain
agreements, may require the other partys consent to the transfer.
- The transfer of the clients goodwill could be difcult in certain situations.
- The transfer of rights may lead to a worsening of nancial conditions (e.g. rent increases for
the lease of premises).
- Impossibility of transferring certain rights held by the seller (permits, licenses, authorisations,
subsidies held by the seller, etc.).
Should an individual or a legal entity wish to purchase a company, the following steps must be
met:
1. Qualifying round.
The seller may prepare a sale prospectus which is a document showing the actual situation
of a company, its assets and liabilities, etc. This prospectus enables the buyer to conduct a
limited nancial assessment of the company, to establish its real value and proceed with a
bid at a fair price.
During this qualifying round, the buyer has access to condential information about the
seller and thus both parties should enter into a non-disclosure agreement (NDA) to make
sure that the buyer does not use condential information about the seller for purposes other
than assessing its interest in acquiring the company.
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Finally, this qualifying round may lead to a memorandum of understanding (MOU)
being entered into by the parties. This MOU expresses a convergence of will between the
parties, indicating an intended common line of action. In some cases, depending on the
exact wording, MOUs can have the binding power of a contract (although in Spain, this
enforceability has been argued).
To obtain such a prospectus, as well to assess or even participate in the complex process of
buying a business, prospective buyers and sellers can get in touch with companies offering
professional intermediation and advice on mergers and acquisitions.
2. Due diligence review process.
Afterwards, the parties may start a due diligence review process whereby the buyer
examines the nancial, legal, tax and labour-related aspects of the potential target (and
during this process, the buyer may be able to identify any deal breaker issues).
The ndings of the due diligence enable the buyer to obtain a favourable position in the
negotiation of the purchase agreement (the issues arising as a consequence of the due
diligence review may affect the purchase price, the payment conditions or the guarantees to
be requested from the seller).
In addition, this due diligence review process is useful for determining the scope of the
representations and warranties of the purchase agreement.
3. Purchase agreement.
Finally, the seller and the buyer enter into a purchase agreement, the terms and conditions
of which vary depending on whether the buyer is acquiring the shares of the target or the
assets and other rights of the target.
The main aspects to be taken into consideration when acquiring a company (either its
shares or its assets) are:
The price and terms of payment.
The sellers liability.
Representations and warranties.
The sellers guarantees.
Under certain circumstances, the parties may sign the purchase agreement, but the
transaction (the acquisition of the ownership of the target and the payment of the purchase
price) may be completed after the conditions precedent agreed upon between the parties
have been fullled (e.g. authorisations from public authorities or compliance with specic
obligations set forth in the purchase agreement).
D. Anti-trust matters
Mergers and acquisitions of a certain size (in terms of turnover and / or market share) must be
reported to the Spanish National Competition Commission for authorisation. This process aims
to avoid mergers and acquisitions that could jeopardize free competition.
The Spanish National Competition Commission (Comisin Nacional de la Competencia) is
the government agency in charge of ensuring and promoting effective competition in Spanish
markets and consistent enforcement of the Competition Law.
When turnover and / or market share breach certain thresholds, the merger or acquisition
must be authorised by the European Competition Authority.
4.3.2 Foreign investments in Spain
Many years ago Spain liberalized its foreign investment rules to attract foreign capital from
(i) non-resident individuals (Spanish nationals or foreigners domiciled outside Spain); (ii) legal
entities with registered address outside Spain; and (iii) public agencies of foreign countries.
Foreign investments must generally be notied to the Spanish authorities after they have
been made, except in the cases of (i) investments from tax havens, which generally must be
declared to the Investments Registry of the Ministry of Economy and Finance in advance;
and (ii) foreign investments in activities directly related to public order, national security and
public health systems, and real estate property investments for diplomatic missions by states
that are not EU Member States, which must be previously approved by the Spanish Council of
Ministers.
Certain foreign investments in Spain below 3,005,060.52 do not need to be reported unless
the investment comes from a tax haven.
Regulated investments in Spain. These are:
1. Investments in Spanish companies (such as the incorporation of Spanish subsidiaries and the
acquisition of shares of Spanish companies).
2. The setting up of branches of foreign companies in Spain.
3. The acquisition of securities that by their nature give the owner the right to participate in
the share capital or carry voting rights in a Spanish company.
4. Investments in mutual funds registered in the Register of the Spanish National Securities
Market Commission.
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5. The acquisition of property situated in Spain when the total amount exceeds
3,005,060.052, or for any amount, in the case of investments made from tax havens.
6. Incorporation of or participation in cooperatives, joint property or foundations, when the
total amount exceeds 3,005,060.052, or for any amount, in the case of investments made
from tax havens.
In general terms it is sufcient for the investment to be reported to the Register of Foreign
Investment of the Ministry of Industry, Tourism and Trade after completion, for administrative
and economic purposes only. The declaration must be made within one month from the date
the investment was made.
- If the investment is made before a notary public, the term of one month will be counted
from the date of execution of the investment before the Spanish notary public.
- In case of transactions related to securities not traded in secondary markets deposited at a
depository or administrative entity, the term of one month will be counted from the date on
which the deposit is carried out.
- In case of acquisition of registered shares, the term of one month will be counted from the
date of the registration in the book of registered shares.
- For investments from a country that is treated as a tax haven, a declaration has to be made
beforehand, which will be valid for six months from the date of submission. However, if the
investment is not carried out within the timeframe of six months, a new declaration must be
submitted before an investment can be made. Subsequently, when the investment is made,
the investment must be notied.
Foreign investments not mentioned above are deregulated, and therefore, need not be
notied to the Spanish authorities.
However, any investments carried out in the sectors of air transport, radio, minerals
and mineral raw materials of strategic interest, mining rights, television, gaming,
telecommunications, private security, manufacturing, trade or distribution of weapons and
explosives for civil use and activities related to national defence, must comply with specic
legislation.
The Directorate-General for Trade and Investments of the Ministry of Industry, Tourism and
Trade can require Spanish companies with foreign shareholders and Spanish branches of
foreign entities to le an annual report on the status of their foreign investments.
Also, Spanish branches of foreign companies are required to submit annual reports regardless
of the amount of their share capital or net equity.
Also, S.L.s with foreign investments are obliged to declare the changes in these investments
by lling the corresponding form at the Directorate-General for Trade and Investments of the
Ministry of Industry, Tourism and Trade, if they meet any of the following requirements:
- Companies with a share capital or net equity higher than 3,005,060.052, provided that:
a. Foreign investors hold 50% or more of their share capital; or
b. One of the foreign investors holds 10% or more of their share capital or of their voting
rights.
- Spanish holding companies when the foreign investors hold 50% or more of the share
capital or a single foreign investor holds 10% or more of their share capital or their voting
rights.
The Directorate-General may also require all those obliged to report foreign investments to
provide the authority with all the necessary information regarding the notication and status
of the foreign investment.
The Spanish Council of Ministers may, however, change the regime applicable to foreign
investments and apply certain rules and procedures for investments in Spain, whereby
government approval from the Council of Ministers must be obtained to carry them out, also
applicable to takeovers by a foreign investor of any large economically signicant Spanish
enterprise. To date, the Council of Ministers has restricted foreign investments in Spain in
matters related to national defence, such as the production or marketing of arms, munitions,
explosives and other armaments.
In the case of listed companies: (i) acquisitions by non-residents of more than 5% of their
share capital or (ii) acquisitions of less than 5% that enables the investors to form part of the
companys managing bodies require prior approval from the Directorate-General.
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5. Corporate Governance
5.1. Overview
Corporate governance is the set of processes, customs, policies, laws, and institutions
affecting the way a corporation is managed, administered and controlled. In Spain, corporate
governance regulations are aimed at listed companies; they contain recommendations and
mandatory regulations included in the Code of Good Corporate Governance of the Spanish
National Securities Market Commission (CNMV) approved in May 2006. Companies may
also create and adopt their own corporate governance policies.
However, other regulations regarding corporate governance are set forth throughout the
Spanish corporate legal system.
Expectations in Spain and on the part of international institutional investors for good
governance and related matters are increasing, and refer to matters such as those concerning
the board of directors of a company, the creation of standing committees and the increase in
transparency regarding the reports on the companys activities and composition.
5.2. Appliance and compliance
Spanish corporate governance legislation is mainly focused on:
1. Ensuring the basis for effective corporate governance in companies;
2. The observance of shareholders rights (i.e. attendance and voting rights at general
meetings).
3. The observance of the control of the company exercised by the shareholders;
4. The role of shareholders at the companys general meetings in accordance with good
corporate governance;
5. The non-discriminatory treatment of shareholders;
6. The disclosure and transparency of the companys managing bodies, such as the board of
directors and general meetings;
7. The composition and responsibilities of the board of directors;
8. The regulation, according to good corporate governance practices, of the committees
appointed by the board of directors; and
9. The regulation of the companys audit committee.
In Spain there is a tendency for shareholders and members of the board of directors of a
company to follow the principles set forth in the Code of Good Corporate Governance and in
Spanish legislation.
Consequently, those responsible for disclosing information (accurately and faithfully) are the
company and its directors.
Therefore, the functions of the members of the board of directors in relation to corporate
governance are (i) to pursue the companys object and management and to adopt all
necessary means therefor and (ii) to monitor and control how executives and ofcers achieve
the companys purposes and pursue its interests.
The Code of Good Corporate Governance recommends rules be set forth for the appointment
of directors and for the updating of their personal / professional information, and that a
mechanism be established to enable the board to function regularly and responsibly.
Spain is currently updating the role of employees in corporate governance in line with the
EC recommendation dated 15 February 2005 for supervising the internal audit function and
reviewing the risk management system. In this sense the company can charge employees with
reporting irregularities.
Listed companies in Spain must provide the market with information / documentation on the
compliance with good corporate governance principles: specically an annual nancial report
within four months from the closing of the business year including (i) the annual nancial
statements and (ii) the directors report (which includes the corporate governance report)
reviewed by its auditors.
The annual report on corporate governance should contain (i) information on the ownership
structure of the company; (ii) the management and administrative structure of the company;
(iii) any related-party transactions between the company and its shareholders and directors
and ofcers and intra-group transactions; (iv) information on the risk control system; (v)
the rules for general meetings; (vi) details on compliance with corporate governance
recommendations and any reasons or explanations for any non-compliance with certain
aspects and (vi) a description of the risk monitoring and internal management system
regarding the transfer of nancial information.
Good corporate governance is also particularly important to shareholders and members of
the boards of directors of unlisted companies. In Spain, a major step forward has been taken
in the guidance to providing a practical and pragmatic corporate governance framework for
unlisted companies. However, how good corporate governance principles should be applied
depends on each companys circumstances and on the judgment of its governing body.
Deloitte can, pursuant to Spanish and international provisions for corporate governance,
assess companies established in Spain for compliance with good corporate governance
principles and expectations and prepare or review the companys corporate governance
structure.
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6. Accounting and auditing
6.1 Overview
It is clearly best practice for a new business to keep detailed records of all the transactions it
carries out and, for a company, this is a legal requirement. As a general rule, this information
must be registered at the Mercantile Registry corresponding to the companys place of
business.
For any company other than the very smallest, this information must be in the standard
company account format provided for in the Spanish National Chart of Accounts (2007), and
these accounts must be audited.
A nancial audit must necessarily be performed by a registered auditor or audit rm (such
as Deloitte) and the related report must be issued in accordance with the requirements and
provisions of the Spanish Audit Law. An audit consists of verifying and deciding whether the
nancial statements present fairly the equity, nancial position and results of operations of the
audited entity in accordance with the regulatory nancial reporting framework applicable to
it. Where applicable, an audit also includes verifying that the accounting information in the
directors report is consistent with that contained in the nancial statements.
6.2 Reporting requirements
a) Separate nancial statements
The format and content of a companys annual nancial statements (commonly known in
Spain as separate nancial statements) are governed mainly by the Spanish Commercial
Code and the Spanish National Chart of Accounts.
Spanish accounting standards are broadly consistent with International Accounting
Standards, although there are some differences.
The nancial statements must be authorised for issue by the companys directors within
the three-month period following the reporting date. These nancial statements must
subsequently be approved by the shareholders at a general meeting and registered at the
corresponding Mercantile Registry.
The nancial statements consist of a balance sheet, an income statement, a statement that
reects the changes in equity during the year, a statement of cash ows and notes to the
nancial statements. The structure and content of these documents are governed by the
Spanish National Chart of Accounts.
Much of the detail that is required can be disclosed in the notes accompanying the nancial
statements, but certain specic items must be shown on the balance sheet or income
statement, as appropriate.
Classications at a broader level of a companys business, such as activities in different
business segments or geographical areas must generally be shown separately to show their
respective contributions to revenue. Specic transactions with related parties must also be
disclosed.
A company must disclose in the notes to the nancial statements the accounting policies
applied, the key factors taken into account by management when measuring and estimating
uncertainty and representations as to whether or not errors have been corrected in the year
or whether or not there have been changes in the application of accounting policies.
The nancial statements must be accompanied by a directors report prepared by the
companys directors. This report must contain, inter alia, a fair presentation of the
companys business performance and situation and a description of the main risks and
uncertainties facing it.
Specialised enterprises such as insurance companies, banks and other nancial institutions
are subject to specic requirements. In addition, SMEs may exclude certain disclosures from
their nancial statements and, in certain cases, may apply simplied accounting policies.
b) Consolidated nancial statements
A group of companies whose parent is a Spanish company may, if certain requirements
are met, be obliged to issue consolidated nancial statements. In this case, the group may
choose between issuing its consolidated nancial statements in accordance with Spanish
accounting principles and issuing them in accordance with International Financial Reporting
Standards (IFRSs). This choice is not available to listed groups, which must necessarily apply
IFRSs.
Except in certain specic circumstances, a company is obliged to prepare consolidated
nancial statements when for two consecutive years at least two of the three following
limits are exceeded by the group taken as a whole:
Assets Revenue
Average number of
employees
11,400,000 22,800,000 250
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6.3 Accounting principles and standards
The accounting principles and standards contained in the Spanish National Chart of Accounts
must lead a companys nancial statements to present fairly its equity, nancial position and
results of operations. For this purpose, the companys transactions must be accounted for
on the basis of their economic substance and not only on the basis of their legal form. There
are no detailed guidelines on fair presentation in the accounting standards and, therefore,
professional judgment must be applied.
The nancial statements must be worded clearly so that the information provided is
comprehensible and useful for the users thereof when they are taking their business decisions.
As a general rule, the nancial statements are prepared in accordance with the going-concern
principle of accounting. Economic events are recognised when they occur, regardless of when
the related payments or collections are made. Also, accounting policies must be applied on a
consistent basis over time, and when applying them company management must be prudent
in the estimates and measurements to be made in conditions of uncertainty.
Lastly, asset and liability items and income and expense items must not be offset.
6.4 Audit requirements and standards
If certain legally established limits are exceeded, a companys nancial statements must be
reviewed by registered auditors.
The auditors must be appointed by the companys shareholders at a general meeting before
the end of the period to be audited for an initial period of not less than three years and not
more than nine. The auditors may be re-appointed by the shareholders for maximum three-
year periods once the initial period has elapsed.
The shareholders may not revoke, without just cause, the auditors appointment before the
end of the period for which they were appointed.
The auditors must check whether the nancial statements present fairly the companys equity,
nancial position and results of operations and, where applicable, whether the accounting
information in the directors report is consistent with that contained in the nancial
statements for the year. As a result of their work, the auditors must issue a detailed report,
in conformity with the Spanish Audit Law. The auditors will have a minimum period of one
month from the date on which they are provided with the nancial statements authorised for
issue by the directors in which to present their report.
Audit procedures are established by rms individually, based on the guidelines of accounting
bodies and the law, supported by auditing standards. Auditors commonly devise tests and
analyses to assess the effectiveness of a companys internal control systems before performing
further tests on the nancial statements under review. Statistical sampling, circularisation, the
use of computer test packs and physical inspection are just some of the procedures commonly
used.
6.5 Frequently asked questions
1. What type of organisations must be audited?
Limited liability companies (including both private and public limited liability companies)
must be audited when for two consecutive years at least two of the three following limits
are exceeded:
Assets Revenue Average number of
employees
2,850,000 5,700,000 50
In addition, any organisations can be audited if the shareholders or owners so wish.
2. How are the audit fees calculated?
Audit fees are based on the time spent on the work calculated using rates which reect the
expertise of the professionals involved. The hourly rates are set by each professional audit
rm.
The time taken to conduct an audit is a reection of both the standard of the companys
internal control systems and accounting efciency and its size.
The fees for audit services must be established before the auditors start their work and must
be set for the whole period in which the work will be performed.
3. What sort of audit procedures are used? How should the company prepare for the audit?
The company should always decide on its own timetable for the production of audited
nancial statements, although there are time limits provided for by Spanish corporate law.
The timetable details can be discussed by the company and the auditors in order to deliver a
cost-effective and efcient product. Information needed by the auditors in order to express
their opinion has to be furnished by the company and the timetable should allow for this.
The accounting policies and procedures necessary to implement them need to be agreed at
an early stage and all problems should be addressed by an executive with the appropriate
level of authority within each organisation.
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4. When must the nancial statements be registered?
The nancial statements must be registered at the corresponding Mercantile Registry within
a period of one month from the date of their approval by the shareholders at a general
meeting.
Failure by the corresponding managing body to meet its obligation to le the nancial
statements within the legally established period will mean that none of the companys
documents will be registered at the Mercantile Registry while this situation continues to
exist. The company will also be ned, at a varying amount, for this situation.
5. Must companies keep mandatory books of account?
Yes. All companies must keep orderly accounting records that are suitable for their
business activities and which must make it possible to monitor all their transactions on a
chronological basis and to periodically prepare balance sheets and inventories. For this
purpose, companies must necessarily keep inventories and nancial statements books and a
journal.
As a general rule, these books have to be kept by the traders, together with their business
correspondence, documentation, vouchers and receipts, for six years from the date of the
most recent entry posted therein.
The accounting records must be kept either directly by the traders or by other duly
authorised persons.
6. Are there major differences between generally accepted accounting principles in China and
Spain?
The answer in brief is yes. A discussion of all the differences falls outside the scope of this
book, but it should be borne in mind that accounting standards around the world are
not the same and timely discussions with nancial advisers are recommended so that the
specic circumstances of any particular company can be highlighted and discussed.
7. Can Deloitte help me set up an accounting system, give me tax and management consulting
advice and generally guide me on business matters?
Yes, it can assist in these ways, provided that its professional independence is maintained.
A Chinese company may initially need technical assistance or more general advice. Deloitte
can offer specic assistance on the establishment of the accounting and reporting systems,
advice on computer systems, training assistance and the temporary loan of staff.
7. Taxation
Spain has one of the most favourable frameworks for establishing a platform for international
investments. The main attractiveness of Spanish tax jurisdiction from an investment
perspective could be summarised as follows:
- The participation exemption regime, for foreign source dividends and capital gains.
- The special tax regime for holding companies.
- The wide range of tax treaties: Spain is a strategic country in which to invest taking into
account its tax treaties with countries all over the world. In particular, Spain is the leading
European country in terms of the number of tax treaties signed with Latin American
countries.
- Its attractive location for carrying out research activities taking into account the available
patent box regime and the tax credits applicable to R&D activities (up to 25% with an
additional 17% tax credit on some qualifying expenditure).
- Attractive jurisdiction for individuals moving from other jurisdictions under certain
circumstances.
All these issues are detailed in the following sections.
Additionally, Spain is one of the 27 EU Member States. EU tax policy supports the Unions
principles of the single market and free movement of capital. Tax policy in the European
Union (EU) can be classied in two main categories: direct taxation, which remains the sole
responsibility of Member States; and indirect taxation, which affects the free movement of
goods and the freedom to provide services. The measures undertaken by Member States with
regard to direct taxation consist mainly of the coordination of their policies in order to prevent
tax avoidance and double taxation as well as to provide the Member States with a fair tax
framework within. From an indirect tax perspective, VAT has been harmonised and common
VAT rules have been implemented.
To sum up: EU tax policy benets European residents, since it ensures an internal European
market and guarantees that competition between Member States is not distorted by
differences in indirect taxation rates and systems. Measures have also been adopted to
prevent the adverse effects of tax competition if companies transfer taxable bases between
European Union Member States.
From the Spanish point of view, as detailed below, business activities would be principally
subject to the Corporate Income Tax Law, which, in general terms, taxes prots obtained at a
rate of 30%.
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7.1. Overview of Spanish taxation
Regarding the functional structure of Spanish taxation, there are three different levels: State
taxes, regional (autonomous community) taxes and municipal taxes. The most signicant taxes
are levied both at the national level (although some of the national taxes are managed by the
Autonomous Communities) and municipal level (by the municipal authorities).
The Spanish tax system is organised around the concept of taxes and charges (Tributos),
which can be broken down as follow:
- exes ("lmpuestos").
- Lev|es ("eses").
- Spec|e| contr|but|ons ("Contr|buc|ones espec|e|es").
Neither levies nor special contributions are addressed in this document, since they are levied
on public services or on individual benets derived from public services.
At state level, taxes are managed by the State Tax Agency (Agencia Estatal de Administracin
Tributaria -AEAT-), an autonomous body within the Ministry of Economy and Finance.
National State taxes devolved to the regions or regional taxes are administered by the regional
governments. Local taxes are usually managed by municipal governments, unless they do not
assume these powers- in which case they are managed by the AEAT.
The provinces of the Basque Country and Navarre collect most of the taxes accrued in their
territories and remit a portion to the central government, under an agreement signed every
ve years.
7.2. Principal direct taxes
7.2.1. Corporate income tax
Residence
A company is resident in Spain if it is incorporated in Spain, has its registered ofce in Spain or
its effective management is in Spain.
An entity resident in a tax haven or a no-tax jurisdiction may be presumed to be a tax resident
in Spain if its main assets consist of real property or rights located or exercised in Spain or
its principal place of business is in Spain, unless the entity can demonstrate that its effective
management and administration are carried out in the other country and there are valid
business reasons for establishing the entity in the tax haven or no-tax jurisdiction other than
the management of shares or other assets.
Taxable scope
From a general perspective, all Spanish entities with separate legal personality (i.e. public and
private limited liability companies and partnerships) and foreign entities are liable for Spanish
corporate income tax.
Spanish resident companies are subject to corporate income tax on worldwide prots and
capital gains; whereas non-resident companies are taxed only on Spanish-source income and
gains, subject to the provisions of a double taxation treaty where applicable. Branches are
generally taxed in a manner similar to subsidiaries.
Rates
The standard 30% corporate income tax rate applies to the worldwide prots of resident
companies.
A reduced rate of 25% applies to the rst 300,000 of taxable prot for small and medium
enterprises (i.e. companies with annual revenue of less than 10 million), with the 30% rate
applying to taxable prots exceeding 300,000.
No distinction is made between the tax rates on distributed and reinvested prots. However,
a deduction for reinvested extraordinary prots may apply, according to which, if certain
requirements are met, the nal rate applicable to reinvested prots is 18%.
Special rates apply to certain companies, such as listed collective investment institutions,
including real estate investment trusts (1%), certain co-operatives (20%) and entities involved
in oil and gas research and exploitation (35%). Special regimes also exist for Spanish and
European Economic Interest Groupings, temporary business associations, private equity
companies and funds and industrial and regional development companies.
Taxable prot
Taxable prot in Spain is comprised of total revenue less deductible expenses and is generally
computed on the basis of the P&L statement as adjusted for tax purposes.
- Ord|nery bus|ness |ncome
Capital gains are treated as ordinary business income taxable at the applicable tax rate
(either the standard 30% or the aforementioned progressive 25%-30% rate for small and
medium enterprises whose revenue in the previous tax year was less than 10 million).
However some capital gains could be exempt (i.e. under the participation exemption
regime, capital gains derived from the sale of an ownership interest owned in a non-resident
company -except these located in tax havens- by a holding company provided that certain
requirements are met).
- Leduct|b|e expenses
Business expenses are deductible if they are directly linked to economic activities performed
by the taxpayer and are properly recorded and documented. Payments of real estate tax
and local surcharges on these taxes are deductible when determining the corporate income
54
tax base, as are interest and royalty payments. Restrictions are imposed on the deduction of
expenses incurred on payments made to entities or persons resident in territories deemed to
be tax havens.
Non-deductible expenses include corporate income tax, criminal and administrative nes
and penalties, surcharges for the late payment of taxes, gifts, provisions to internal pension
allowances, amounts directly or indirectly representing a return on equity and expenses for
services related to transactions performed with persons or entities resident in tax havens
unless the taxpayer proves that the expense relates to a transaction that was actually
performed.
- Leprec|et|on end emort|set|on
The allowable depreciation must be calculated taking into account the useful life of the
asset and its normal use as established in the Corporate Income Tax Regulations.
In general terms, depreciation is deductible provided that it is duly booked and its amount
corresponds to an effective decline in value.
Under the Corporate Income Tax Law, depreciation is considered to be effective when it is
determined:
On the basis of the rates and limits established in ofcial tables.
On the basis of the declining balance method: the declining balance method is applicable
to all assets except buildings and furniture, and allows depreciation to be shifted towards
the early years of the useful life of an asset.
On the basis of the sum-of-the years-digits method: under the sum-of-the-years-digits
method, the sum is determined on the basis of the depreciation period established in
ofcial tables.
On the basis of a plan approved by the tax authorities.
Depreciation/amortisation of property, plant and equipment and intangible assets is based
on historical cost, using straight-line rates chosen by the company within the limits set for
each industry by the Ministry of Economy and Finance.
The ofcial tables specify the following annual rates: commercial buildings, 1%-2%;
industrial buildings, 1.47%-3%; ofce furniture, 5%-10%; machinery, 5.55%-12%; vehicles,
7.14%-16%; computers, 12.5%-25%; and software, 16.7%-33%. Leased assets are subject
to the same depreciation rates as other assets.
Depreciation/amortisation may be taken on tangible and intangible assets. However, in
the case of intangible assets, Spanish GAAP were adapted to IFRSs, applicable to reporting
periods beginning on or after 1 January 2008. The main changes made to Spanish GAAP
relate to the impairment of intangible assets.
Intangible assets with a nite useful life qualify for annual amortisation limited to 10%
for the period of time in which they give rise to the obtainment of income, provided they
are acquired for valuable consideration from an unrelated entity. Software licenses are
an exception to the general intangible asset rule, as they are amortised on the basis of a
specic table provided for in the related tax regulations.
Intangible assets with indenite useful lives are not amortised for accounting purposes,
although a 10% amortisation correction may be applicable for tax purposes, provided that
certain requirements are met.
Similarly, goodwill is not amortised according to the Spanish GAAP. From the tax
perspective, 5% of the original amount of the goodwill may be deducted provided such
goodwill was acquired for valuable consideration from an unrelated entity and a reserve for
the amount deducted is set up.
Additionally, the Corporate Income Tax Law allows accelerated or even unrestricted
depreciation for certain investments, for small and medium enterprises, etc.
- L|v|dends
Dividends received from resident or non-resident companies are subject to corporate income
tax and qualify for double (both domestic and international) taxation tax credits.
When dividends are paid by a Spanish company, a tax credit of up to 100% could be
applied, provided that the dividends are paid by entities in which an interest of at least
5 percent is held, provided that this interest has been held uninterruptedly during the
one-year period prior to which the distributed income becomes claimable or, failing that,
be maintained subsequently for the time required to complete that period.
When the dividend is paid by a non-resident entity, double taxation tax credits are
deductible for any foreign tax paid in the country of the payor. (See Double taxation tax
relief).
Alternatively, an exemption for foreign source dividends could be applicable provided that
certain requirements are met. (See Participation exemption).
56
- Losses
Operating losses may be carried forward for up to 15 years, starting from the rst business
year in which prots are earned in the case of newly incorporated entities. The carry back of
losses is not allowed.
Notwithstanding the above, the Spanish government issued a decree on 19 August 2011
(Royal Decree-Law 9/2011) that makes temporary changes to the corporate income tax,
including a restriction on the offset of net operating losses (NOLs) carried forward.
The decree was published in the Ofcial State Gazette on 20 August and applies as from
that date.
The corporate income tax changes are as follows:
The decree introduces a temporary limitation on the offset of NOLs carried forward. For
the years 2011, 2012 and 2013, companies with a turnover between 20 million and
60 million will be able to offset 75% of taxable income with NOLS brought forward and
companies whose turnover exceeds 60 million will be able to offset 50%. Previously,
there was no restriction.
Additionally, the period for offsetting tax losses from previous years is extended from 15
years to 18 years (effective for tax periods beginning as of 1 January 2012). This 18-year
extension applies regardless of whether tax losses were incurred in periods beginning in
2011, 2012 and 2013, or in subsequent or prior years. This extension of time is applied to
all taxpayers.
Tax incentives for certain investments and activities
- 0nrestr|cted deprec|et|on
In business years commencing in the period from 2011 to 2015, unrestricted depreciation
can be taken on newly acquired xed assets and real estate assigned to business activities.
This incentive provides for depreciation for tax purposes on a discretionary basis.
- Reduct|on of tex bese due to ess|gnment of certe|n |nteng|b|e fxed essets. "letent box"
The Corporate Income Tax Law provides for a 50% reduction in the tax base relating to
gross revenues arising from the assignment of the right to use certain intangible assets such
as qualifying intellectual property (IP):
Patents, secret formulae or processes, designs or models, plans or rights on information
concerning industrial, commercial or scientic experience.
Know-how.
The following intangible assets are excluded: trademarks, copyright on literary, artistic or
scientic works including lms, publicity rights, software and leases of industrial, commercial
or scientic equipment.
This reduction is not applicable in the tax year following that in which the qualifying IP
income exceeds six times the cost of development. Therefore, the total cost of the IP
development can be recovered substantially in full by applying this incentive.
The IP must be created in-house, i.e. the company developing the intangible assets must be
the same company as that which assigns them.
The assignee must not reside in a tax haven and must effectively use the IP for business
activities. Detailed records of the related income are required.
- ex cred|ts
Tax credits are available for certain activities (i.e. for research, development and innovation
activities -R&D&i-, for environmental investments, for development of information and
communication technologies, assets of cultural interest, professional training, employment
of disabled people, payments to pension plans, etc.) These tax credits allow the deduction
of a rate which ranges from 1% to 25% (+17% on certain qualifying expenses), of the
expenses incurred on the performance of the corresponding activity.
International double taxation relief: ordinary credit method
Spanish domestic law grants a unilateral tax credit to corporate income tax payers for direct
taxes incurred that are similar to Spanish income taxes. Generally, the credit will be granted
for an amount equal to the lower of the tax payable in Spain on the income or the actual tax
incurred by the taxpayer (if a tax treaty is applicable, the tax payable that might arise from it).
In addition to a direct tax credit for foreign income tax paid, a credit for underlying tax also
will be available, i.e. a credit for the tax previously paid by a non-resident payor of dividends
to a Spanish company. This credit is granted for dividends paid by a non-resident subsidiary
in which the Spanish entity held, directly or indirectly, an ownership interest of at least 5%
for at least one year prior to the date on which the dividend becomes claimable or if the 5%
ownership interest is maintained until the one-year period requirement is fullled.
The amount of these credits cannot exceed the tax payable in Spain had the prots been
obtained in Spain.
Unused tax credits may be carried forward for ten years.
58
Participation exemption: dividends and capital gains
Under the Spanish participation exemption regime, dividends received by a Spanish entity that
holds at least 5% of the shares of a foreign entity for a continuous period of at least one year,
with the foreign entity being subject to a tax comparable to Spanish corporate income tax
(a requirement that is considered to be met if it is resident in a country with which Spain has
a tax treaty with an exchange of information clause), not being resident in a tax haven and
obtaining at least 85% of its prots from business activities, are exempt.
Capital gains obtained by a resident company on the sale of shares of a non-resident
company, which are generally taxable in Spain, are exempt if the conditions for the
participation exemption are met. However, anti-avoidance rules may render all or part of the
gains taxable in the case of circular schemes, loss-making companies or mergers.
Where the requirements for the exemption are not met, double taxation could be avoided
through the ordinary credit method.
Other exempt income: Business prots obtained through a permanent establishment
When a resident company obtains business prots through a permanent establishment
abroad, exemption shall be applied if:
- the income derived through the permanent establishment has effectively been subject to a
tax comparable to Spanish corporate income tax. This is deemed to be met if the permanent
establishment is established in a country with which Spain has a tax treaty containing an
exchange of information clause (currently all of its treaties). The exemption, however, is
not granted if the tax authorities prove that the permanent establishment carries out, in
the same market, the same activities that were previously carried out by a Spanish-resident
subsidiary; and
- the permanent establishment is not resident in a tax haven. This requirement is waived if
the permanent establishment is resident in another EU Member State and the taxpayer
proves that it was established in that state for sound business reasons, it carries on business
activities and at least 85% of the income of the permanent establishment has been earned
from the performance of business activities abroad.
If the head ofce has previously deducted losses incurred by a permanent establishment, the
exemption applies only to the prot exceeding the amount deducted.
The exemption is generally applied on a country-by-country basis. In the case of permanent
establishments, however, it is calculated separately for each establishment.
Special regime for international holding companies
There is a special regime for international holding companies (ETVE regime), under which
dividends and capital gains received by an ETVE (i.e. an international holding company) from
its foreign subsidiaries are exempt when the following requirements are fullled:
Dividends and capital gains received by an ETVE from qualifying subsidiaries are exempt from
corporate income tax, provided the requirements for the participation exemption regime
(discussed above) are met.
The ETVE held an ownership interest of at least 5% in the non-resident entity during a
one-year period (even if that period is completed afterwards). The 5% ownership interest
requirement will be deemed to have been met if the stake in the non-resident company
exceeds 6 million.
The regime is available to any Spanish resident entity, provided its company object includes the
management of holdings in non-resident entities and the substance requirement (adequate
resources) to manage this activity is met.
Dividends distributed by the ETVE to a non-resident shareholder will not be subject to
Spanish income tax. Capital gains obtained by that shareholder as a result of the transfer of
the ownership interest in the ETVE will similarly not be subject to Spanish corporate ncome
tax, provided certain requirements are met. If the dividends are distributed to a resident
shareholder, the latter will be entitled to double taxation relief. And if capital gains are
obtained by a resident shareholder, he will be entitled to opt between double taxation relief or
a participation exemption benet.
Transactions between related parties. Transfer pricing
Spanish transfer pricing legislation requires that transactions with related parties be carried
out on arms length terms and that taxpayers prepare transfer pricing documentation.
Spain generally incorporates the OECDs transfer pricing guidelines with respect to valuation
methods. The main methods available for determining market prices are the comparable
uncontrolled price, the cost-plus and the resale price methods. If none of these methods are
applicable, the prot split and the transactional net margin methods should be applied.
Documentation of related party transactions must be kept, with signicant penalties for the
failure to comply with this obligation.
A taxpayer may conclude an advance pricing agreement (APA) with the tax authorities
that entitles the company to: (1) use its proposed method of valuing transactions for four
scal years; (2) value R&D contributions; and (3) establish management expenses. In certain
circumstances, an APA may be rolled back to the prior accounting period.
Thin capitalization
Under the Spanish thin capitalization rules when a companys direct or indirect net interest-
bearing borrowings from non-resident related individuals or legal entities, excluding banks,
are greater than three times the companys capital for tax purposes, the interest accruing
in respect of the surplus should be regarded as dividends for Spanish tax purposes and,
therefore, would not be tax deductible in Spain, and would potentially be subject to Spanish
withholding tax. When applying this rule, the average net interest-bearing borrowings and the
60
capital for tax purposes for the year under review must be used. The capital for tax purposes
consists of the companys equity excluding the prot/loss for the year.
However, these thin capitalization rules are not applicable when the foreign related nancing
is granted by a resident in another EU Member State, provided that that state is not deemed
to be a tax haven for Spanish tax purposes.
However, thin capitalization rules could apply whenever the nancing is indirectly arranged
with a non-EU company, since the EU company would be a mere vehicle for passing through
nancing from a non-EU company to a Spanish entity, giving rise to the applicability of those
rules.
To date, the Spanish Directorate-General of Taxes has issued several rulings regarding back-to-
back loans or guaranteed nancing, and is somewhat sensitive in this regard, in the sense that
it considers situations such as these to constitute indirect indebtedness.
According to the Spanish authorities, indirect indebtedness arises when a non-resident
company related to the Spanish borrower, although not the lender, assumes the risk of any
possible default by the borrower. However, it should be noted that in order to determine
whether the non-resident related company should be obliged to cover the default of the
Spanish borrower, all the facts involved in each transaction should be taken into account (i.e.
the nancial structure of the company or the possibility of that company being involved in an
event of default).
It is important to bear in mind that interest charged by a related party should be valued on an
arms length basis in order to avoid transfer-pricing issues.
Valuing transactions at arms length value has become an important issue since the debt-
equity ratio of 3:1 was eliminated for loans granted by EU residents to their Spanish
associates.
Controlled foreign companies
The control foreign companies (CFC) rules apply when a Spanish taxpayer (entity or
individual) has a shareholding in a foreign entity that is classied as a CFC, and the CFC
obtains certain types of income.
An entity is deemed to be a CFC when:
- it is a non-resident entity (excluding EU residents if the taxpayer can show that the CFC was
set up for valid economic reasons and engages in active business activities);
- the Spanish taxpayer, alone or with related parties, holds a direct or indirect interest of 50%
or more in the capital, equity, results (prots) or voting rights;
- and the foreign tax paid by the non-resident entity on income subject to the Spanish CFC
rules is less than 75% of the tax calculated in accordance with Spanish tax rules.
Only specic categories of income are subject to the CFC rules (in general, passive income),
mainly:
- income derived from the ownership of real property, unless such income derives from the
performance of activities that qualify as business activities for Spanish tax purposes;
- dividend income;
- capital gains derived from real property and shareholdings;
- income derived from the lending of capital;
- income derived from the provision of services and from insurance and nancial activities;
Nonetheless, exceptions to the application of said CFC rules may apply, such as de minimis
rules, income from the provision of certain services and insurance and nancial activities and
certain dividends and capital gains.
Where CFC rules are applicable, the attribution is made on the basis of the percentage of the
Spanish resident's interest in the CFC.
Dividends paid out of prot that has already been attributed under the CFC rules are not
subject to Spanish corporate/personal income tax.
Credits are allowed against Spanish corporate income tax for foreign income tax effectively
paid by the CFC and/or its subsidiaries on income subject to attribution and foreign
withholding tax deducted on dividends paid out of prots previously subject to attribution.
The credit is limited to the amount of the Spanish corporate income tax liability corresponding
to the income subject to attribution. Taxes paid in tax havens may not be credited.
Administration-Filing forms
A companys tax period is its business year. The tax period may not exceed twelve months.
Companies must le a tax return and pay any tax due within the rst 25 calendar days after a
period of six months following the close of the business year.
Corporate income taxpayers are required to make three advance payments of corporate
income tax during the year, in April, October and December. The advance payment may be
calculated by following two methods:
- Applying a 18% rate to the tax due in the previous year;
- Applying a rate equal to ve-sevenths of the corresponding tax rate (for taxpayers taxable at
the standard 30% rate), the prepayment would be 21% on the taxable prot for the period
from the beginning of the tax period to the end of the prepayment period: i.e. from the
beginning of the tax period to 31 March (prepayment for April), 30 September (prepayment
for October) and 30 November (prepayment for December).
62
The latter method is mandatory for taxpayers whose revenue exceeded 6,010,121.24 in the
twelve months before the beginning of the current year tax period. A taxpayer whose revenue
does not exceed that amount can make the advance payment by applying the 18% rate to
the tax payable for the previous year.
In addition, by virtue of Royal Decree-Law 9/2011 the percentage of the corporate income tax
prepayments corresponding to October and December 2011 and the three installments for
years 2012 and 2013 is increased from 21% to 24% for entities with a turnover between 20
million and 60 million, and to 27% for entities whose turnover exceeds 60 million.
Consolidated tax returns
Spain permits the ling of a consolidated income tax return and the offsetting of prots and
losses within the group of Spanish companies (subject to certain limitations).
A group of companies may be taxed on the basis of a consolidated balance sheet, subject
to shareholder agreements at every entity level and subsequent communication to the tax
authorities.
To qualify as a group for such purposes, a Spanish resident company must own directly or
indirectly at least 75% of its Spanish subsidiaries that are subject to corporate income tax
(70% if the companies are ofcially listed on the stock exchange). The parents ownership
interest must be held on the rst day of the tax period in which the consolidated regime
applies and must be maintained throughout the entire tax period. All the companies in the
group must have the same tax period and the reporting period must not exceed twelve
months.
Statute of limitations
The general statute of limitations period is four years from the statutory ling deadline or the
date the return is actually led, if later. Where an amended return is led after the deadline,
the four-year period restarts.
However, when tax losses or tax credits deducted were generated in previous years that had
already become statute-barred, the tax authorities could request the taxpayer to provide
evidence for those losses or credits by producing the related documentation.
Rulings
In general, the Spanish tax authorities can issue binding rulings in advance on the tax
consequences of a proposed transaction.
7.2.2. Personal income tax
Residence
An individual is considered a resident for personal income tax purposes when at least one of
the following requirements is fullled:
- the individual is present in Spain for more than 183 days in a calendar year;
- Spain is the individuals main centre or business base or the place where his/her professional
activities or economic interests are located, either directly or indirectly;
- the taxpayers spouse and dependent children habitually reside in Spain.
Residents in Spain are subject to personal income tax on their worldwide income;
non-residents are subject to tax only on Spanish-source income. This circumstance must
be proved to the tax authorities. Generally speaking, the Spanish tax authorities require
a certicate of residence in another country issued by the tax authorities of that country.
Alternatively, it must be possible to show that (a) he/she has spent 183 days or more of that
year in another country; and (b) the direct and indirect centre of his/her vital and economic
interests or business or professional activities is not in Spain.
An individual who changes his/her residence to a tax haven will not lose Spanish-resident
status in the tax period in which the move is made and in the following four tax periods.
A non-resident individual who is resident in an EU Member State may opt to be subject to
Spanish personal income tax if the individual can demonstrate that his/her habitual residence
is in another EU Member State and that at least 75% of his/her total income during the year
was obtained as salary or professional income in Spain.
Taxable income
There are six types of income for personal income tax purposes:
i. salary income (rendimientos del trabajo);
ii. income from movable capital (rendimientos del capital mobiliario);
iii.property income (rendimientos del capital inmobiliario);
iv. professional income (rendimientos de actividades econmicas);
v. capital gains (ganancias y prdidas patrimoniales); and
vi.imputed income (rentas imputadas). Income is imputed in the following cases:
immovable property, other than a permanent dwelling;
attribution of income;
international scal transparency regime (CFC or ow-through regime);
income from unit-linked insurance policies that do not meet certain legal requirements;
transfer of the rights of publicity; and
income of collective investment institutions (IICs) established in tax havens.
64
All these types of income are treated on the basis of the rules specically applicable to them,
for valuation purposes. Specic expenses are deductible from each type of income.
It should be noted that some income is exempt from personal income tax:
dividends up to 1,500 per year;
qualifying prizes (listed);
certain types of welfare benets and indemnities paid by the government;
mandatory indemnities received as severance pay or for termination of employment up
to the maximum legal amount. The entire amount becomes fully taxable, however, if the
taxpayer is hired within the next three calendar years either by the former employer or by
any associated enterprise under a parent-subsidiary relationship;
indemnities for physical or mental injuries in the statutory amount or under a court order
or an insurance contract;
public scholarships granted for any level of education (including a doctorate) and those
granted by qualifying non-prot organizations regulated in Law 49/2002;
court-ordered child support;
Spanish-source income from sea and/or air transport enterprises (as expressly granted
under international reciprocity arrangements by the Ministry of Economy and Finance);
employment income (limited to 60,100 per year) earned abroad if it has been effectively
taxed in the country of source under a tax comparable to the Spanish tax; and
Once determined, the components of taxable income are aggregated in two main groups as
follows:
the general income is the aggregate of employment income, property income,
professional income and capital gains, including capital gains not included in savings
income.
savings income comprises both (i) income from movable capital (dividends, interest and
monetary return or payment in kind on life or disability insurance contracts); and (ii) capital
gains that arise on the transfer of assets.
Rates
In general terms, Spain levies personal income tax at progressive rates ranging from 24% to
45% (the top rate varies depending on the region of residence).
However, as from 1 January 2010, savings income and capital gains are subject to a at rate
of 19% on the rst 6,000 and of 21% on income exceeding this amount.
Special rates for new residents
An individual who is assigned to work and live in Spain may elect to be taxed as a
non-resident for the rst six years of the assignment. Under such an arrangement, the
individual is taxed at a at rate of 24% on the gross amount of the income (i.e. no deductions
or allowances are granted).
To qualify for the aforementioned non-resident taxation status, several requirements must be
fullled:
- the individual must not have been a tax resident in Spain for the previous ten years;
- s/he must work in Spain for a Spanish tax resident company or a PE of a non-resident
company;
- s/he must not earn tax-exempt income in Spain under the Spanish Non-Resident Income Tax
Law;
- s/he must not earn more than 600,000 of salary income (otherwise, the standard rate will
apply).
Double taxation tax relief
Apart from the exemption applicable to income obtained abroad (see. Taxable income),
foreign taxes paid may be deducted from Spanish tax (limited to the amount that would have
been payable in Spain).
Administration
The tax period for individuals is the calendar year.
Individuals must le a tax return and pay the tax due within six months following the end of
the tax year.
The minimum salary income threshold for ling a tax return is 22,000. However, an individual
with total annual household income of at least 11,200 must le a tax return when income
is paid by more than one employer, and the income received from the second and successive
employers is at least 1,500.
66
7.2.3. Non-resident income tax
Non-residents are subject to Spanish tax only on Spanish-source income. However, this
taxation should be foreseen and allowed by the provisions of a double taxation treaty where
applicable.
A taxpayer who is a non-resident must prove this circumstance to the tax authorities. For this
purpose, the Spanish tax authorities generally require a certicate of residence in another
country issued by the tax authorities of that country.
For individuals, it should be possible to show that (a) s/he has remained 183 days or more
in that year in another country; and (b) the direct and indirect centre of his/her vital and
economic interests or his/her business or professional activities is not in Spain.
Permanent establishment
Based on the existence or non-existence of a permanent establishment in Spain, the
non-resident will be taxed under different rules.
Under Spanish Law, non-resident company and individuals are considered to operate through
a permanent establishment in Spain when she/he/it continuously or habitually uses in Spain
installations or workplaces of any kind in which she/he/it carries on all or part of her/his/its
activity or when she/he/it acts therein through an agent authorised to enter into contracts in
the name and for the account of the taxpayer who uses said powers habitually.
In particular, management headquarters, branches, ofces, factories, plants, warehouses,
shops or other establishments, mines, oil and gas wells, quarries, agricultural, forestry or
livestock operations and any other place of prospecting for or extraction of natural resources,
and building, installation or assembly works with a duration of over six months shall be
considered permanent establishments.
Non-resident entities or individuals acting through a permanent establishment in Spain
When a non-resident acts in Spain through a permanent establishment, she/he/it is taxed on
income from professional activities. These taxpayers are generally subject to the same rules as
those provided for in the Corporate Income Tax Law, with some differences.
However, in determining taxable income, interest, royalties, fees and payments for technical
assistance paid to the head ofce are generally not deductible.
Reasonable executive and general administrative expenses are deductible if they are duly
substantiated, shown in the accounts of the permanent establishment, and relate to the
business operations of the permanent establishment.
Branches are generally taxed in a similar manner to subsidiaries.
This taxation should be foreseen and allowed by the provisions of a double taxation treaty
where applicable.
Non-resident individuals or entities not acting through a permanent establishment in Spain
A non-resident not acting through a permanent establishment in Spain is taxed on an income-
by-income basis.
Spanish-source income, which includes:
- income from professional activities;
- dividends, interest, royalties and other income from movable capital when paid by a resident
of Spain;
- property income earned in Spain; and
- capital gains from the disposal of movable or real property if located in Spain and securities
issued by Spanish residents.
These types of income are taxed in Spain as follows, unless an applicable tax Treaty provides
for a lower rate.
- Dividends paid to a non-resident are subject to 19% withholding tax.
- Intercompany dividend payments made to residents of other EU Member States are exempt
from Spanish withholding tax (due to the implementation of the EC Parent-Subsidiary
Directive) if the foreign parent has held at least 5% of the share capital of the Spanish
company for one year before dividends are declared or if the one-year holding period is
subsequently completed. Said exemption does not apply when the majority of the voting
power at the parent is held by non-EU residents, unless the parent effectively carries on a
business activity related to that of its subsidiary, effectively manages its subsidiary and has
the appropriate human and material resources, or was incorporated for valid economic
reasons and not just to benet from the exemption.
- Interest paid to a non-resident is subject to 19% withholding tax unless a lower rate applies
under a tax treaty or the payment is made to a resident of another EU Member State.
Interest on bank deposits and government bonds is exempt.
- Royalties paid to a non-resident are subject to 24% withholding tax unless the rate is
reduced by a tax treaty or the royalties qualify for exemption under the EC Interest and
Royalties Directive. The Directive is not fully applicable for royalties until 1 July 2011 (prior to
this date, the withholding rate is 10% for qualifying EU entities).
- Capital gains obtained in Spain by non-residents are, in general, subject to 24% withholding
tax unless lower rates are allowed under a tax treaty.
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- A 19% branch remittance tax applies to after-tax prots paid to a head ofce (in addition to
the normal corporate income tax rate). This tax does not apply to branches of EU entities or
entities based in a country that has signed a tax treaty with Spain (unless the treaty provides
otherwise). There is a special tax on estates owned by non-resident entities.
- Non-resident entities that own or control Spanish real property are subject to a 3% special
tax on the ofcially appraised value of the property. This tax does not apply to foreign states,
public institutions, international bodies, entities covered by a tax treaty (with an exchange of
information clause), entities engaged in business activities in Spain, companies listed on the
secondary stock market or non-prot entities.
7.2.4. Inheritance and gift tax
Inheritance and gift taxes are imposed on all Spanish resident heirs, beneciaries and
recipients at rates ranging from 7.65% to 34%. However, in most regions, the tax has been
substantially reduced for resident individuals by a 99% allowance in favour of descendants,
ascendants and spouses.
This tax is also imposed on non-residents in Spain receiving assets (e.g. estates) located in
Spain.
7.3. Principal indirect taxes
7.3.1. VAT
Value added tax (VAT) is an indirect tax, which is imposed at every stage of production,
distribution, or delivery of goods or services. VAT is designed to tax nal consumption by
taxing the value added at each stage of the manufacturing and selling process.
The VAT charged by the seller to his customers is called output VAT and the VAT paid to
his suppliers of goods and services used for his business activities is called input VAT). The
taxpayer can deduct input VAT from the output VAT and consequently the tax is borne by the
nal consumer.
Certain transactions are exempt from VAT, including supplies of services and goods relating
to insurance and nancial activities, health, education and the lease of residential property.
Special reference should be made to transfers of securities. However, in some cases such
transfers could be subject to transfer tax (see Transfer Tax).
VAT does not apply in the Canary Islands (where another indirect tax similar to VAT but with
some differences, e.g. lower tax rates, is applicable) or in the North African enclaves of Ceuta
and Melilla.
VAT payers are normally entitled to deduct VAT on the supplies of goods and services they
receive, if they regularly produce other goods and services subject to VAT, or if VAT was paid
on transactions relating to international trade or on deductible transactions conducted outside
Spain.
The standard VAT rate is 18%. There are two reduced rates, 8% and 4%, the latter of which
applies to basic goods.
Registration is mandatory for all VAT payers carrying out transactions in Spain and a
special VAT identication number is required when a company carries out intra-community
transactions (i.e. within the European Union).
VAT returns must be led monthly if the revenue for the previous period exceeds
approximately 6,010,121.24; otherwise, quarterly ling is required.
Spain has a consolidated VAT regime under which VAT payers may elect to le a consolidated
VAT return by aggregating the individual VAT payable or refundable of each entity in the
group.
7.3.2. Transfer tax
Companies pay transfer tax on various transactions that are not part of their normal business
activities.
The principal rates are 7% for transfers of real property, 4% for transfers of movable property
and administrative concessions and 1% on certain real property rights.
Autonomous Communities are entitled to apply a different rate in certain areas, and most
have opted to apply a 7% rate to real property transfers.
Special reference should be made to transfers of securities. Article 108.1 of Securities Market
Law 24/1988 (Law 24/1988) provides for VAT and transfer tax exemption for transfers of
securities (including shares of companies). However, Article 108.2 of Law 24/1988 establishes
a restriction on the exemption provided for in Article 108.1.
Under this restriction, the exemption from transfer tax does not apply to transfers of securities
or shares of entities i) at least 50% of whose assets consist of real property located in Spain
provided the purchaser acquires, directly or indirectly, more than 50% of the stake of the
company, as a consequence of the acquisition; or ii) whose assets include securities enabling
it to exercise control over another entity 50% of whose assets consist of real property located
in Spain.
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7.3.3. Capital duty
Capital duty is levied at 1%.
For companies, the duty applies on contributions of capital, mergers and certain other
substantial changes in corporate structure. For individuals (shareholders of a company),
the duty applies on liquidations of and capital reductions at companies in which they have
ownership interests.
Since 3 December 2010, incorporations of companies, capital increases, other contributions
from shareholders that do not imply a share capital increase or the movement to Spain of the
place of effective management of the business or its registered ofce when neither of them
were located in another Member State are exempt from capital duty.
7.3.4. Stamp tax
Stamp tax is levied at 0.5% of the value of the subject matter of notarised documents
registered in a public register, although all the Spanish regions have increased the general rate
to 1% (except the Canary Islands, where the rate is 0.75%).
7.3.5. Property tax
Landowners must pay real property tax to the local authorities, up to a maximum of 1.1% of
the cadastral value for urban property and up to a maximum of 0.9% of the cadastral value
for rural property.
Additional taxes are imposed on the increase in urban land values when land is transferred.
7.3.6. Customs and excise duties
As an EU Member State, Spain applies the EU Community Customs Code, which sets out
the general rules and procedures, which means that all Member States apply legislation and
collect duties with the same criteria and efciency, since once in the EU, the free movement
principle applies. That means that goods move freely within the customs territory of the
European Union, without paying customs duties or any commercial restriction or customs
requirements being applied.
As a result, national rules must be adapted to Community directives.
The Spanish Customs & Excise Department with the Customs of the other Member States of
the EU, has direct relations with the Customs of countries which are not part of the European
Union, especially with the candidates to join the European Union, with Latin America and the
North of Africa. Relations involve all the elds of information exchange and mutual assistance
in the ght against fraud and smuggling, and technical assistance for the development and
modernisation of the Customs. For this purpose, Spain has signed the following bilateral and
multilateral conventions:
- EU/Other countries (including protocols of mutual assistance of Association Conventions):
USA, Hong Kong, Korea, Norway, Andorra, Canada, Turkey, Albania, Algeria, Armenia,
Palestinian Authority, South Africa, Azerbaijan, Bulgaria, Chile, China, Croatia, Egypt, Faroe
Islands, India, Antigua, Former Republic of Macedonia, Georgia, Iceland, Israel, Japan,
Jordan, Kazakhstan, Kyrgyzstan, Lebanon, Liechtenstein, Mexico, Moldavia, Morocco,
Montenegro, Russian Federation, San Marino, Switzerland, Tajikistan, Tunisia, Ukraine,
Uzbekistan.
- Multilateral Spain/Other countries: Convention between the Customs National Management
of Latin America, Spain and Portugal on cooperation and mutual assistance.
- Conventions within the EU: Naples II Convention and SIA Convention.
- Bilateral Spain/other countries: Germany, Algeria, Argentina, Austria, Cuba, USA, France,
Italy, Morocco, Mexico, Norway, Portugal, Sweden, Russian Federation, Turkey.
Excise taxes are imposed on the consumption of certain products (i.e. the production or
import of alcoholic beverages, tobacco, oil and gas, electricity and certain motor vehicles).
These taxes are levied in the country of destination and are only due at a given stage of
the consumption cycle. Therefore, they are due at different times depending on the kind of
product involved, i.e. when these products leave the authorised factories or warehouses,
when they are imported in Spain, when they are consumed, etc.
These taxes are generally levied at lump-sum rates (with ad valorem rates for cigarettes). The
rules regarding the valuation of the transactions, exemptions and tax payable depend on the
product.
The Canary Islands, Ceuta and Melilla are generally exempt from these taxes, although excise
duties apply to alcohol in the Canary Islands.
7.3.7. Tax on certain means of transport
A vehicle registration tax applies at ad valorem rates on the nal registration in Spain of most
new and used vehicles, including most types of passenger cars, most pleasure or sporting
boats and motorised aircraft. There are certain exemptions.
The rate of the registration tax ranges from 0% to 12%, depending on the vehicles and on the
CO2 emissions they make.
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7.3.8. Other taxes
Insurance companies carrying out taxable transactions pay a tax of 6% on paid premiums.
Companies pay municipal governments an economic activity tax. The self-employed and small
rms with annual revenue of less than 1 million are not subject to that tax. Larger rms are
exempt during their rst two years of operations. Rates increase on the basis of the amount of
a companys turnover.
Any person undertaking construction projects requiring permission from the municipal
government must pay a construction tax to the municipal government at a top rate of 4%;
rates are set for each municipality.
7.4. Avoidance of double taxation
Spanish direct tax regulations contain specic rules for the avoidance of double taxation. In
general, these rules permit the deduction of the taxes paid abroad with the limit of the tax
that would have been payable in Spain had the prots been obtained in Spain.
7.4.1. Foreign tax credits/ Exempt income
These credits cannot exceed the tax that would have been payable in Spain had the prots
been obtained in Spain:
- When the double taxation arises at a resident entity or a non-resident acting through a
permanent establishment, the double taxation mechanism applies. (See Corporate income
tax. Double taxation relief).
- When the double taxation arises for a resident individual or a non-resident not operating
through a permanent establishment, the double taxation mechanism is that provided for in
the Personal Income Tax Law (see Personal income tax. Double taxation tax relief).
Additionally, it should be noted that by virtue of the exemption regime, specic types of
income obtained abroad are exempt in Spain, provided that certain requirements are met (i.e.
dividends, transfer of shares, prots obtained through a permanent establishment abroad,
salaries obtained abroad, etc.) (see Corporate income tax: Participation exemption, other
exempt income; Personal income tax: Taxable income).
7.4.2. Tax treaties
As mentioned for non-resident income tax purposes, any taxation of a non-resident should be
foreseen and allowed by the provisions of a double taxation treaty if any.
In this regard, Spain is a strategic country in which to invest taking into account its tax treaties
with countries all over the world. In particular, Spain is the leading European country in terms
of the number of tax treaties signed with Latin American countries.
Following is a summary of the main withholding tax rates applicable under the tax treaties in
force in Spain:
Treaty Partner Dividends (%) Interest (%) Royalties (%)
India 15 15 10/20
Slovakia 5/15 0 5
Indonesia 10/15 10 10
Hungary 5/15 0 0
Canada 15 15 0/10
Malaysia 0/5 10 5/7
Korea (R.O.K.) 10/15 10 10
Ecuador 15 5/10 5/10
Mexico 5/15 10/15 10
Bulgaria 5/15 0 0
Iceland 5/15 5 5
Venezuela 0/10 4.95/10 5
Belgium 0/15 10 5
Poland 5/15 0 10
Australia 15 10 10
Czechoslovakia 5/15 0 5
Austria 10/15 5 5
Greece 5/10 8 6
Japan 10/15 10 10
Israel 10 5/10 5/7
Algeria 5/15 5 14/7
Lithuania 5/15 10 5/10
United Arab Emirates 5/15 0 0
Tunisia 5/15 5/10 10
Jamaica 5/10 10 10
Bosnia and Herzegovina 5/10 7 7
Netherlands 5/10/15 10 6
Brazil 15 15 10/15
Chile 5/10 5/15 5/10
United Kingdom 10/15 12 10
Sweden 10/15 15 10
New Zealand 15 10 10
Philippines 10/15 10/15 10/15/20
Pakistan 5/7.5/10 10 7.5
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Norway 10/15 10 5
South Africa 5/15 5 5
Macedonia 5/15 5 5
Morocco 10/15 10 5/10
France 15 10 5
Trinidad and Tobago 0/5/10 0/8 5
Bolivia 10/15 15 15
Thailand 10 10/15 5/8/15
Moldova 0/5/10 5 8
Iran 5/10 7.5 5
Czech Republic 5/15 0 5
Argentina 10/15 0/12.5 3/5/10/15
Saudi Arabia 0/5 5 8
Serbia 5/10 10 5/10
Cuba 5/15 10 5
Finland 10/15 10 5
Turkey 5/15 10/15 10
Italy 15 12 4/8
Egypt 9/12 10 12
Germany 10/15 10 5
Latvia 5/10 10 5/10
Costa Rica 5/12 0/5/10 10
Ireland 15 0 5/8/10
Russia 5/10/15 5 5
Croatia 0/15 8 8
Switzerland 0/15 0 5
China (P.R.C.) 10 10 10
Malta 0/5 0 0
Albania 0/5/10 6 0
Estonia 5/15 0/10 5/10
Portugal 10/15 15 5
Slovenia 5/15 5 5
Romania 10/15 10 10
United States 10/15 0/10 5/8/10
Luxembourg 5/10/15 10 10
Vietnam 7/10/15 10 10
Information obtained from database TaxAnalysts.com
Additionally, tax treaties with the following countries/jurisdictions have not yet come into
force: Armenia, Bahamas, Barbados, Belgium, Georgia, Germany (new version), Hong Kong,
Kazakhstan, Kuwait, Luxembourg, Nigeria, Panama, Peru, San Marino, Senegal and Singapore.
7.4.3. Republic of China Spain tax treaty
The China-Spain tax treaty, in force since 20 May 1992, follows the OECD Model Tax Treaty.
However, there are certain differences with respect to the aforementioned Model:
- Article 17. Artistes and athletes
Income obtained in this connection is exempt from tax in which the related activities are
exercised when the events are supported by public or government funds of the other state.
- Article 20. Teachers and Researchers
Almost none of the OECD countries have included this Article, which provides that the
income of teachers and researchers is exempt from tax if certain requirements are met.
- Article 21. Students, Apprentices and Trainees
This Article which, follows the United Nations Model Tax Treaty, establishes for non-resident
students of the other contracting State specic rules for the exemption of income obtained
in that State.
- Article 22. Items of income
This Article provides for the taxation of other items of income arising from sources
outside the other contracting state, without establishing any limit. If there is a permanent
establishment in either of the States, the taxation should be determined on the basis of
Articles 7 and 14 of the tax treaty.
- Article 24. Methods of eliminating double taxation
Spanish residents:
When taxes have been paid in China, Spain allows as a deduction from income tax an
amount equal to the tax paid in China. This tax credit may not, however, exceed the
portion of the income tax attributable to the income that may be taxed in China.

For this purpose, the amount of Chinese tax levied shall be deemed to be equal to 15% of
gross dividends, 10% of gross interest, and 15% of gross royalties.
Chinese residents:
The amount of income tax payable in Spain may be deducted from the Chinese tax levied
on that resident. The amount of this credit, however, may not exceed the amount of
Chinese tax on that income.
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Additionally, the underlying taxes could be deducted, provided that the income received is in
the form of a dividend paid by a company resident in Spain to a company resident in China
and which owns not less than 10% of the shares of the latter.
The main rates provided for in this tax treaty are as follows
China 10 10 10
7.4.4. Hong Kong Spain tax treaty
On April 1, 2011, a tax treaty was signed between Hong-Kong and Spain, which follows the
OECD model tax treaty.
This tax treaty is not yet in force.
However, once it becomes applicable Hong Kong will be excluded from the Spanish list of tax havens.
The main rates provided for in this tax treaty are as follows:
Hong Kong 0/10 5 5
8. Labour environment
8.1. Overview
The main characteristic of Spanish Labour Law is its complexity, arising from a wide variety
of factors. First of all, the administrative organisation of the state in regions, as previously
mentioned, called Autonomous Communities, which have legislative and executive
competences regarding certain issues. Laws and other regulations are enacted by the central
government and the various authorities of the Autonomous Communities. Thus, labour
competences are not always centralised in a single state authority, but are allocated among
the various administrative authorities of the state.
Secondly, in addition to the regulations established by the authorities, employees and
employers establish working and production conditions through collective bargaining
agreements, with terms agreed by both parties. Collective bargaining agreements may be
company agreements or general industry agreements, whose scope of application can be
nationwide, Autonomous Community or province-wide. Consequently, depending on the
economic activity of the company and its location, the labour rules to be observed vary.
Lastly, from a practical standpoint, please bear in mind that the interpretation of labour regulations
made by judges and tribunals (case law) is essential due to the general principle of in dubio pro
operario (in case of doubt in favour of the worker) established in the Labour Law.
8.2. Employment of foreigners
Nationals of the European Economic Area (EEA) member states do not need permits to work
in Spain although EEA nationals who will be residing more than three months in Spain must
register on the Central Register of Aliens. Country members of the European Economic Area
and Swiss citizens enjoy similar rights under a different set of agreements.
Non-EEA employees must apply to the Ministry of Labour and Social Affairs for work permits.
All permits are renewable. Foreigners with a Spanish relative, workers necessary to install
foreign imported machinery, top executives and others receive preferential treatment. The
period of validity is different depending on the type of each work permit. Under Spains
labour laws, foreigners legally working in Spain enjoy the same rights and obligations as
Spanish nationals.
8.3. Employment and remuneration
Like other European countries, Spain maintains a system based on a labour code and
standardised employment contracts (usually permanent). Legislation exists, among other
purposes, to:
- Create a legal framework for temporary employment agencies;
- Specify provisions related to termination, labour mobility, wages, working hours, paid
holidays, collective bargaining and part-time work; and
- Set out specic types of employment contracts.
Working hours
The legal working week is 40 hours, although many companies have reduced working hours
to 37 or 38. The Workers Statute maintains a 40-hour legal working week but permits total
hours to be distributed irregularly over the year if such an arrangement is part of a collective
bargaining agreement.
Each employee has the statutory right to a block of one-and-a-half days off a week (two
days a week for workers under 18). The Workers Statute allows employees and employers to
negotiate blocks of three days off over a fortnight.
The Workers Statute also allows employees and employers to negotiate extensions to the
statutory nine-hour day if a 12-hour rest period is maintained between shifts. Employees
under 18 may not legally work for more than eight hours per day, including training;
employers using apprenticeship contracts should take this limit into account.
Overtime regulations are dictated by national law and collective bargaining agreements. There
is a statutory annual maximum of 80 hours of overtime per employee.
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Wages
The Ministry of Labour and Social Affairs establishes the minimum wage annually (in
December) for the following year; increases usually match the expected ination rate.
Industrial action
Local representatives of the Ministry of Labour and Social Affairs determine whether a strike
is legal, abusive or illegal. Employees must give ve days written notice to call a legal
strike (strikes in the public service sector require ten days notice). Legal strikes may be called
by a simple majority of workers representatives (if a quorum of 75% is present) or by secret
vote of a simple majority of the workforce (if 25% or more have requested the vote).
During a strike, workers are represented by a strike committee with a maximum of twelve
members. Employers agree with the committee to appoint maintenance personnel. Strikers
are not permitted to force non-strikers to abandon their jobs. No wages need be paid during
a legal strike, but social payments and unemployment compensation continue. The employer
may not hire new personnel and striking workers may not be hired by another employer.
8.4. Social Security and benets
Social security coverage is mandatory for employees and the self-employed, with social
contributions paid by both the employee and the employer. General contingency contributions
represent 28.3% of an employees wages with the employer paying 23.6% and the employee
paying 4.7%. In addition, companies have to pay specic contributions on the basis of the
economic activity carried on. Large enterprises offer a variety of special employee benets,
not all of which are mandatory, such as housing, lunches, nurseries, recreational facilities,
medical insurances, life insurance policies, pension plans, low-cost loans, training courses and
transport.
8.5. Termination of employment
An employer must obtain approval from the government labour authorities for collective
redundancy procedures. Collective redundancy procedures are dened as the termination of
employment contracts for economic, technical, organisational or production-related reasons
that, within a 90-day period, affect at least 10 employees in companies with fewer than 100
employees; 10% of the workforce in companies with 100300 employees; or 30 employees
in companies with 300 or more employees. Collective dismissal also includes the dismissal
of all employees on the payroll, where there are more than ve employees. After following a
specied procedure, the employer may be authorised to terminate the relevant employment
contract.
When a worker is dismissed, the size of the termination payment depends on whether the
dismissal is justied or unjustied. Justied dismissals, for objective causes (i.e. economic,
technical, organisational or production-related reasons) require payment of 20 days salary
per year worked with the rm, up to a maximum of 12 months. Unjustied dismissals require
payments of 45 days salary per year worked, with a maximum of 42 months payment. No
payments are required if an employee is dismissed for disciplinary reasons and the dismissal is
declared fair and justied.
To terminate an individual in top management with a special labour relationship, a minimum
three months notice (up to a maximum of six months notice) or the notice period established
in the employment contract is required. In the case of disciplinary dismissal the Law does not
establish a minimum notice period but this is usually agreed upon in the contract.
9. Banking sector in Spain
9.1. Entering the Spanish banking market
Retail banking services, intended for the consumer, small- and medium-sized enterprises,
makes up more than 50% of the banking business in the EU. The Spanish banking system
traditionally specialises in retail banking and this has given it a clear competitive advantage.
In Spain, retail banking services are provided principally by banks and saving banks. However,
the Spanish banking sector is currently being restructured because of the economic crisis
and a new solvency criteria required by law. Due to this restructuring, savings banks are
undergoing a process that involves the separation of their nancial activity into a newly
created bank majority owned by the savings banks.
For Chinese banks or investors intending to enter into the banking sector the following
options are available under Spanish regulation:
- Setting up a bank in Spain.
- Opening a branch of an EU bank in Spain, which has no legal personality.
- Establishing a branch of a foreign non-EU bank in Spain.
- Acquiring an existing bank already incorporated in Spain.
9.1.1. Formalities for setting up a bank in Spain
Pursuant to Royal Decree 1245/1995, to create a credit institution in Spain, prior
administrative authorisation from the Ministry of Economy and Finance is required.
To obtain such an authorisation, compliance with an extensive series of requirements is
essential and must be certied before the Bank of Spain. These requirements vary depending
on the nature of the credit institution and cover all aspects of the organisation such as
minimum capital required, shareholders, Board of Directors, administrative structure,
procedures for control, feasibility of the project, etc.
As soon as the authorisation has been obtained and once it has been constituted and
registered with the Bank of Spain the bank may enjoy the benets of an EU passport in order
to offer its services in other EU Member States, either through a branch or under the freedom
of services regime.
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9.1.2. Branch of an EU bank in Spain
An EU bank may avail itself of the benets of the EU passport and carry on banking activities
in Spain after the Home State Regulator noties the Bank of Spain, either by setting up a
branch or under the freedom of services regime.
Furthermore, no prior authorisation from the Bank of Spain would be necessary, and there
may be no need to meet the usual requirements for the establishment of the new bank.
9.1.3. Branch of a foreign non EU bank in Spain
These credit institutions will not be entitled to the benets of the EU passport and, therefore,
need to obtain prior authorisation from the Bank of Spain if they want to operate in Spain
through branches. The process of opening a branch will be equivalent to the creation of a
new Spanish credit institution.
9.2. Regulation of the banking Business
9.2.1. Spanish supervisory authorities
In Spain, institutions that provide banking services are supervised by the Bank of Spain and
those which provide investment and inssurance services, are supervised by the Spanish
Securities Market Commission (Comisin Nacional del Mercado de Valores or CNMV) and
the Directorate General of Insurance ( Direccin General de Seguros y Fondos de Pensiones or
DGS) respectively.
9.2.2. Mergers and acquisitions of Spanish banks
Due to the economic crisis that began in the summer of 2007, savings banks have undergone
an intense concentration process. The aim of this concentration process is to improve their
efciency through capacity reduction. In parallel, credit institutions have made a full-scale
transparency drive, disclosing all the data on their actual situation and their risks (in particular
their real estate exposure and dependency on wholesale funding), and they have also set
about writing down sharply their most problematic assets.
Falling condence and the subsequent difculties in obtaining funding on international
markets have made it necessary to adopt measures to ensure that the progress made over the
past few months in restructuring savings banks is successfully completed. Such measures have
included the creation of the Fund for the Orderly Restructuring of the Banking Sector (FROB).
Saving banks are immersed in a banking transformation and besides the FROB they are
looking for foreign investors.
In order to acquire a bank or equities from a credit institution the investor must obtain the
regulatory approval from the Spanish supervisory authorities.
9.3. Corporate income tax
9.3.1. Attribution of prots
A branch in Spain of a Chinese bank will normally be deemed to be a permanent
establishment of the Chinese bank for Spanish tax purposes. As explained, this means that the
branch will be subject to Spanish Non-Resident Income Tax (NRIT) on the net taxable income
deemed attributable to its Spanish activity in a similar manner to Spanish resident banks that
are subject to Spanish Corporate Income Tax (CIT). The applicable tax rate on the net taxable
prots of the branch will be 30%, the same applicable to resident banks under CIT rules.
In determining the amount of prot attributable to the branch, one guiding principle is that
the branch should be taxed in Spain on the prots which the branch might be expected to
make if it were a separate and independent enterprise engaged in the same or similar activities
under the same or similar conditions, taking into account the functions performed, assets
used and risks undertaken by the Chinese bank through the branch.
Hence the Spanish taxable prot of a branch in Spain of a Chinese bank is expected to include
not only income derived from the ordinary trade of the branch, but also income derived from
any assets which must be allocated to the branch (because of being functionally connected to
the activity of the branch), as well as any capital gains (or losses) derived from the transfer of
such assets.
9.3.2. Minimum amount of free capital for Spanish tax purposes
One particular issue in achieving a correct attribution of taxable prot to a banking branch in
operation consists of the amount of minimum free capital that must be allocated to it for
Spanish purposes in order to support the functions it performs, the assets it uses and the risks
it assumes. By free capital we refer to a minimum amount of capital which does not give
rise to a tax deductible allowance in Spain form of interest expense deduction.
Currently, it is generally accepted that in order to arrive at an arms length attribution of prots
to a branch an allocation of a minimum amount of free capital to it is required, even though
Spanish tax legislation does not expressly provide for a set of rules giving detailed guidelines
on the level of minimum free capital that a branch is expected to have for Spanish tax
purposes.
Until a few years ago this was not an area of particular concern to branches of foreign banks
operating in Spain. The traditional tax approach of branches of foreign banks was regulatory-
based as the most habitual position in the industry was to assume that the level of capital
assigned to a branch for regulatory and accounting purposes should be deemed acceptable
also for Spanish tax purposes. For many years the Spanish tax auditors neither considered this
position as controversial nor actively challenged it.
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Although Spanish legislation passed in relation to this matter has remained unchanged over
the years, in practice, the OECD guidelines highlighted in the report entitled Attribution
of prots to permanent establishments released in 2008 and in the latest updates of the
Commentaries to Article 7 of the OECDs Model Tax Convention on Income and Capital
have inuenced the approach taken by the Spanish tax authorities in some recent audits of
branches of foreign banks.
Since, as explained, there are no ofcial or approved guidelines on how to calculate the
minimum free capital assigned to a branch of a foreign bank that may be accepted by the
Spanish tax authorities, there is a margin for interpretation. The case-by-case approach seems
sensible here and branches of foreign banks are therefore advised to discuss this matter with
their advisors in order to assess their particular position in this area and whether the capital
assigned for regulatory and accounting purposes may be deemed acceptable as minimum
free capital for Spanish tax purposes.
9.3.3. Specic tax computation considerations for branches of Chinese banks
In practice, assuming that the accounting books of the branch reect a true and fair view
of the fact that the key functions performed, assets used and risks borne by the branch
are consistent with the OECD guidelines on attribution of assets and risks to permanent
establishments for tax purposes, the NRIT tax base of the branch will be determined on the
basis of the branchs accounting prot or loss calculated under Spanish GAAP, which must
then be adjusted (upwards or downwards) taking into account the provisions of Spanish CIT.
It should be noted that the Spanish GAAP applicable to banking branches is that set by the
Bank of Spain for banks , which reects the Bank of Spains adaptation of IFRS. Therefore, the
result under the Bank of Spain accounting rules is the starting point to calculate the Spanish
tax base.
An area where differences typically arise between the accounting prot or loss of banking
branches and the Spanish tax base is the credit loss allowance. The Spanish tax regulations
deal in certain detail with the requirements that the credit loss allowances recognised by
resident banks and branches of foreign banks need to meet in order to be considered tax
deductible in Spain.
Most of the differences in this area between accounting and tax relate to timing; hence they
typically have an impact on the deferred tax asset computation of the branch.
Credit loss allowances that are specic in nature (those which are specically assigned to cover
particular loans or credit risks considered on an individual basis) are only deductible when they
have been booked in the local records of the branch and up to the minimum level of coverage
set by Bank of Spain accounting regulations. Allowances recognised in excess of the minimum
coverage are in principle non-tax deductible. One relevant practical implication is that
where the branch calculates the specic credit loss allowance following criteria established
in the policies of its head ofce (or in general where the amount of the specic allowance
recognised is deemed to be in excess of the minimum coverage established under Bank of
Spain regulations), differences may arise between the amount of the credit loss allowance for
accounting purposes and the tax deductible allowance.
Certain restrictions apply, however, to credit loss allowances recognised in respect of certain
risks which may be deemed non-tax deductible in nature. For instance and without going
into detail, the specic allowances recognised in respect of the following loans are generally
deemed non-tax deductible, although certain exceptions might apply:
- government loans or credits that have a government guarantee;
- loans that are secured by rights in rem over nished dwellings;
- loans that result from restructuring or renewal of credit after default or impairment of
previous loan facilities;
- loans granted to related parties (however, in certain circumstances such as in case of Court
resolution on a dispute over the amount or existence of the loan, these provisions may be
allowed);
- loans granted to certain entities or bodies, such as political parties, trade unions, business
and professional associations, etc. (except in certain circumstances, such as Court declared
bankruptcy);
Country risk provisions may generally be deducted for tax purposes provided that they have
been recognised following Bank of Spain accounting rules, do not exceed the minimum
coverages set by the Bank of Spain and full certain requirements on the nature and
conditions of the transactions.
Provisions that have been calculated on a global basis (i.e. not specically assigned to cover
individualized risks) are as a general rule deemed non-tax deductible. However, the tax
regulations permit the tax-deductibility of a given amount of the allowance, which must be
determined on the basis of tax calculations carried out in accordance with specic rules.
A reasonable amount of expenses incurred abroad for the benet of the branch, such as
management and general administration expenses as well as expenses incurred in support
functions performed abroad may be allowed by the branch for Spanish tax purposes, provided
that:
- they are appropriately recorded in the branchs accounting statements;
- the amounts to be allocated, the allocation method and the distribution of the expenses are
documented in a report to be submitted to the tax ofce; and
- the allocation methods adopted are economically sound and are consistently applied over
time.
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Broadly, the rest of the CIT rules are generally applicable in respect of the taxable implications
of other non-banking specic matters (e.g. amortization, depreciation and impairment of
assets, provisions to cover certain risks, transfer pricing regulations, non-deductible expenses,
taxation of dividends, use of carry-forward losses, tax credits etc.). (We refer to our comments
in the section on CIT).
9.4. VAT
9.4.1. Output VAT: the VAT exemption on nancial services
Many transactions carried out by banks and other entities in the nancial services industry are
treated as VAT exempt services for Spanish VAT purposes.
The scope of the VAT exemption on certain nancial services includes, among others, the
following transactions: the issuance of, or any dealings with, money or security for money; the
advancing of funds and/or the granting of credit as well as making arrangements for credit;
any dealings with shares, stocks, bonds, debentures, promissory notes, bills of exchange
(excluding collection services relating to such bills and factoring of debts); and the operation
of any current, savings and deposit accounts.
Where the VAT exemption on certain nancial services applies, banks and nancial entities
registered for Spanish VAT purposes (such as in principle a branch in Spain of a foreign bank)
are not required to charge output VAT to their customers.
9.4.2. Input VAT recovery
The application of the VAT exemption to nancial services has a major impact on the nancial
services industry. Indeed, banks and other entities in the nancial services industry cannot fully
deduct input VAT on services or goods supplied to them, so long as the nancial services they
supply themselves are, to a signicant extent, VAT exempt, and hence do not entitle them to
deduct input VAT.
As a result, input VAT incurred by banks and branches of foreign banks on the acquisition of
goods and services typically constitutes an area of cost for the nancial services industry, since
only a limited amount of it can be recovered, as explained below.
This stems from the fact that the VAT services that qualify for the VAT exemption on certain
nancial services generally do not entitle the taxpayer to deduct the input VAT incurred in the
acquisition of goods and services. Likewise, as a general rule, the VAT exemption on nancial
services is applied automatically, so it cannot be waived in order to allow deduction of the
input VAT.
Nonetheless, some transactions carried out by banks are deemed taxable and do not qualify
for the VAT exemption on nancial services (e.g. leases, some advisory services, etc.). Likewise,
under certain conditions, some services on which output VAT is not charged may, as an
exception, qualify for the deduction of input VAT (for instance, loans granted to traders not
established in the European Union).
Under Spanish VAT legislation, entities that carry on activities that qualify for VAT deduction
and others that do not, which is generally the case of banks and other entities in the nancial
services industry, may partially recover some of the input VAT incurred in the acquisition of
goods and services in proportion to the amount of the transactions they carry out that qualify
for input VAT deduction.
The Spanish VAT Law regulates different methods and special rules that are relevant when
calculating the VAT recovery rate:
- The general VAT recovery rate mechanism, which is based on a percentage calculated on
an annual basis as the ratio of the turnover of transactions carried out that qualify for input
VAT deduction in relation to the total turnover of the branch (which must be determined
according to VAT rules), which is then applied to the total input VAT of the branch.
- The special VAT recovery rate allows 100% recovery of input VAT incurred in acquisitions
of goods and services provided that they are used exclusively in carrying on activities that
qualify for full deduction of the VAT borne, whereas a 0% recovery rate must be applied to
input VAT incurred on services/goods acquired by the nancial entity which are allocated
exclusively for carrying out activities that do not qualify for VAT deduction. For the input VAT
incurred in the purchase of services/goods that are partly allocated to carrying on activities
that qualify for such a right and others that do not, a recovery rate would be calculated
for such items under the general VAT recovery rate rules. In order to apply the special
deductible proportion rule, an application must be made by ling the corresponding form
with the Spanish Tax Authorities.
- A different sector of activity is deemed to exist for VAT purposes when an entity carries
on different types of business activities with potentially signicantly different VAT recovery
regimes as dened in the VAT Law (e.g. a banking business with a low recovery rate and
leasing and/or real estate business with a potentially higher VAT recovery rate). Where
different sectors of activity exist, VAT recovery rules can be applied separately for each
sector of activity.
In view of the limitations on input VAT recovery, intra-group services within banking groups
may potentially increase the groups tax bill. In order to minimise the VAT cost arising from
intra-group transactions, choosing to set up a VAT group in Spain and other methods of
structuring the provision of services within the groups, are popular alternatives in the Spanish
nancial services industry.
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9.5. Withholding taxes
We discuss below potential withholding implications on interest income earned by a branch
of a Chinese bank on its loan portfolio. We also discuss potential withholding implications on
outbound interest payments made on funding assigned to or received by the branch.
9.5.1. Withholding tax on interest income
In relation to loans granted to Spanish-resident entities and traders and/or branches in Spain
of non-residents, interest income will be exempt from Spanish withholding tax if it is obtained
by a resident bank and/or by a branch in Spain of a foreign bank. The Spanish withholding
tax exemption does not apply to interest from government and corporate bonds and other
securities in the portfolios of banks and branches in Spain of foreign banks.
In the case of cross-border loans, interest income from loans granted by a branch of a Chinese
bank to non-resident entities and persons may be subject to foreign withholding tax according
to the tax provisions applicable in the particular jurisdiction where the interest income arises.
In this regard, a branch in Spain of a Chinese bank does not generally have access to the
network of Tax Treaties signed by Spain with third countries (unlike Spanish resident banks,
which may avail themselves of the Spanish Tax Treaty network). It should be analysed on a
case-by-case basis whether a branch in Spain of a Chinese bank may apply the provisions of
the respective Tax Treaty with China and the State in which the interest originates.
Where foreign withholding tax is borne on interest income from abroad, the branch of a
Chinese bank would be given an ordinary credit in Spain in order to relieve potential double
taxation due to the interest income arising outside Spain when it is taxed again at the branch.
Accordingly, the branch should be entitled to offset against the Spanish NRIT due the lower
of:
- the foreign withholding tax effectively borne abroad on the related foreign-source income;
or
- the Spanish NRIT liability attributable to such interest income.
9.5.2. Withholding tax on interest payments
In relation to interest payments made by the branch, interest income paid by the branch is
generally subject to 19% Spanish withholding tax, although some exceptions and special rules
may apply, including the following:
- Interest paid to holders of non-resident bank accounts is exempt from Spanish withholding
tax.
- Interest paid to Chinese-resident entities is subject to Spanish withholding tax of 10%, in
accordance with the China - Spain Tax Treaty.
- Interest obtained by entities or persons resident in another European Union Member State is
exempt from Spanish withholding tax.
9.6. Reporting obligations
Credit institutions that provide services in Spain have reporting obligations to the supervisory
authorities in accordance with the activities carried out by such institutions. Although these
obligations are extensive it should be noted that they are very standardised.
In this context, credit institutions have to report all aspects relating to the performance of
banking services to the Bank of Spain and any issues concerning investment and/or ancillary
services to the CNMV. In the event that the credit institution carries on insurance activities, the
DGSFP is responsible for monitoring and meeting the entitys reporting obligations.
Likewise, the Executive Service for the Prevention of Money Laundering (SEPBLAC in
Spanish) will be responsible for overseeing and monitoring the fullment of money laundering
reporting obligations.
One important characteristic of the Spanish banking sector that foreign investors must take
into account is that the Spanish banking sector has an ex ante deposit-guarantee scheme.
This guarantee scheme collects funds in advance on a regular basis against the prot and loss
accounts of the member Banks by means of obligatory contributions.
In addition to Spanish withholding tax obligations, banks and branches in Spain of foreign
banks are subject to a wide range of tax reporting obligations whereby they are obliged to
disclose signicant amounts of information to the tax authorities on transactions carried
out with their customers as well as with their suppliers. In general, compliance with these
obligations requires specic IT banking systems to be developed in order to provide timely and
accurate information.
9.7 Leasing and asset nance
9.7.1 Legal requirements
Under Spanish regulations, leasing is not an activity that is reserved for credit entities. The
main activity reserved for credit entities is the raising of funds from the public through
deposits. Therefore, it is not necessary to obtain authorisation from the Spanish Regulator
(Bank of Spain) in order to carry on this activity.
However, the majority of entities that carry on leasing activities in Spain are nancial entities
supervised by the Bank of Spain (Banco de Espaa) such as banks, savings banks (Cajas de
Ahorro), credit co-operatives (Cooperativas de Crdito), the Spanish State Financing Agency
(Instituto de Crdito Ocial) or nancial credit establishments (Establecimientos Financieros de
Crdito).This is due to the fact that in order for tax benets to apply to leasing transactions,
certain requirements must be met to be agreed upon with the nancial entity. In this respect,
leasing transactions may be agreed upon with any entity but tax benets will only apply if the
leasing agreement is entered into with one of the above-mentioned entities and complies with
certain legal requirements.
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9.7.2 Types of leases recognised (by law)
Spanish legislation only regulates one type of lease: nance leases, as this is the only type of
lease to which tax benets are applicable. Other types of leases are possible but they do not
benet from tax advantages.
9.7.3 Finance leases
The denition of a nance lease is as follows: an agreement for the sole purpose of assigning
the use of movable or immovable assets acquired by the lessor for such purpose in accordance
with the lessees specications and in exchange for the lease payments set forth in the
agreement. The user is granted a purchase option which may be exercised upon the expiry
of the lease term. Under a nance lease, the lessee must use the leased asset for agricultural,
shing, industrial, commercial, craft, servicing or professional activities.
A nance lease may only be entered into by nancial entities: banks, savings banks, credit
co-operatives and nancial credit establishments. The obligations are as follows:
i. The lessor must acquire the goods and deliver them in accordance with the customers
instructions.
ii. The customer must hold the goods uninterruptedly (i.e. not sell or transfer them) while they
are owned by the nancial entity.
iii.On expiry, the lessor must allow the purchase option to be exercised (transfer of ownership
to the customer).
iv. The lessor must assign to the customer the owners right to legal action against the supplier.
v. If the customer becomes insolvent, the nancial entity may impose its ownership and
segregate the leased asset from the customers assets that are subject to the insolvency
proceeding.
Finance lease agreements must meet the following requirements to qualify for the application
of tax benets:
a) They must be for a minimum term of two years in the case of movable goods and of ten
years in the case of real estate or industrial facilities.
b) The nance lease instalments must be stated in the respective agreements making a
distinction between the portion relating to recovery of the cost of the good by the lessor
entity, excluding the value of the purchase option, and the charge made by the lessor,
notwithstanding any indirect taxation that may apply.
c) The annual amount of the portion of the lease instalments corresponding to recovery of the
cost of the good must remain equal or increase throughout the lease term.
d) Finance lease agreements must include an option in favour of the user to purchase the asset
at the end of the lease term.
In case of a breach of the terms of the lease, the lessor may terminate the agreement and
recover the goods through a special procedure.
Non-nance leases
In the area of movable property, there is one kind of non-nance lease. There are no specic
rules applicable to these agreements and there are also no restrictions on which entities may
perform this type of transaction.
In these agreements, the manufacturer (lessor) gives the use of essential goods to the business
owner (lessees) and, therefore, there are only two parties involved because there is no
supplier. Maintenance, spare parts and liability for hidden defects are the lessors responsibility.
These agreements are different, from an economic point of view, from renting agreements
which can also be used by consumers.
Leaseback
In this kind of lease, the lessor acquires real estate belonging to the customer (lessee), to
whom they grant the use of such property for a certain price for a specic period of time,
during which the lessee can regain ownership of the real estate.
9.7.4 Financial regulations / supervisory requirements
Where nance lease transactions are performed by nancial entities established in Spain, these
entities are subject to authorisation and supervision by the Bank of Spain (Banco de Espaa).
In particular, the Bank of Spain ensures that Spanish nancial entities comply with the various
rules with respect to capital adequacy, equity, solvency and accounting requirements.
Spanish regulations also encompass a special type of nancial entity: nancial credit
establishments (Establecimientos Financieros de Crdito), which can perform leasing and
other nancing activities (factoring, granting of credit, nancing of transactions, issue and
management of credit cards, acting as guarantors) but cannot raise reimbursable funds from
the public. They must be authorised by the Bank of Spain but, as the scope of their activities is
more restrictive than banks, they are not subject to such stringent regulations (Royal Degree
692/1996, of April 26, of Financial Credit Entities).
The procedure for obtaining authorisation is very similar to that for the incorporation of banks
and savings banks but the requirements laid down for nancial credit establishments are more
exible, and require a lower minimum share capital than that required for banks and savings
banks, and fewer members are required to make up the Board of Directors.
9.7.5 Regulatory requirements for lease transactions
All lease agreements, regardless of whether or not they are classied as nance leases, are
subject to compliance with general legislation on advertising and the protection of consumers,
users and personal data. It is worth noting that lease agreements are normally entered into as
part of economic/professional activities and not for a particular purpose.
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Lease agreements entered into with nancial entities must also comply with specic rules on
advertising and transparency applicable to agreements signed by nancial entities with their
customers (Order of 12 December 1989, on interest rates, fees, customer information and
advertising of credit entities, Bank of Spain Circular 8/1990, of 7 September, on transparency
rules and customer protection and Order EHA/1718/2010, of 11 June, on the advertising of
banking services and products).
10. Institutional framework for attracting foreign investment to Spain
10.1. Spanish Government Institutions
The Spanish Government has been particularly aware of the importance of promoting foreign
investments through specic institutions since 2000. In addition, the current economic
crisis and its deep impact on Spains economy has increased the need to encourage foreign
companies to invest in Spain.
The main institution created to encourage foreign investment is the State Company for the
Promotion and Attraction of Foreign Investment (Invest in Spain). It was created in 2005 as
part of the Department of Foreign Trade within the Ministry of Industry, Tourism and Trade.
The main objectives of Invest in Spain are:
- To promote an appropriate investment climate
by identifying investors potential needs and
suggesting appropriate measures to meet
them.
- To attract foreign investment by focusing
on the countries, sectors and companies in
international businesses with the greatest
growth potential.
- To foster initiatives to promote and attract
inward investment to Spain and promote
and coordinate a suitable climate for foreign
investment.
- To provide an image of Spain as a competitive
and increasingly international country.
Promotion of
good investment
climate
Identication o
high hpotencial
international
businesses
Fostering activitie
to attract
investment
Creating an
attractive image of
spain
Apart from compiling specic information and guides on establishing a company in Spain,
another important function of Invest in Spain is to publish reports on specic topics, such
as Why Spain?, which gives an overview of the different factors to encourage investors to
consider investing in Spain.
Another service provided by Invest in Spain on its website is the Aid and Incentives Search
service. This service allows investors from different countries to search for specic aid available
for each country and see whether there are specic budget lines according to the selected
criteria or the planned project or investment.
Specic information is also available on each region in Spain because there can be major
differences between regions with respect to certain issues such as tax incentives.
As a member of the EU, Spain can offer direct access to European aid programmes for
potential investors, thereby providing a greater incentive to invest in Spain. This aid and the
programmes are coordinated by several Spanish Ministries such as: the Ministry of Industry,
Tourism and Trade, the Ministry of Science and Innovation and the Ministry of Economy and
Finance, among others.
10.2. Support framework in regions and relevant cities
Spain has a complex structure differing between the countrys regions. It is organised in 17
regions (Autonomous Communities), divided into provinces, and two Autonomous Cities
(Ceuta and Melilla).
1 Madrid: Madrid International Development
Company (PromoMadrid)
2 Castilla la Mancha: Institute for the External
Promotion of Castilla-La Mancha (IPEX)
3 Extremadura: Extremadura Avante
4 Castilla y Leon: ADEurope Foundation
5 Galicia: The Galician Institute for Economic
Promotion (IGAPE)
6 Asturias: Economic Development Institute of the
Principality of Asturias, IDEPA
7 Cantabria: Cantabria Regional Development
Organisation (SODERCAN)
8 Basque Country: La Sociedad para la transformacin
competitiva (SPRI Group)
9 La Rioja: Economic Development Agency of La Rioja
(ADER)
10 Navarre: Navarre Development Organisation
(SODENA)
11 Aragn: Aragon Exterior (AREX)
12 Catalonia: Invest in Catalonia. ACC1
13 Valencian Community: Valencia Export Institute
(IVEX)
14 Balearic Islands: Institute for Business Innovation of
the Balearic Islands (IDI)
15 Murcia: Institute for the Development of the
Region of Murcia
16 Andalusia: Innovation and Development Agency of
Andalusia, IDEA.
17 Canary Islands: Canary Islands Economic Promotion
Agency (PROEXCA)
18 Ceuta: Company for the Development of Ceuta
(PROCESA)
19 Melilla: Public Association for the Promotion of
Melilla, PROMESA
1
2
3
15
4
5
6
7
8
9
10
11
12
13
14
16
17
18
19
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In addition to Invest in Spain, which is a central government institution, each Autonomous
Community has its own entities created to support foreign investment in each region.
This map represents every region in Spain and the institutions responsible for supporting
investment and helping foreign companies requiring assistance and advice for starting up
businesses.
Following is a description of each institution:
- The Innovation and Development Agency of Andalusia (IDEA) contributes to the economic
and social development of the region, offering the best services to companies and
employers and promoting business spirit, innovation and cooperation within the eld of
science and technology and the competitiveness of its productive structure.
One of the Agencys stated objectives is to attract investment and national and international
companies
It prepares studies and specic information for potential investors on such subjects as
Andalusias most signicant business sectors, macroeconomic and demographic data and also
publishes information on specic grants offered by Andalusia to foreign companies.
- Aragon: the Government of Aragon works through the agency, Aragon Exterior, to support
the success of new investment projects in Aragon. It provides all the information required by
a new investor to assess whether Aragon is the most suitable place to start up a business.
Exterior Aragn provides the following services, free of charge:
Searches for business locations, land, ofces, warehouses, cutting out all the
intermediaries.
Contacts with local suppliers.
Help with processing licences.
Identication of all the European, national, regional and local grants and economic.
incentives available for the investment project.
Legal advice.
Searches for sources of nancing.
Processing visas and residence permits.
Establishment of executives (homes, international schools).
- Asturias: the Economic Development Institute of the Principality of Asturias (IDEPA) is a
public entity created in 1983. It is responsible for business promotion in Asturias and its
main objective is the promotion and improvement of the Asturian business network. To
achieve this objective, the institute works along two lines: attracting new investment and
improving the competitiveness of regional companies.
- Balearic Islands: the Institute for Business Innovation of the Balearic Islands (IDI) is the
website of the regional Ministry of Economy and Finance aimed at promoting the benets
of doing business in the Balearic Islands in order to attract foreign investors. It also connects
entrepreneurs with business ideas and the capital (investors) to put them into action.
- Basque Country: the institution in charge of promoting investments is the SPRI Group which
was created in 1981 with the aim of supporting the Basque business network, focusing on
competitiveness and its position in the global market.
One of the main objectives of the SPRI Group is to attract, develop and maintain foreign
investment and partnerships, particularly in high value-added industries, such as renewable
energies, the aerospace industry, the electric vehicle industry or bioscience.
- Canary Islands: the Canary Islands Economic Promotion Agency (PROEXCA) is a public
company attached to the Ministry of Finance of the Canary Islands, which aims to promote
and encourage the internationalisation of local businesses and the implementation of
policies for economic development and investment attraction.
The organisation provides information on the economic attractions of the islands, and acts
as an intermediary between entrepreneurs and developers to aid new investment in the
islands through support services, recruitment and project funds for investment, with the
help of specialised consultants.
- The Cantabria Regional Development Organisation (SODERCAN) makes an active
contribution to strengthening the industrial fabric of Cantabria. Its main activities are:
The promotion of entrepreneurial talent and start-ups.
Attracting foreign investment.
Support for the development of enterprises capable of competing.
Support for the transformation of mature companies struggling to compete in a global
market economy.
Development of the Knowledge Society and dealings with public authorities.
- Castilla y Len: the ADEurope Foundation promotes activities aimed at generating value-
added business projects in strategic sectors for Castilla y Len through the development of
specic programmes for attracting investment.
ADEurope provides various services to potential investors:
Assistance with location searches for projects.
Information on the regional economic environment.
Human Resources.
Operating costs.
94
Useful contacts.
Assistance with searches for local partners.
Information on investment incentives, R&D, employment, training and others.
Advice on nding funding.
Personalised assistance throughout the investment process.
Travel Assistance prospecting Castilla-Leon.
- The Institute for the External Promotion of Castilla-La Mancha (IPEX) is an agency attached
to the regions Ministry of Economy and Finance which is responsible for attracting
investment to the region.
- Catalonia: The ACC1 agency promotes company competitiveness. It encourages
innovation, internationalisation and attracts investment.
Its main objectives in relation to the attraction of investment are:
To promote new investment, reinvestment and expansion of businesses in Catalonia and
boost the development of new business activities in Catalonia to act as a magnet for
investments with high value added.
To assist with the consolidation of companies in Catalonia, enabling strategic investment
agreements between companies.
- Ceuta: The Company for the Development of Ceuta (PROCESA) is responsible for the
management of the initiatives nanced by European Structural Funds, in addition to
facilitating and encouraging projects and initiatives to benet the region.
- Extremadura: The Extremadura AVANTE agency was created in 2010 to foster business
start-ups in Extremadura by providing products and services to potential investors.
- Galicia: the Galician Institute for Economic Promotion (IGAPE) was created in 1993 as a
public entity afliated to the Ministry of Economy and Industry (part of the Xunta de Galicia
or autonomous community government).
Its mission is to foster new businesses, encourage improvements in the productivity
and competitiveness of companies already established in the region, to attract foreign
investment and to promote the internationalisation of Galician companies. It also provides
companies wanting to set up business in Galicia with support, information and help with
managing grants for starting up businesses in the region.
- The Economic Development Agency of La Rioja (ADER) is a public agency of the regional
Ministry of Economic Development. The agencys main objective is to foster and benet
companies in order to aid economic growth in the region. The initiatives it promotes are
aimed at helping Spanish and foreign companies to establish businesses.
- Autonomous Community of Madrid: the Madrid International Development Company
(PromoMadrid) is a public entity belonging to the regional Ministry of Economy and Finance
created in 2004.
Its main objectives are to support companies in starting up business abroad and also to
attract and retain foreign investment. It undertakes any initiatives required to improve the
image, perception and reputation of the region.
- Melilla: the Public Association for the Promotion of Melilla (PROMESA) helps encourage
economic activity by managing grants and providing services to local companies and new
investors, such as economic information and information on the benets of investing in the
region.
- Murcia: the Institute for the Development of the Region of Murcia undertakes many
activities to improve economic growth in the region and attract investment, such as
facilitating access to nance for business projects involving investment in xed assets,
quality, technology, globalisation and industrial equipment, and also participates in the
creation of innovative nancing instruments to support SMEs and entrepreneurs.
- The main objective of the Navarre Development Organisation (SODENA) is to promote the
generation and development of business projects for Navarre from Spain and abroad and
take part in initiatives aimed at improving the regions economic competitiveness.
- The aim of the Valencia Export Institute (IVEX) is to attract investment that generates wealth
and employment in the region and to select business projects with high value added and a
considerable technological component. The following are examples of its activities:
Attracting multinational companies, agencies and public R&D with an industrial impact to
boost new investment and help develop regional clusters based on own capabilities.
Strengthening systematic initiatives to attract knowledge-intensive activities carried on by
multinational enterprises, giving priority to those that already have production facilities in
Valencia.
Not only have the Autonomous Communities developed institutions, agencies and other
mechanisms to attract foreign investment to Spain, but big cities such as Madrid, Barcelona
and Seville have also created their own specic institutions.
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The Economic Development Agency Madrid
Emprende was created in 2005 and is
attached to the citys Department of Economy,
Employment and Civic Participation. Its
main objective is to promote the business
competitiveness of Madrid.
Initiatives developed by Madrid Emprende
include: the promotion of entrepreneurial
talent, improvement of business infrastructure,
supporting innovation in small- and medium-
sized enterprises (SMEs) and the promotion of
foreign investment.
Sevilla Global was established in 2000 as a
local public limited company. Its main purpose
is to develop a new local urban economic
strategy and foster business development.

Promalaga, belonging to Malaga city
council, promotes the benets offered by
Malaga to foreign and national investors, and
also provides support and nancial services
to existing and newly created companies in
Malaga.
10.3. Grants and subsidies to attract foreign investment
The Spanish Central Government and Autonomous Community Governments have developed
an extensive system of programmes, grants and aid to promote investment, employment,
competitiveness and economic growth.
Another contributing factor in attracting investment to Spain is that, as result of Spains EU
membership, Spanish institutions are involved in developing and managing European funds
which represent a large proportion of the total incentives offered to start-ups.
To foster the commercial activities of foreign companies, Spain has signed agreements to
avoid double taxation with the main countries doing business in Spain. This helps avoid tax
evasion and facilitates a better control of the economic ows between nations.
In 1990 an agreement was signed in Beijing, Agreement between the Government of Spain
and the Government of the Republic of China for the avoidance of double taxation and
preventing tax evasion with respect to Taxes on Income and on Capital.
The main lines of action dened to encourage investment in Spain are:
Training and employment. Incentives for training and employment can mean signicant
savings in labour costs for the beneciaries.
The main activities carried out by the Spanish Government are as follows:
Incentives are given to companies for training programmes, in the form of reductions in
social security contributions.
Promoting the creation of permanent employment through grants to employers.
As a result of the economic situation, Royal Decree 1975/2008, of 28 November, on
urgent economic, tax and employment measures and access to housing was approved.
This law created new types of incentives for the promotion of permanent contracts for
"unemployed workers with family responsibilities" through reductions in employers social
security contributions.
Others aid and subsidies to generate stable employment and economic activities in
particular areas of Spain.
Law 35/2010, of 17 September, on urgent measures to reform the employment market
contains a number of measures to achieve the goal of the legislation by creating a support
system to foster youth employment and job opportunities for the unemployed.
Research and Development (R&D). Grants and subsidies in this area include grants for the
promotion of innovation projects, technological upgrading and research and development,
which have been a priority for the Spanish government.
In line with the VII European Union Research, Development and Innovation Framework
Programme for 2007-2013, the government approved the VI National Research,
Development and Innovation Plan for 2008-2011, and expects to double the nancing
compared with the previous period and improve incentive management. These subsidies are
co-nancied by the EU Structural Funds.
Some of the main programmes and strategic plans developed under the Research and
Development initiative are as follows:
Programa INGENIO 2010, CONSOLIDER and AVANZA: aimed at increasing public and
private investment in R&D&I.
98
Plan AVANZA2: its main objectives are to:
Contribute to economic recovery by encouraging the widespread and intensive use of
information and communication technologies (ICT).
Promote and strengthen the demand for a specialised ICT industry.
The Centre for Industrial Technological Development (CDTI) promotes innovation and
the technological development of companies, by providing funding on preferential
terms, as well as advice and support to companies wishing to submit European
cooperative projects under Research and Development Programmes such as EUREKA.
State Innovation Strategy (e2i):
Program Innocredit: to nance innovative projects through credit lines provided by the
Spanish State Financing Agency (ICO).
Program Inventa: to co-nance large industrial centres for competitiveness, through
the Ministry and the ICO.
Program Invierte: to support venture capital in the early stages of "large unique
strategic projects" with a high technological component.
Renewable energy. The 2011-2020 Plan for Renewable Energies in Spain (Renewable
Energy Plan in Spain or "PER") aims to increase the growth and development of renewable
energies in Spain.
The Energy Diversication and Saving Institute (IDAE) has been developing a number of
specic aid programmes in the renewable energy industry:
Strategic Projects Aid Programme: designed to provide incentives to companies carrying
out multi-year investment projects in energy saving and efciency technologies.
Biomcasa Programme (biomass programme): aimed at increasing the supply of biomass
generated energy, in line with the needs of potential users of hot water and air
conditioning in buildings.
Geotcasa Programme (geothermic energy): created to establish a system for nancing
geothermic installations in buildings for authorised companies and to promote a quality
offering in line with the needs of potential users of hot water and air conditioning in
buildings.
Solcasa Programme (solar energy), this programme aims to set up a system of nancing
for solar thermal facilities in buildings for authorised companies.
Central State nancial aid and incentives for Spanish regions: in compliance with
European Union limits and requirements, to encourage productive investment in certain
areas of Spain, help reduce regional inequalities and strengthen inter-territorial lower
income regions.
The Spanish regions offering the best incentives are:
Extremadura and the Canary Islands: 40% of eligible net investment.
Andalusia: 30% of the net investment from 1 January 2011 to 31 January 2013.
Castilla-La Mancha and Galicia: up to 30% of the investment.
Regional incentives include:
Repayable subsidies on approved investments.
Interest subsidies on loans obtained from nancial entities.
Grants for repayment of the above loans.
Subsidies for the employers social security contribution for common contingencies for a
maximum number of years determined by regulations.
Additionally, some regions (Autonomous Communities) provide additional incentives for
investment in areas not covered by State regulations. The main incentives are:
Repayable grants.
Special conditions for loans and credits.
Technical advice and training.
Tax incentives.
Guarantees.
Social security deductions.
Some of the Autonomous Communities have special incentives such as the Canary Islands
Special Zone (ZEC), approved by the European Commission in January 2000. It was created
to attract and encourage the investment of capital and international companies that
make a decisive contribution towards social and economic progress in the Canary Islands.
At present, the benets of the ZEC zone are valid until 31 December 2019 and may be
extended subject to authorisation by the European Commission.
European Union: the aid granted by the European Union is aimed at promoting the
development of those regions of Member States with the lowest wealth and employment,
and those suffering from industrial relocation processes.
Those incentives supplement development plans nanced by the Spanish State. They
are channelled through the government and the nancial institutions which act as
intermediaries.
100
The most important instruments include:
European Investment Bank: the EIB supports projects that foster the development of
disadvantaged regions and those of interest that benet the EU as a whole.
European Investment Fund: its two main objectives are to provide guarantees for loans of
all kinds and to acquire and manage temporary minor holdings in companies involved in
the implementation of trans-European networks.
Structural funds: these are used to nance public and private initiatives to achieve
structural improvements in the Member States and to close the gap between the most
afuent and poorest EU countries. Currently, these funds are the European Development
Fund (ERDF) and European Social Fund (ESF).
Research Programmes, Development and Innovation (R & D + I): the main programme is
the Seventh Framework Programme for Research and Technological Development (FP7),
which is the main EU instrument for funding research in Europe during the 2007-2013
period.
Appendix
I. Chinas 12th Five Year Plan
A) Introduction
After nearly two years of planning, in March 2010 the 12th Five Year Plan (FYP) was ratied
by the CPC Central Committee. The Plan will be Chinas economic and social guide for the
period from 2011 to 2015. The 12th FYP highlights the development of an inclusive growth
pattern for the country. Through this inclusive growth, the country will develop in the coming
years at a slower rate but with a greater focus on quality, while prioritising sustainable growth
and creating a consumer-driven economy. The Chinese governments main objective will be to
maintain the countrys social stability and the redistribution of wealth.
Compared to previous plans, the 12th FYP marks a turning point in the pattern of Chinas
economic growth, as the country faces the need to develop a sustainable economic growth
model based on the increase of domestic consumption and diminishing dependence on
the foreign trade sector. In order to achieve its objectives, the Government has once again
emphasised the key role of imported technologies, as well the need for private nance, both
foreign and domestic.
The Plan is built around four basic pillars: (1) encouraging domestic consumption and
addressing social inequality; (2) consolidating and upgrading strategic industries; (3)
developing the western and central areas of the country; and (4) promoting energy efciency
and environmental protection.
B) Strategic Priorities of the 12th FYP
The 12th FYP centres on the expansion of domestic demand and the reform and upgrading of
domestic systems and industries to promote quality-oriented economic growth.
The Plans Strategic Priorities are as follows:
- Lncoureg|ng domest|c consumpt|on.
- be|enc|ng soc|e| |neque||ty end |mprov|ng soc|e| we|fere.
- Conso||det|ng end upgred|ng |ndustr|e| sectors. lromot|ng the Streteg|c Lmerg|ng Sectors.
- be|enc|ng reg|one| deve|opment, focus|ng on Centre| end vestern Ch|ne.
- Suste|neb|e deve|opment end energy effc|ency.
- Reform of fnenc|e| end texet|on systems.
- Suste|neb|e urben|set|on end modern|set|on of rure| end egr|cu|ture| |nfrestructure.
C) Strategic Emerging Industries Plan
As part of the 12th FYP, the Chinese Government has placed particular emphasis on the
so-called Strategic Emerging Industries. These are seven industries chosen by the Government
for their importance for upgrading the countrys industry, the great potential they show in
terms of demand and as export platforms and the opportunities offered for China to become
a global leader in those industries.
102
The Seven Strategic Emerging Industries are:
- Lnergy effc|ency end env|ronmente| protect|on.
- Next generet|on |nformet|on techno|og|es.
- lherme end b|otechno|ogy.
- |ghend menufectur|ng.
- New Lnerg|es.
- New Meter|e|s.
- New Lnergy /utomot|ve.
Government plans are that by 2015 these seven emerging strategic industries will account
for 8% of GDP, compared to 3% in 2010, and reach 15% of GDP in 2020. An ambitious
investment plan has been prepared for the development of the emerging strategic industries:
Strategic Emerging Industries Expected Investment
Energy efciency and
environmental protection
3 trillion by 2015
Next generation information
technologies
1 trillion to be invested in IT by 2014
Pharma and Biotechnology 2009-2011, planned 850 billion in investments for
health care system reform
High-end manufacturing 1.5 trillion by 2015
New Energies 5 trillion in total by 2020 ( 3 trillion for hydropower,
wind power, nuclear power, solar energy;
1 trillion for smart grid; 1 trillion for new energy
vehicles, clean coal etc. Rail: 3.5 trillion and Subway:
1 trillion by 2015
New Materials 750 billion by 2015
New Energy Automotive Up to 1 trillion by 2020
D) What economic measures will the government be likely to take?
In order to achieve the 12th FYP targets, the Chinese Government will need to implement
several economic measures to boost the countrys production and strengthen its peoples
spending power. We foresee that the most important economic measures will be as follows:
- Increase industrial demand for steel, energy, construction materials, non-ferrous metals, etc.
through state-sponsored construction of housing, transportation and utility infrastructure
and industrial upgrading.
- Stimulate domestic consumption using direct subsidies to consumers, wage increases, price
controls and improved logistics efciency.
- Expand channels of nancing for enterprises and improve nancial services through the
liberalisation of interest rates and diversication of nancial services.
- Guarantee the control of supply and pricing of major commodities by central government.
- Gradually position the as an international currency. Reduce the growth of imports of
important resources and commodities, particularly production factors; while simultaneously
increasing exports of value-added products to guarantee a continuous contribution to
economic growth.
- Expand Chinese presence in international markets, especially in African and Middle Eastern
countries, which have low barriers to entry for Chinese rms and carry signicant strategic
advantages.
E) Major issues and implications
The 12th FYP period marks a possible turning point in the pattern of Chinas economic
growth, driven by internal and external pressures. This is a very ambitious economic and
social development plan that will require considerable effort by Chinas central government to
promote the required regulatory reforms. Considerable private sector involvement will also be
required to cover the nancing needs of the development plan.
Social imbalances
First of all it will be necessary to increase the minimum wage of urban and rural workers and
improve their employment conditions through the implementation of a pension system and
the upgrading of basic healthcare systems. Growing social imbalances between urban and
rural populations is a major concern for the government and it will therefore promote the
adoption of new agricultural technologies to increase productivity. The government will also
accelerate the development of affordable housing, increasing the housing supply for low-
and middle-income sections of society and reform the household registration system (Hukou
system).
Investment
Domestic and outbound investment and the use of foreign FDI will need to be reformed
to promote the consolidation of traditional industrial sectors and encourage the
internationalisation of Chinese companies. Incoming FDI would be encouraged to focus on
high-tech and emerging industries rather than industries with over-capacity problems, highly
polluting industries or industries of national strategic importance. At the same time, the
government will promote the expansion of the services industry and encourage domestic
enterprises to invest, operate, acquire and cooperate overseas.
104
Continental China
The development of Chinas second- and third-tier cities away from the coast will require
considerable investment in infrastructure, telecommunications and public services. Industrial
production centres will need to be relocated away from the cities and site production facilities
away from the coast. The Chinese government will need to grant subsidies and tax incentives
and also build over 85,000 km of new roads and 40,000 km of high-speed railways.
Tax system reform
The Chinese tax system will require further upgrading to ensure social equality and guard
against possible asset bubbles by levying a property tax, for instance, and to ensure that the
government earns revenues from resources, real estate and other sources.
Green energy
Implementation of the industrial development envisaged in the FYP will require an enormous
amount of energy and resources. The country will need to promote energy efciency and the
use of renewable energies. It will therefore need to promote private investment in renewable
energies such as wind, solar and hydraulic energy generation. Environmental protection and
the creation of waste treatment plants will be major challenges for Chinas development in
coming years.
Implications for SOEs
State Owned Enterprises will need to improve their real competitiveness overseas. Cross-
border expansion and/or investment can combat decreasing competiveness in the domestic
market, as monopolistic pricing models wane in effectiveness. For instance, in 2009 CNPC
beat Exxon Mobil as the leading company in global market capitalisation in its Industry.
However, its prot per capita is US$ 10,000, in comparison to Exxon Mobils US$ 500,000.
China is urgently seeking sources of supply to reduce its dependence on imported resources.
State-owned enterprises will play a major role in large outbound M&A energy, resources, and
agricultural sectors. Enterprises will need to develop overseas strategies to effectively evaluate
and manage the risks relating to policies, laws, price assessment and integration.
Implications for Private Enterprises
Like State Owned Enterprises, private enterprises will be encouraged to go abroad to look
for investment opportunities. Accordingly, they will need to improve their international
competitiveness and establish an appropriate outbound strategy.
II. How Can ICBC Help?
Industrial and Commercial Bank of China Limited (ICBC), established in January 1984, is
the largest commercial bank in China. On October 27th, 2006, ICBC was listed on the
stock exchanges of Shanghai and Hong Kong. Through its worldwide network consisting
of 16,227 domestic ofces, 203 overseas ofces and 1,562 correspondent banks, ICBC
provides comprehensive nancial products and services to more than 4.12 million corporate
banking customers and 259 million retail banking customers. ICBC has strong international
presence and trans-markets operations around the globe on top of its leading position in most
commercial banking areas in domestic market. As of 31 December 2010, ICBC recorded total
assets of 13.45 trillion (equivalent to US$ 2.03 trillion) and ranked top among listed banks
worldwide in terms of capitalization, protability and customers deposits.
In October 2010, ICBC obtained the approval from Bank of Spain to the banking license for
its branch in Spain, which signies ICBCs successful landing on the Spainish market and
becoming the rst Chinese commercial bank, and only one by now, to set up operating
branch in Spain.
ICBC (Europe) S.A Sucursal en Espaa (ICBC Spain Branch) commenced business on 24
January 2011, offering comprehensive, professional, exible and diversied banking services
at all times. We are positioned to become a nancial bridge between China and Spain to
boost bilateral economic and trade relationship. Our customers include Spanish overseas
Chinese individuals, Chinese invested companies, enterprises with Sino-Spanish trade and
investment ties, Spanish corporate, Multinationals and nancial institutions. By virtue of
ICBC Groups leading market position, quality customer base, diversied business structure,
strong innovation and excellent brand value, ICBC Spain Branch can cater to various nancial
requirements such as account opening, deposits, remittances, nancing, and wealth
management etc.
We have a team of experienced, professional, vigorous and creative staff who work closely
with our clients to understand and analyze their needs. We hope to forge a long-term and
reliable partnership with our clients to grow and thrive together. For those Chinese and
Spanish customers who look to explore trade and investment opportunities in both markets,
ICBC Spain can be a dependable business partner and the banking brand of best choice.
Products & Services
Retail Banking
1. Deposits
Current deposit and time deposit in , US$ and (Renminbi, the Chinese Yuan). Structural
deposit product tailored to customers unique needs available. Opening Account Witness is
our featured service.
106
2. Remittance
Fund transfers in , US$ and . Featured products include Express Payment and
Pre-settlement Exchange Remittance. Fund transfer between China and Spain through
ICBC is faster and more cost-efcient, and remittance is our unique products in local
market.
3. Banking Cards
A range of banking card products including Euro Debit Card, Credit Card, China UnionPay
Dual-currency Card etc.
4. Foreign Exchange
Foreign exchange and currency conversion between , US$ and etc.
5. Wealth Management
Comprehensive investment and wealth management products.
6. Internet Banking
Convenient internet banking for account management, deposit and fund transfer.
7. Certicate and guarantee
Issuance of deposit certicate and guarantees.
8. Others
Other services include Safe Deposit Box, Pledged Personal Loans, Insurance Referrals and
son on.
Corporate Banking
1. Deposits
Current deposit and time deposit in , US$ and . Structural deposit product tailored to
customers unique needs available.
2. Syndicated Loan
Participate in syndications in primary and secondary markets.
3. Corporate Loan
Term loans, Revolving Facilities, Overdraft, Discount and Factoring.
4. Project Financing
Various project nancing as well as Aircraft Financing and Ship Financing.
5. Trade Finance
Letter of Credit, Import & Export Financing, Packing Loan, Shipping Guarantee, International
Factoring and Forfeiting etc.
6. International Trade Settlement
Standard settlement services such as L/C, T/T and Collection payments, all types of Bank
Guarantees, especially payment for cross-border trade with Chinese importers & exporters.
7. Treasury Business
FX trading, currency and interest hedging products, and related products.
8. Others
Corporate Internet Banking, Global Cash Management, Investment Banking Consultancy,
Payroll Service and other featured products.
Examples of how ICBC can help
As part of the ICBC Group, ICBC Spain Branch has close links with ICBC branches in China and
ICBC group companies across a variety of countries and markets to offer innovative solutions
to our customers nancial needs both in China and Spain.
- Case Example 1: Establishing new company in Spain
A Chinese company is setting up a new business in Spain. ICBC Spain Branch helps the
company open account to receive capital fund, and issue the certicate of funding for the
company to complete commercial registration formalities. Moreover, the Bank provides
account and banking card services to the Chinese expatriate staff of the company to meet
their daily spending needs.
- Case Example 2: Business Operation in Spain
The Spanish branch of a Chinese company operates and sells in local market. ICBC Spanish
Branch provides the following services:
Opening accounts for the company and its staff to meet the daily settlement and payment
needs, and payroll service.
Supply chain nance to facilitate the companys purchase of raw materials.
Factoring service based on the companys account receivables to help it expand sales.
Other value-added services including wealth management, risk mitigation solutions.
- Case Example 3: Merger and Acquisition
A Chinese corporate is in the process of acquiring a signicant part of shares of Spanish
company, and has a plan to set up a joint-venture in China in near future. ICBC Spain Branch
joins hands with the investment banking arm of ICBC Group in Hong Kong to provide
investment banking services to the company. The solution package includes acquisition
nance structuring, initial public offering in Hong Kong when conditions mature, or issuance
of debt.
- Case Example 4: Parent Guaranteed Financing to Subsidiary
In most cases its not easy for the Spanish subsidiary of a Chinese company to get sufcient
108
credit from local banks at the infant stage of its business. If in China ICBC maintains
satisfactory business relationship with and has enough credit line for the parent company, it
can issue a bank guarantee, against the counter guarantee of the parent company, to ICBC
Spain Branch. Then ICBC Spain Branch will grant a loan to the subsidiary company in Spain.
- Cese Lxemp|e b. C|obe| Cesh Menegement
A Chinese multinational company sets up its European regional headquarter in German
and has a branch in Spain. The German headquarter wants to closely monitor the Spanish
branchs account movement and make fund transfer conveniently whenever necessary. ICBC
Spain Branch designs the internet-banking based Cash Management Solution which enables
the company to easily check details of its Spanish branchs account at any time, and realize
pooling and distribution of funds through different levels of authorization.
Contact
Industrial and Commercial Bank of China (Europe) S.A Sucursal en Espaa
Paseo de Recoletos, 3, 28004, Madrid, Spain
Tel: +34 912168888
Fax: +34 912168866
Website: www.icbc.com.es
III. How can Deloitte help?
Chinese Services Group
Deloittes large client base in China consists of both state-owned and privately owned
enterprises ranging in size from medium to very large enterprises. We have considerable
experience working with Chinese enterprises and a history of successfully supporting their
globalising activities. We are therefore familiar with the particular needs of enterprises in China
that are investing globally and describe below the special support structures we have created
to provide the highest level of support and the principles on which our service relationships
are based.
The Deloitte global network contains a platform that is unique among professional services
rms the Chinese Services Group (CSG). Over the course of its seven-year history in the
Deloitte organisation, the CSG has become a unique resource in the market for companies,
government bodies and investment organisations both in China and abroad. The network
extends to all corners of the globe and our understanding of serving Chinese companies from
Dsseldorf to Lagos and from Perth to Sao Paulo is vast.
The CSG serves as the unifying force to market, facilitate and deliver Deloitte professional
services to both multi-national corporations investing in China and Chinese companies
expanding overseas. Operating as a platform to leverage China expertise, bridge the cultural
gap and to ensure client service excellence, the Global CSG, in coordination with the China
rm, complements a multi-member rm, multi-industry, multi-functional and multi-disciplinary
approach.
Deloitte's CSG practice has coverage in nearly 120 locations around the world, spanning six
continents. With such an expansive geographical reach, combined with a decentralised group
of dedicated China practitioners ready to serve your company, Deloitte can serve you no
matter where you expand overseas.
GCSG Coverage
110
Our global practice
The Deloitte global network comprises more than 168,000 people in 140 countries. Our
commitment to clients and ability to team across borders continue to set our member rms
apart in the marketplace. Deloitte member rms believe that to be called global advisers,
it isnt enough to have a presence everywhere around the world and clients in every city;
whats crucial is having a culture of collaboration that draws upon our strengths, regardless of
location. Our culture is the strength of Deloitte. We look forward to embrace the challenges
ahead and achieve our vision to be the Standard of Excellence.
Our practice in China
From being the rst foreign accounting organisation to establish a presence in Shanghai,
Deloitte is now one of the largest professional services organisations in the Chinese Mainland.
With a network of ofces in Beijing, Chongqing, Dalian, Guangzhou, Hangzhou, Hong Kong
SAR, Jinan, Macau SAR, Nanjing, Shanghai, Shenzhen, Suzhou, Tianjin, Wuhan and Xiamen,
we have over 8,000 people located across the most vibrant economic areas in China. Backed
by our global network, we deliver the full range of audit, tax, consulting and nancial advisory
services to our national, multinational and growth enterprise clients.
Deloitte was the rst foreign accounting organisation to establish a presence in China,
opening an ofce in Shanghai in 1917, and is now one of the largest professional services
organisations in China. Our clients include over 800 MNCs and their afliated companies and
around one-third of all companies listed on the Hong Kong Stock Exchange.
Our practice in Spain
Deloitte is the leading professional services company in Spain. It bases its leadership on the
excellence of its professionals knowledge and on its client service approach in all its service
lines. The Deloitte network in Spain is composed of over 4,200 professionals and 20 ofces
across Spain, including all of Spains major cities, such as Madrid, Barcelona, Zaragoza,
Valencia, San Sebastian, La Corua, Bilbao and others.
In order to provide a specialised service to its clients, Deloitte structures its human capital into
industries and geographical areas, thus contributing greater value added by providing a quality
service adapted to and catering for the special features of each organisation. This division by
industry allows us to have teams of experts in almost all the various industries and to gain
in-depth knowledge of the Spanish market.
Our Services
Our business model, with in-depth competencies in audit, tax, consulting and nancial
advisory services, uniquely positions Deloitte to deliver superior value and assist clients in
managing change. Member rms are assisting companies to comply with new regulatory
requirements so that they can successfully participate in the public capital markets. Deloitte
is integrating clients technology, processes and human capital so that they can compete
more effectively. Below is a high-level introduction to the key services related to outbound
investment:
Audit Services
With our experience in local and international laws and regulations, we can assist you with the
all-important obligation of meeting applicable reporting requirements. Our audit specialists
examine your nancial statements and accounting records to give you an independent
opinion on reports to shareholders, directors, trustees and others. Our traditional role as
Auditors also places us in an ideal position to build up a clear understanding of your business,
enabling us to help you identify the major risks and opportunities in your strategies and
activities. Additionally, we provide nancial statement reviews, fact-nding reports on nancial
information, capital verication assurance, business operation assessment, and reporting
services for foreign exchange and special purposes.
As your Reporting Accountants, we help prepare and submit audited statements and accounts
in compliance with listing requirements. At the pre-listing stage, we can play a pivotal role in
assisting you with approaching sponsors and underwriters, and in providing consultation and
advice in your negotiations with them. With state of the art technology, our professionals
deliver efcient and cost effective audit solutions to you.
Consulting Services
As the worlds largest management consulting rm, we help organisations build value by
providing insights that create new futures and doing the hard work to improve performance.
Delivering this kind of value requires a broad range of talent and capabilities across human
capital, strategy & operations and technology and importantly, aligned to the unique needs
of specic sectors, businesses and organisations.
Our clients look to us for the ability to implement the ideas we present. They expect excellent
performance that draws upon our breadth of industry and service experience. Simply put, we
provide our clients with world-class insights that generate tangible and measurable impact.
Enterprise Risk Services
With continual technological innovation, increased accountability at boardroom and senior
management levels and changes to the regulatory environment, managing risk has become
more complex. Our Enterprise Risk Services (ERS) combine to help you better identify, measure
and manage risk and enhance the reliability of your control system and procedures.
Financial Advisory Services
The Financial Advisory practice at Deloitte provides expert and in-depth advice to corporate
clients, private equity houses, MBO/MBI teams, entrepreneurs and government. We offer
strategic and nancial advisory services to help assess, measure and minimise the impact of
fraud on business; business and advisory services to companies and their stakeholders in both
in-court and out-of-court reorganisations and much more.
Our China Financial Advisory team is part of Deloitte's Asia Pacic network and, as a result,
we are experienced in advising on complex cross-border assignments at a local level and
offer you a breadth of sector expertise that few can rival. We are able to draw upon specialist
112
knowledge within Financial Advisory and work across other areas of the rm to help you
successfully implement a solution no matter how complex it may be.
The breadth of our skills is just the starting point. We combine these skills to develop well-
rounded solutions based on a full understanding of your ambitions, your business and the
environment in which you compete. We believe this integrated approach gives clients of
Deloitte a clear commercial advantage.
Tax Services
Whether you are looking to expand overseas or to invest in Hong Kong or the Chinese
Mainland, you will need to maximise the efciency and effectiveness of your assets. Our tax
specialists are made up of professionals from the organisations international tax practice,
as well as local consultants, a number of whom are former tax ofcials with a thorough
understanding of tax systems and regulations in Hong Kong, the Chinese Mainland as well as
in any other tax jurisdictions in which you may be interested.
IV. Deloitte International Tax Source
Professionals of the member rms of Deloitte Touche Tohmatsu Limited have created
the Deloitte International Tax Source (DITS), an online resource that assists multinational
companies in operating globally, placing up-to-date worldwide tax rates and other crucial tax
material within easy reach 24/7.
Connect to the source and discover:
A unique tax information database for 65 jurisdictions including
- Corporate income tax rates;
- Domestic withholding rates;
- Historical corporate rates;
- In-force and pending tax treaty rates on dividends, interest and royalties;
- Indirect tax rates (VAT/GST/sales tax); and
- Holding company and transfer pricing regimes.
Guides and Highlights Deloittes Taxation and Investment Guides provide an analysis of the
investment climate, operating conditions and tax system of most major trading jurisdictions while
the companion Highlights series summarizes the tax landscape of more than 130 jurisdictions.
Tax publications Global tax alerts and newsletters provide regular and timely updates and
analysis on signicant cross-border tax legislative, regulatory and judicial issues.
Tax tools Our suite of tax tools include annotated, ready-to-print versions of the holding
company and transfer pricing matrices; expanded controlled foreign company coverage for
DITS countries; and information exchange matrix and monthly treaty update; and expanded
coverage of VAT/GST/Sales Tax rates.
Webcasts Live interactive webcasts and Dbriefs by Deloitte professionals give you valuable
insights into important tax developments affecting your business.
DITS is free, easy to use and always available!
www.dits.deloitte.com
V. Ofce locations
Deloitte ofces in China
Beijing Branch
8/F Ofce Tower W2
The Towers, Oriental Plaza
1 East Chang An Avenue
Beijing 100738
China (PRC)
Phone: 86-10-8520 7788
Fax: 86-10-8518 1218
Chongqing
Room 10-12, 13/F International Trade Center
Chongqing
38 Qing Nian Road
Yu Zhong District
Chongqing 400010
China (PRC)
Phone: +86 23 6310 6206
Fax: +86 23 6310 6170
Dalian Branch
Room 1503 Senmao Building
147 Zhongshan Road
Dalian 116011
China (PRC)
Phone: 86-411-8371 2888
Fax: 86-411-8360 3297
Guangzhou Branch
26/F Teemtower
208 Tianhe Road
Guangzhou 510620
China (PRC)
Phone: 86-20-8396 9228
Fax: 86-20-3888 0119 0121
Hangzhou Branch
Room 605, Partition A
EAC Corporate Ofce, 18 Jiaogong Road
Hangzhou 310013
China (PRC)
Phone: 86-571-2811 1900
Fax: 86-571-2811 1904
Hong Kong SAR Ofce
35/F One Pacic Place
88 Queensway
Hong Kong, SAR China (PRC)
Phone: 852-2852 1600
Fax: 852-2541 1911
Macau SAR
19/F The Macau Square
Apartment H-N
43-53A Av. do. Infante D. Henrique
Macau, SAR China (PRC)
Phone: 853-2871 2998
Fax: 853-2871 3033
Nanjing Branch
Room B, 11th Floor Golden
Eagle Plaza
89 Hanzhong Road
Nanjing 210029
China (PRC)
Phone: 86-25-5790 8880
Fax: 86-25-8691 8776
Shanghai
30/F Bund Center
222 Yan An Road East
Shanghai 200002
China (PRC)
Phone: 86-21-6141 8888
Fax: 86-21-6335 0003
Shenzhen Branch
13/F China Resources Building
5001 Shennan Road East
Shenzhen 518010
China (PRC)
Phone: 86-755-8246 3255
Fax: 86-755-8246 3186
Suzhou Branch
Suite 908, Century Financial Tower
1 Suhu Road Industrial Park
Suzhou 215021
China (PRC)
Phone: 86-512-6289 1238
Fax: 86-512-6762 3338
Tianjin Branch
30/F The Exchange North Tower No.1
189 Nanjing Road, Heping District
Tianjin 300051
China (PRC)
Phone: 86-22-2320 6688
Fax: 86-22-2320 6699
114
Deloitte ofces in Spain
A Corua
Ferrol, 1
A Corua 15004
Spain
Phone: +34 981 12 46 00
Fax: +34 981 12 46 08
Alicante
Maisonnave, 28 bis
Alicante 03003
Spain
Phone: +34 965 92 17 70
Fax: +34 965 22 89 67
Barcelona
Avenida Diagonal 654
Barcelona 08034
Spain
Phone: + 34 93 280 40 40
Fax: + 34 93 280 28 10
Bilbao
Calle Ercilla, 24
Bilbao 48011
Spain
Phone: +34 944 44 70 00
Fax: +34 944 22 88 21
Granada
Acera del Darro, 10
Granada 18005
Spain
Phone: +34 958 80 56 76
Fax: +34 958 80 56 78
Huesca
Edicio Flix de Azara
Ctra. Zaragoza N-330, KM 566
Huesca 22197
Spain
Phone: +34 91 514 50 00
Fax: +34 91 514 51 80
Las Palmas
Presidente Alvear, 52
Las Palmas de Gran Canaria 35007
Spain
Phone: +34 928 47 25 10
Fax: +34 928 26 98 26
Madrid
Plaza de Pablo Ruiz Picasso,1
Torre Picasso
Madrid 28020
Spain
Phone: 00 34 91 514 50 00
Fax: 00 34 91 514 51 80
Mlaga
Edicio Mlaga Plaza
c/ Don Cristin, 2
Malaga 29007
Spain
Phone: + 34 95 207 55 00
Fax: + 34 95 207 55 10
Wuhan Branch
Unit 2, 38/F New World International Trade Tower
568 Jianshe Avenue
Wuhan 430022, PRC
China (PRC)
Phone: +86 (27) 8526 6618
Fax: +86 (27) 8526 7032
Xiamen Branch
Unit E, 26/F International Plaza
8 Lujiang Road, Siming District
Xiamen 361001, PRC
China (PRC)
Phone: +86 (592) 2107 298
Fax: +86 (592) 2107 259
Murcia
Avda Teniente Montesinos, 10
Planta 17
Edicio Torre Godoy
Murcia 30100
Spain
Phone: +34 968 27 09 10
Fax: +34 968 27 09 11
Oviedo
Calle Palacio Valds 9
pl. 1 y 2. Edicio Palacio Valds
Oviedo 33002
Spain
Phone: +34 985 21 98 49
Fax: +34 985 21 88 57
Palma de Mallorca
Avda Comte de Sallent n3
Palma de Mallorca 07003
Spain
Phone: +34 971 71 97 27
Fax: +34 971 71 00 98
Pamplona
Avda. Po XII, 30 Bis
Pamplona 31008
Spain
Phone: +34 948 17 00 86
Fax: +34 948 17 27 91
San Sebastin
Pza. Julio Caro Baroja, 2, 2 Planta
San Sebastin 20018
Spain
Phone: +34 943 26 78 00
Fax: +34 943 26 78 01
Sevilla
Amrico Vespucio, 13
Isla de la Cartuja
Sevilla 41092
Spain
Phone: +34 954 48 93 00
Fax: +34 943 26 78 01
Tenerife
Leoncio Rodrguez, 3
Edicio El Cabo
Sta. Cruz de Tenerife 38003
Spain
Phone: +34 922 20 94 50
Fax: +34 922 20 94 55
Valencia
Av. de Aragn, 30
Edicio Europa
Valencia 46021
Spain
Phone: +34 96 307 09 00
Fax: +34 96 307 09 60
Vigo
Av. Garca Barbn, 106
Vigo 36201
Spain
Phone: +34 986 81 55 00
Fax: +34 986 81 55 06
Zaragoza
Maria Zambrano, 31
Ed. World Trade Center
Torre Oeste - Plta. 16
Zaragoza 50018
Spain
Phone: +34 976 21 46 75
Fax: +34 976 23 55 40
116
VI. Deloitte team involved in this edition
Coordination
Fernando Anaya
Senior Manager
fanaya@deloitte.es
Chinese Services Group
Fernando Pasamn
Partner
fpasamon@deloitte.es
Fernando Anaya
Senior Manager
fanaya@deloitte.es
Jos Sotomayor
Senior Consultant
jsotomayor@deloitte.es
Mercantile Department
Gonzalo Navarro
Partner
gnavarro@deloitte.es
Mara Jos Gil
Senior Manager
margil@deloitte.es
Accounting Department
Ral Fidalgo
Director
rdalgo@deloitte.es
Tax Department
Brian Leonard
Partner
bleonard@deloitte.es
Fernando Anaya
Senior Manager
fanaya@deloitte.es
Vernica Ruiz
Manager
vruiz@deloitte.es
Labour Department
Guillermo Rujas
Partner
grujas@deloitte.es
Borja Palacios
Manager
bopalacios@deloitte.es
Banking Department (Regulatory issues)
Gloria Hernndez
Partner
ghernandezaler@deloitte.es
Virgina Arizmendi
Manager
varizmendi@deloitte.es
Banking Department (tax issues)
Ignacio Garca
Partner
igarciaalonso@deloitte.es
Pedro de la Iglesia
Senior Manager
pdelaiglesia@deloitte.es
Public Sector Consultancy
Ignacio Nio
Director
inino@deloitte.es
Alberto Gutirrez
Manager
agutierrezrojo@deloitte.es
Beln Garca
Senior Consultant
bgarciaquintana@deloitte.es
CIBS Department
Carlos Martn
Senior Manager
carmartin@deloitte.es
Arturo Calvo
Senior Consultant
acalvopelayo@deloitte.es
China Firm
Timothy Klatte
Partner (Shanghai)
tiklatte@deloitte.es
For more information, please, visit www.deloitte.es
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about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member rms.
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2011 Deloitte, S.L.
Designed and produced by CIBS, Communications, Corporate Image and Business Support, Madrid.

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