The Spanish market is advantageous to foreign investors right now because it is one of the few countries within the EU that is focusing on facilitating foreign entrepreneurship. Spain’s goal is to give a boost to its economy by internationalizing it and has therefore enacted several laws in furtherance of that goal. One of them is Law 14/2013 in Support of Entrepreneurs and Internationalization, which grants residential status to a certain foreign investors. The foreign investor may apply for a residential permit, called a Golden Visa, for him-or her- self and his or her immediate family* provided that the foreign investor realizes:
- A real estate investment, for one or more properties free of any liens or encumbrances, valued at €500,000 or more.
- An investment in Spanish companies or investment funds for a value of €1,000,000 or more;
- An investment in Spanish government bonds in the amount of € 2,000,000 or more;
- Build a business or distribute an innovative product that will benefit Spain’s public and economic interests and which(no amount requirements):
- Creates jobs
- Has a notable socio-economic impact;
- Contributes to scientific or technological innovation.
With a Golden Visa, the investor may reside and work in Spain and travel with ease to any country part of the Schengen territory.
*Immediate family refers to: a spouse or domestic partner, and children under 18 years of age or children or elders over 18 years of age who are economically dependent on the investor (30 July 2015 reform of the aforementioned law).
In regards to real estate investments, it is important to be aware of the significant drop in prices in recent years. If the plan is to open a new business in Spain, finding the adequate venue will be very easy, not to mention cheap. In some areas of Spain, real estate is at an alluring 45% low, as opposed to other EU states such as the UK. For more information about optimum places to invest, read here.
Another incentive is the steady decrease of taxes in the past few years. Once issued a Golden Visa, a foreign investor is required to pay taxes on the totality of his or her assets owned around the world and on his or her Spanish earnings. These are called the Net Asset and the Capital Gain taxes. For example, the current rate for a net estate valued at 700,000€ or more is between 0.2% and 2.5% depending on the Spanish city the investor wishes to reside in. As of now, there are no ceilings or restrictions on a new company’s earnings. In fact, Capital Gains taxes have been reduced from a rate in the mid-20s to 20% in 2015, and is projected to be set at 19% in 2016.
If one wishes to retain a non-resident status, the investor must only pay taxes on Spanish assets. In addition, the Spanish government has signed treaties with many countries preventing double taxation, making sure Spanish assets are only taxed in Spain. Another method to benefit from additional tax reduction is participating in the Spanish Social Security System.
While it is clearly a good time for companies to be profitable with all the advantages provided, the failure rate of new companies is quite high. To minimize this possibility for our clients, we at Mariscal Abogados have done a study on failed ventures. Upon a closer look, the companies that have failed have two things in common: 1) the lack of completing a due diligence, and 2) the failure to understand the vital need for legal assistance.
The reality is that there is a plethora of administrative and legal procedures required when making a significant investment in Spain. Having them all done personally can be a difficult feat, especially when new to Spain, as most of these procedures require a certain level of legal expertise in foreign investment. This is especially convenient for clients who have to travel often or who are not planning on establishing their main domicile in Spain.
This article is not considered as legal advice