• What is the “Registro de Inversiones Exteriores” –“Register of Foreign Investments”- and when is it necessary to declare an investment that has been made?
• Who should make the declaration to the Foreign Investment Register?
• Labor costs that must be borne by the company for each employee
• Incentives for hiring employees
• How many technology and science parks does Spain have?
• What is a Pyme?
• Are there any tax breaks for Pymes?
• What are “Uniones Temporales de Empresas –UTEs” -“Temporary Business Alliances”-?
• How do “Uniones Temporales de Empresas –UTEs” -“Temporary Business Alliances”- pay tax?

What is the “Registro de Inversiones Exteriores” –“Register of Foreign Investments”- and when is it necessary to declare an investment that has been made?

Investments and withdrawals of foreign capital in Spain must be declared to the “Registro de Inversiones Exteriores” –“Register of Foreign Investments”- within the Ministry of Economy and Competitiveness, for administrative, statistical or economic purposes. Investments from tax havens must be declared beforehand unless they are tradeable stocks that have already been subject to public issue in an official secondary market.

Who should make the declaration to the Foreign Investment Register?

a) As a general rule:

• The non-residents responsible for the investment.

b) Exceptions:

• Investment service companies, credit agencies, other authorized financial entities or entities whose involvement is essential for share transfer or which act as custodians or administrators of purchased shares when the investment is made in tradeable stocks;
  The Spanish company in which an investment is made, in the case of nominal shares;
  Investment Fund managers when the investment is made using Spanish funds.

Labor costs that must be borne by the company for each employee

As a general rule, all companies intending to hire employees in Spain should bear the following social costs:

• Salary: the salary is the financial compensation that an employee receives for services provided to his/her employer. The amount is agreed between employer and employee. It is essential that the minimum requirements of the “Convenio Colectivo” –“Collective Agreement”- for the relevant sector are met although any variations that benefit the employee are of course permissible. “Convenios Colectivos” –“Collective Agreements”- tend to define the minimum salary for workers on the basis of job categories and these are upheld by the Law.
• Contributions: All companies that employ personnel must make Social Security payments on their behalf to the “Tesorería General de la Seguridad Social” –“General Treasury of Social Security”-. The amount is calculated by applying a percentage to the contribution base for each employee which, in turn, depends upon their salary. The maximum contribution base for 2011 is 3,230.10 euros/month. The percentage applied varies depending upon the concept applied to it, although the general is 28.30%. This percentage shall be added to other percentage that varies depending upon the business activity of the company.
• Other costs: The items detailed above are the principal costs that the company will have to bear. Nonetheless, depending on the “Convenio Colectivo” –“Collective Agreement”- in question, there may be other costs that the company must bear (fringe benefits, bonuses, pensions etc).

Incentives for hiring employees

In Spain, there are numerous incentives for hiring staff. As a general rule, they are designed to encourage the creation of permanent employment and are especially generous for groups that for reasons of age, sex, disability etc. find it difficult to enter the labor market under normal circumstances. These incentives usually take the form of discounted Social Security contributions and information regarding eligible contracts, discounts applicable for each case and so on, can be found at this link (only available in Spanish).

How many technology and science parks does Spain have?

Spain, at the beginning of 2010, had more than 80 technology and science parks distributed throughout the 17 Autonomous Communities. The majority of these parks are part of the “Asociación de Parques Científicos y Tecnológicos de España (APTE)” –“Association of Science and Technology Parks of Spain”-, whose website is: www.apte.org.

What is a Pyme?

A Pyme is an SME (Small or médium-sized enterprise). They are defined by number of employees, turnover and annual balance sheet. The following is the European Commission’s definition as published in Recommendation 2003/361CE (“Recomendación 2003/361CE de la Comisión”):

• A medium-sized enterprise is defined as a company with fewer than 250 employees and whose annual turnover does not exceed 50 million Euros or whose annual balance sheet does not exceed 43 million Euros.
• Likewise, a small enterprise is defined as a company with fewer than 50 employees and whose annual turnover and annual balance sheet are below 10 million Euros.

PYMEs with a turnover of less than €10,000,000 per tax period have a special system of taxes, with lower tax rates (25% on income under €300,000 and 30% on the excess) as well as other tax benefits.

Are there any tax breaks for Pymes?

In accordance with regulations governing corporation tax, those companies whose turnover corresponding to the tax period immediately preceding is less than 10 million Euros shall be eligible for certain tax benefits.

• With regard to the amortization of new tangible and intangible fixed assets and real estate investments, they are able to amortize these either freely in certain instances, or at an accelerated rate in others.
• In addition, loss for depreciation of credit to cover risk for insolvency is deductable up to a limit of 1% of receivables.
• As far as the tax rate is concerned, the idea is that Pymes pay 25% on the first €300.000, and 30% on the rest unless they meet certain employment retention criteria and have a turnover lower than €5,000,000 and an average workforce of fewer than 25 employees. In this case, the tax rate would be 20 and 25 % respectively.
• Additionally, those entities whose net turnover is less than 1 million Euros will be exempt from the tax on business activities.

What are “Uniones Temporales de Empresas –UTEs” -“Temporary Business Alliances”-?

UTE is the acronym used in Spain for “Uniones Temporales de Empresas” -“Temporary Business Alliances”-. This can be defined as a system in which two or more companies which have a common interest come together to carry out a project or provide a certain service, temporarily setting themselves up as a single company for the duration of the project or service.

The UTE does not have its own legal personality, and so the tax base resulting from the UTE (positive or negative) is assigned to the participants in the temporary joint venture proportionally according to the percentage held as indicated in the articles of association.

Nonetheless, UTEs behave like independent companies reporting to a single authority and as such should not be confused with joint ventures which are set up as contractual agreements.

How do “Uniones Temporales de Empresas –UTEs” -“Temporary Business Alliances”- pay tax?

As regards direct taxation, a special tax system is applicable to temporary joint ventures which meet certain requirements. This system is similar to the fiscal transparency system, although with particular features (further information).

 

Prepared by: