Modifies its investment control regulation and expands reporting obligations for inward and outward FDI

01 Sep 2023

On 4 July 2023, the Government of Spain approved Royal Decree 571/2023. The decree, which entered into effect on 1 September 2023, builds upon Law 19/2003 of July 4, 2003. It further aligns Spain's foreign investment framework with EU Regulation 2019/452 and outlines scenarios where the general liberalized system for foreign investments may be suspended, requiring prior administrative approval if the investment is deemed to have an impact on public order, public security, public health, or national security.

Key changes include refined definitions for strategic sectors and clarified definitions of critical and dual-use technologies. The exemption regime undergoes substantial revisions, exempting investments in strategic sectors if the acquired company's turnover is below €5 million, as well as short-term investments lacking substantial influence and low-risk operations in the energy sector. Notably, the blanket exemption for investments under €1 million has been removed. Furthermore, the decree mandates that all authorization applications, irrespective of their size, follow a standardized process with a maximum decision period of three months. It establishes a legal foundation for prior consultation, making it obligatory for consulted entities, and enforcing a deadline of 30 working days for resolutions.

In addition, the decree introduces significant changes related to the mandatory reporting of Foreign Direct Investment (FDI), both inbound and outbound, in the Investment Registry of the Ministry of Industry, Trade, and Tourism. It also extends reporting requirements to encompass new transactions not covered by previous regulations. These include intragroup financings, specific shareholder contributions to Spanish company equity without capital increases, and reinvestments of profits in companies. Furthermore, the obligation to declare is eliminated for investments in transferable securities that do not seek to influence control and fall under the category of portfolio investments.