Doing Business Internationally: Spain

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Christy: Hello, everyone, and welcome to today's webinar, "Doing Business Internationally: Spain." My name is Christy DeMaio Ziegler, and I will be your moderator.

Please join me in welcoming our host, Helena Ledic, an associate general counsel for CSC in the Chicago office. Helena?

Helena: Thank you so much, Christy, for the introduction. Everyone in the audience, I am delighted to introduce to you our speakers today for the "Doing Business International Spain" series. We're joined today with Carmen Rozpide. Carmen is the Managing Director for CSC in Spain. And then we'll also be joined with Ana Freire, who is the Business Unit Manager for Legal in CSC Spain. So Carmen?

Carmen: Hello, everybody. Very pleased to share with you all today why Spain is such an interesting jurisdiction. We hope that at the end of this webinar our audience gets a more clear picture on the advantages of doing business in Spain.

Helena: First, let's talk about our agenda today for our Spanish webinar. First we'll learn a little bit about CSC. We'll talk a little bit about why Spain. We'll get into doing business, those legal and regulatory considerations. We'll then go into entry options for foreign investors. And, of course, we'll talk about how CSC can help.

A little bit about CSC. For more than 120 years, CSC has been the partner of choice for companies around the globe, trusted to handle everything from incorporating a company through maintaining compliance, to corporate transaction work, protecting digital assets from the threats of the online world, and everything in between. We offer the solutions and technology that keep businesses running in the background, allowing clients to focus on the important work of growing their business.

With our global footprint, CSC has offices and capabilities in more than 140 jurisdictions across Europe, the Americas, Asia-Pacific, and the Middle East. We're a global company capable of doing business wherever our clients are, and we accomplish that by employing local experts, such as Carmen and Ana, in every business we serve.

Let's learn a little bit about Spain first. It's the 13th largest recipient of foreign investments in the world, and it's got the 14th largest economy in both the European Union and the eurozone. It's the second largest auto manufacturer in Europe. And it also has the most expensive high-speed rail network in Europe. And very importantly, there is a lot of government support for research, and it lands in the top five for government funding for research institutions in the world. And, of course, Spain is a member of the European Union.

So let's get started now talking about why Spain. Carmen, why don't you tell us a little bit about the business climate in Spain and why Spain is such an attractive place for foreign investments?

Carmen: Okay. Then I think, "Why Spain?" I think there are many reasons, and the fact that it is, as you mentioned, the 13th country most attractive for foreign investments, it's a fact. Okay. So why? I think Spain is a well-being country, with safety, good weather, and quality of life. Okay. This makes the people from other jurisdictions invest in real property here in Spain. And they come for vacations, for retirement, or even many of them change their residency here to Spain. Okay.

Also, Spain has a legal certainty, has qualified legal and tax workforce, competitive prices within Europe. What does this make? This makes, for example, we have many private equity firms of all around the globe that invest in Spain. They invest in non-performing loans. They invest in land to construct hotels, facilities, supermarkets, even in real estate and solar parks. Okay.

Ana, why don't you give us some other examples?

Ana: Sure, Carmen. I would add that the labor force is highly qualified. At the same time, it has lower salaries compared to other countries in Europe, which is why corporations also choose Spain as a place to establish there creating companies. Finally, we think the excellent infrastructure and strategic location of Spain, it links with other countries in Europe, Africa, and Latin America, helping clients that wish to establish holding companies to centralize from Spain their investments in the mentioned countries. The mix of these advantages makes Spain an attractive jurisdiction to invest.

Helena: Let's now learn about doing business in Spain. So Carmen, why don't you get us started off talking about entry options for foreign investors?

Carmen: Great. Then I wanted to highlight that sometimes it is convenient for foreign companies before starting their real operations in Spain that they want to carry out some marketing activities or they want to analyze more the Spanish market to have a better understanding before they really start operations. For these situations, we can use the representative office. Okay.

A representative office has much less administrative obligations to comply with in accordance with Spanish legislation, and you don't have to pay taxes in Spain. You might be able to have a couple of employees to do this marketing or this research of the Spanish market, and you may have these employees, but still you don't have revenues and you don't pay taxes.

And Ana, I would love you to explain the entry options when a foreign company really decides to start operations in Spain.

Ana: Of course. When the client has already decided to do business in Spain and starts operations, the most common way of pursuing it is through a permanent establishment, which means that a non-resident company acts directly in the Spanish jurisdiction. This format shall imply to start having certain administrative obligations that we'll be delighted to accompany the client with.

Typically, the foreign entity may wish also to incorporate a branch, which is a form of permanent establishment, but having to be registered before the Spanish Commercial Registry and thus having more legal procedures. Yet the branch has not a legal personality separated from the mother company.

Another usual option is to incorporate a subsidiary, normally in the format of a limited liability company, which is a totally separated entity from the shareholder, with its own share capital and governing body. That limits the liability of its actions for the shareholders. It has its own obligations in the day-to-day.

Helena: Now let's dig a little deeper and learn a little bit about the requirements for doing business in Spain. Carmen, can you get us started off, please?

Carmen: Yes, of course. In this slide, I would like to highlight, for example, the following. So we have indicated the possibility of incorporating a subsidiary or a branch. Also we have an alternative. Sometimes the incorporation of these entities take time, so we have available shelf companies, so already incorporated companies that we can sell to our clients. Okay. That's a quicker way to have the entity. So if there is a rush in order to close the transaction, that is available.

The only thing we do in these cases, for example, is that once we have sold the shares to the foreign entity, we need to notify the bank, because these shelf companies, they already have a bank account, an operative bank account. So we need to notify the bank of the changes at the level of the ultimate beneficial owner, and we also need to go to the notary also to declare the change of the ultimate beneficial owner. But I think this also is important for you to know the availability of shelf companies.

Another important matter that I will highlight is that in Spain it is needed for shareholders and directors of a Spanish entity, for foreign shareholders and foreign directors of a Spanish entity, they need to apply for a Spanish ID number. Okay. Here, I want to highlight that really it has no implications. So many clients, they always ask, "What are the implications that you are requesting for me a Spanish ID number?" Okay, no implications. No worry about that. It's only a more formalistic way that is needed. It's a more formal requirement. But that's not an issue, and that's not a problem. Okay.

Ana, you want to highlight something else?

Ana: Yes. The fact that Spanish GAAP is the mandatory accounting method for certain actions highlights the need of a choice of a partner like us that are experts in converting IFRS financial statements, for example, into Spanish GAAP.

Also, with taking into account the rush that a client needs sometimes may lead us to settle an agreement with an employee before the legal entity is registered as an employer and that the salary agreed in the private agreement could not be paid as an official salary. So it's always important not to skip steps.

There is a more cost-effective method, in our experience, to inject funds in subsidiaries, which is simpler than the share capital increase. We call it just a simple contribution to equity without the need of issuing new shares, and that will save administrative costs and will be also quicker.

Helena: Now that Carmen and Ana have given us an introduction to Spain, talking about the different entry options for foreign investors and some of the requirements, let's now talk about how CSC can help you.

So let's now talk about how CSC can help you. We're going to dig into this a little bit about the different services that we offer in Spain, and we'll be hearing from Ana and Carmen about things such as entity formation, management, and then we'll go into things such as anti-money laundering, tax regulatory, and fund administration. So why don't you get us started off, Ana?

Ana: Perfect. Thank you, Helena. In the presentation, you can read the full range of services we can provide to clients. But let us develop further in any of them.

The bank account opening can be accompanied by the bank account management, for example, that we usually do for our clients. The electronic certificate is now mandatory for all legal entities in Spain, and it triggers the opening of an electronic inbox where mostly tax authorities shall communicate with the company. It should be read carefully and reviewed every week. So it is obtained upon the grant of identification number that Carmen talked about before.

Also, as we commented before, the reporting in IFRS is one of our expertise. Let me highlight that the registered address can be different to the tax address or work center for employees. This is important to take into account. The proxy holder service is because not always a client needs to appoint a local director, and they can just appoint an attorney to be able to assist with the local formalities.

Finally, the corporate secretarial services also includes the coordination with third parties involved, such as notary public and Commercial Registry.

Carmen: So I will continue with the other services. So as we mentioned, we do the accounting, and tax and accounting is very in connection. So we can comply in Spain we do all the tax compliance services. So the company in order to be in good standing needs to do the corporate income tax, the withholding tax, the VAT returns, and local taxes. We can handle all those day-to-day taxes for our clients.

In addition, we do fund administration, okay, so for vehicles as funds. We also do the fund accounting. We do investor reporting, and we do also the know your client for the investors in order to identify all the investors of the fund and really know if they are okay.

So we don't only do the know your client services for investors. We do many other AML services. Okay. So we have an important team because here, in Spain at least, when you sell and buy real property, and we have a lot of companies that own and sell and buy real property, you need really to do certain check of know your client to the people buying the property or to the people selling the property. It may mean that you need also to check the origin of funds in order to be in accordance with the Spanish legislation. So we really do all those services also.

As a conclusion, I could say that really we do all the day-to-day obligations that the company might have from an administrative perspective. Okay. I love saying also that we are the business behind the business in a way. So we help all our clients to comply with all legal obligations so they are in good standing.

Helena: Let's now talk about CSC's global coverage. We're in 140 different jurisdictions across the entire world, and we have the distinct advantage of serving our clients wherever they happen to be. We have those regional hubs around the globe, with in-country experts, such as Ana and Carmen, who understand the ins and outs of the various jurisdictions. You will work with a dedicated service team in your time zone, fulfilling all your service needs. In all, our team is wherever you need us to be.

As Carmen said, we are the business behind business at CSC. As you can see from our solutions that are listed here, we're the partner of choice for global companies needing expertise in business administration and compliance, fund solutions, transactions and lending, capital markets, and then domain security and brand protection and more. Whatever your company needs to stay in compliance, transact business, and become secure against the threats of the online world, CSC can help.