Foreing investment in Spain duplicates in 8 months. Why?

Recently, the Economy Minister Luis de Guindos has revealed that foreign investment in Spain has doubled between January and August 2013. Until August had reached 19,000 million in direct investments, compared with 9,000 million recorded in the same period last year.

When he was just saying that, Microsoft co-founder Bill Gates has made a big bet on the recovery of Spain’s construction sector by becoming the second-largest shareholder in FCC,  a Spanish builder hit hard by the collapse of a decade-long property bubble five years ago. He has acquired 6 per cent of its treasury shares for €113.5m.

What are the reasons for this increased investment?. Apart from the classic reasons that have made Spain the 2nd most popular holiday destination in the world (Tapas, 300 days of sun every year, cheap and simple acces via low cost airlines, solid infraestructures, security, etc), it does seem that there are new ones that are setting  this trend.

The audit Ernst & Young positioned Spain  in the fourth place of the classification of the Europa´s most attractive.  The reasons they outlined were 10:

1. Falling housing prices

The housing bubble that spurred an entire country exploded in 2008 and since then prices collapsed in a steady decline is not yet known whether it has bottomed out with a "Bad Bank" which brings more toxic assets at bargain prices.

According to an "investment guide" of BNP Paribas, there are several reasons to invest in real estate in Spain successfully, including the own price of real estate assets located in its lowest level in recent years and represents a "unique opportunity" and just for the future return on investment in terms of economic recovery cause a spike in prices.

2. Competitive salaries

In Spain, labor costs, according to Eurostat, is down since 2008 while in the other European partners increased between 5 and 10%. A workforce 30% cheaper than the average of the Eurozone it is very tempting for foreign companies .

3. Residence permit for two years

The purchase of properties from more than 500,000 euros by foreigners will entitle them to a residence permit for two years. This clause is designed to "avoid embarrassment" to these foreign citizens having to leave the country every ninety days to renew their visas.

4. Unique opportunity

Large companies believe it is time to invest in Spain because the activity will start to grow in 2014 and foreign investors can purchase prices opportunities that will best when the economy strengthens.

5. Prime position on the map

Its privileged position makes it an ideal platform for conducting international business: it belongs to the European Union, is the gateway from the north also with South Africa because of our close historical and economical.

6. Starting business is easy 

Starting a business in Spain is not difficult. The types of companies are in line with those in other OECD countries and there is also a wide range of possibilities, which meet all requirements. We must also emphasize almost total liberalization that governs foreign investment and exchange control, in line with EU rules.

7. Recovery confidence

The reformist path, the announcement of the European Central Bank's plan (OMT) to buy debt in the secondary market, or the defense of the euro (in its irreversibility) by eurozone partners have reduced uncertainty and recovered confidence of investors in our country.

Since the suspicion touched last summer background with a runaway premium that exceeded 600 basis points, now it remains at levels around 300 points and interest paid on the debt are therefore lower. A Matter of Trust recovered reflected in the increased investment.

8. Room for improvement at European level

Most global investors rely on increasing the attractiveness of Europe. "60% of executives from BRIC countries and 45% of Americans are confident that Europe will be a more attractive destination for investors in the coming years," noted in the document.

Moreover also stressed that the imminent risk of rupture in the Eurozone, which, as mentioned in the previous point, weighed heavily in the past year, has now been diluted. "Although the eurozone crisis persists, the international business community believes in the strengths of the area and consider that Europe is a reasonable long-term bet," argued Marc Lhermitte, Partner Consulting and author's own report.

9. Greater labor flexibility

Labor reform alone will not create jobs but  introduces the basis for international companies have more ground to present their policies and decide to come to Spain. Economy Minister Luis de Guindos, considers labor reform, in addition to the adjustment measures, are able to attract foreign investment, and in this sense the minister pointed out the example of Ford's decision to increase its production in Valencia or Renault and Nissan decided to reinforce its commitment to Spain.

10. Modern patent and trademark law

Spain has one of the most modern legislation on patents, trademarks and industrial designs, according to the Observatory defends Mark Spain.

An example of this is that our country is the world's second most renewable energy patents per capita, only behind Germany and ahead of the United States, and especially noted for his innovation in the sun, which focuses 43% of the total, according to the latest report by the Spanish Patent and Trademark Office (SPTO).

The country is also the fifth most renewable patents absolute number, behind the U.S., Japan, Germany and the UK, while investment volume ranked seventh

On top of that, the economy numbers in Spain shows that the recovery is not far away. 

Since 2009, the divergence between Spain and the core countries of the euro zone has been to a large extent corrected: inflation, which peaked at 4.3 percent in 2008, was negative in 2009 and is less than 3 percent today, despite sharp increases in indirect taxes; the spread in unit labor costs with respect to the euro zone average, which was 19 percent, is now 9 percent, both across the whole economy and in industry. The current account deficit, 10 percent of GDP in 2007, was less than 2 percent in 2012.

While public servants have had pay cuts of between 10 and 25 percent, cuts of 20 to 40 percent are not uncommon in the private sector. In short, Spain has regained competitiveness and is in a position to benefit from growth in her trading partners. Lastly, the restructuring of the banking system is nearly completed (partly at the cost of a higher public deficit), and de-leveraging of the banking sector is slowly proceeding (from 19 in 2007 to 16.7 in 2011)

Sources of growth exist, however: first, a healthy export sector that has increased market share throughout the recession; of these exports, steel and chemicals make up for 26 percent of the total, followed by capital goods (20 percent) and automobiles (17 percent); food products, Spain's traditional source of foreign exchange, are now only 16 percent of the total. Second, there is a return of confidence in the stability of the Spanish economy and in the resolve to pursue reforms.

So is not only the government and the Bank of Spain are saying it. 

Authorised voices confirm that, in short, in 2013 Spain may start to get out of the slump. If so, it will be slow progress, but progress. A long way, but upwards.

Javier Herrera Llamas

New Law on investment Residence in Spain. Property = visa

On 28-09-2013 has been enacted the Investors’ Support and Internationalization Act which includes, among others measures, a Spanish residency programme that will allow investors to become permanent investors if they invest, at least, €500,000 in a property. The law intends cleary to facilitate non EU nationals traveling to, or residing in Spain, who intend to carry out a ‘relevant investment’.


Let´s see together the most important items of the new law:

What is a relevant investment?

According to the new Law, the following will suffice to attain residency in Spain:

• An investment of at least €2,000,000 in Spanish Government bonds.
• An investment of at least €1,000,000 in shares of Spanish companies.
• An investment of at least €1,000,000 with a Spanish-based bank or financial entity (basically, depositing that money in a savings or fixed deposit account).
• An investment of at least €500,000 in Spanish property (one or more), per applicant, provided the first €500,000 of the property value is unencumbered (mortgage free).
• A business investment that is to be carried out in Spain and is deemed of public interest for which purpose, at least one of the following conditions will be considered relevant: a) jobs it will create b) socioeconomic impact in the geographical area where the activity is to be carried out and c) relevant contribution to technological or scientific innovation.

Investment by foreign companies also qualify for residency provided it does not originate from an offshore tax haven, and that the investor owns, directly or indirectly, the majority of its voting rights and has also the right to designate or remove the majority of the members of the board of directors.

Investment Residency Visa and Investment Residency Permit

The Act has created 2 different types of documents to enter and reside in Spain, the Residency Visa and the Residency Permit. 

The Residency Visa is valid for up to 1 year, and the Residency Permit is valid for up to 2 years, which can be extended for a further 2 years. This would give a total of 5 years, 4 of which are deemed proper residency and the first one, just the right to stay and live (an important distinction because 5 years of continued residency entitles the beneficiary to reside permanently in Spain). In addition to meeting the conditions to qualify for the Investors’ Residency Visa, an applicant for an Investors’ Residency Permitwill have to comply with the following:

• Hold an Investors’ Residency Visa that is not overdue by more than 90 days over the expiration date.
• Have travelled to Spain at least once during the validity of the Visa.
• Prove that the investment that enabled the applicant to receive the Visa is still in place.

What other requirements have to be met?

The Act will also require that any applicant complies with the following (standard in the Non-Lucrative or Non-Working Residency Permit):

• Not be in Spain irregularly.
• Be over 18 years of age.
• Absence of a criminal record in the country of original residency.
• Have medical insurance.
• Have sufficient money or financial means to support the applicant (and family) during the period of stay in Spain: if we are guided by the prerequisites of the Non-Lucrative Residency Permit, the applicant will need to prove earning of at least €2,128/month, plus an additional €532/month per family member.

Application Process and Timescales

The Residency Visa will be applied for and granted by the Spanish Consulate of the demarcation of the applicant. The Residency Authorization will be applied for and granted by Directorate General of Migrations. An application for a Residency Visa will be resolved in a maximum period of 10 days, except where the application is subject to the EU visa Code. The Residency Authorization will be granted in a maximum period of 20 days from application after which period, if the Consulate has not responded, the application will be presumed granted.

How would it work, in practical terms?

An applicant that wishes to apply for a Residency Visa under the Act will first need to apply for an ordinary visa, with a view to travel to Spain and investigate investment options/opportunities, meet with lawyers, real estate agents, banks, etc. 

Once a decision is made and the investment carried out, the Residency Visa will have to be applied for at the Consulate. Obviously, it is possible that an investor decides to proceed with the investment operations remotely (for instance, purchasing a property via a lawyer, with a Power of Attorney) and, on conclusion of the property conveyance transaction, he applies for a Residency Visa with the required proof of his investment i.e. Property Title Deeds. The Act does stipulate that the investment needs to be maintained during the period of the validity of the Residency Visa or Residency Permit, and that routine checks may be carried out to verify if this is the case.

Do I have to be in Spain for more than 6 months during any year period?

Specifically, NO! The Act stipulates that Residency Visa or Residency Permit holders do not need to spend more than 6 months in Spain, with a view to renew the permit (which implies that, as stipulated in the law, provided they are in Spain at least once during the period of the Residency Visa, they are pretty much free to spend their time as they wish, in Spain or in any other country). This means a very significant change with the previous regulation.

Can I become a Permanent Resident in Spain or a Spanish Citizen through this method?

YES. In fact, the Act specifically states that the applicant’s absences will not prejudice the right to permanent residency (5 years onwards) and citizenship.

Can a person still apply for permanent residency without having to invest the sums in this law i.e. buying a property worth say €200,000, with a €180,000 mortgage?

The Act has not modified the other existing types of residency permit applications, which are:

• Non-Lucrative Residency Permit (Autorización de Residencia No-Lucrativa)
• Self-Employed Work and Residency Permit (Autorizacion de Residencia y Trabajo Por Cuenta Propia)

This means a person can still apply for residency in Spain via the regular -above- procedures.

Can I apply if I already have a (unencumbered) property in Spain worth €500,000?

The Act does not include investors who already had a property in Spain prior to its enactment although, nothing stops them from selling, buying again and then apply for the Investors Residency Visa and further, the Investors Residency Permit. People that comply with the other financial criteria (having cash deposits, shares etc.) can apply, so there is always other practical ways to obtain the same result.

We hope this brief resume of the Law helps you to understand the new regulation, and to set an investment strategy to obtain residency rights in Spain, if that is your goal.

Javier Herrera Llamas

Policy for integration of immigrants in Spain. All in review...

Rajoy's government seeks to unify the criteria in Spain in relation to the integration of immigrants.
Currently the requirements for access to different services by non-EU foreigners vary considerable depending what administrations are you dealing with.

The government noted that the non-EU integration has been developed so far by the state, communities and local governments in the matter exerting competition  with lack of coordination in is Security, health, integration programs, etc.. and in many cases causing conflict of interest. This have caused a divergence of the conditions of access of non-EU citizens to the various services and also in the conditions which must allow for remain in the country.

The goal of the Government is to establish a common criteria for all public administrations setting a legal framework for the development of a national policy and thus framing criteria for a national integration policy.

Thus, the Council of Ministers has decided to reform the Inimigration act in order to define common criteria of integration of immigrants and to determine the scope of each of the public administrations.

The most important items that have been made public are the following:

1.- A single work permit.
2.- Complete definition of who will be granting the working permits and how they will be processed in a way that ensures that all administration take part in the process, but is still friendly with the applicant.


All this must be put in relation with the avowed purpose of facilitating investment in Spain for the acquisition of property or for business reasons and to provide a simple and effective way to acquire residence in these cases. What still remains to be determined in detail.

So we will still have to wait and see those principles converted into specific rules.

In the meantime, always we can follow the well stablished routes to acquire residence, that will remain in force until changes come in force.

Javier Herrera Llamas

Buying property =Residence in Spain?. Looking into details…

Recently the Spanish government announced its intention to offer resident visas to wealthy overseas investors spending a minimum €160,000 on a property purchase.

The measure is expected to imitate agreements already established in Portugal and Ireland. Jaime Garcia-Legaz, Secretary of State for Trade, insisted that the law change is necessary to reduce Spain’s unsold housing stock.  He told a conference in Madrid: “In coming weeks, we will start to reform the law regarding foreigners to reactivate demand abroad and contribute toward reducing housing stock.” The Prime Minister Mariano Rajoy stressed that the plan has not yet been finalized, but added that Spain ‘‘needs to sell these homes’’ and that getting them off the market could help revive the nation’s devastated construction industry.

The reason for that is quite simple: Spain has more than 700,000 unsold houses following the collapse of its real estate market in 2008 and demand from the recession-hit domestic market is stagnant. In the mean time, Spain is in the midst of a double-dip recession with 25 percent unemployment, though Rajoy said he believes Spain has managed to avoid a financial implosion and will start growing again in late 2013 and in 2014.

This is not something completely new in Spain. 

In fact, if you own a property in Spain you are granted a multiple entry visa permit allowing you to visit Spain more up to 90 days each 6 months. 

If that is not enough, you can today apply for a non lucrative residence permit. This allows the foreign national to reside in Spain, without carrying out labour activities, provided always that you can show a yearly income of more than 25.560,52 € per year, and other 6.390,13 € per year per each member of the family.

Is, anyway, not enough to show that the applicant has financial resources to live in Spain without working, but also will require: 1) not being found in Spanish territory illegally, 2) no criminal record in Spain and in the former countries where has resided for the past five years, 3) not listed as objectionable in the territorial space of countries with which Spain has signed an agreement to this effect, 4) Having a public or private insurance with a concerted health insurer authorized to operate in Spain, 5) not being previously deportated from Spain or any other EU country. and 6) not having any of the diseases that may have serious public health implications .

So, as you can see the proposal is not such a big change !!!.

Legislation can take some months to pass through the Spanish parliament. However, the Prime Minister has insisted that this programme will be accelerated to help deal with the problems within the Spanish economy.

The details of the Law has not yet being made public, so very little information is existing.  but we can make some well founded guessing

Will the Visas Apply to a family?

At this stage we still don't know but it is likely that close family members may be included.

Is it limited to Russia and China?

We expect not. Since Russia and China were expressly mentioned in the initial brief,  but the intention is to cover most countries that are not on the Spanish governments' list of high risk countries for terrorism.

Will the visas allow to work?

There are no details at this stage. And quite probably will not. However the measure could pave the way for buyers to eventually obtain a Spanish passport and then be eligible to work anywhere within the 27 EU states.

Will the visas grant access to schools and hospitals?

We expect it will not be a general opening of the public welfase system, but will be allowed for residents contributing to the Spanish welfare system. And quite probably, some form of medical insurance still may be necessary.

Will the visas allow residency elsewhere in Europe?

This is likely to meet some disapproval with other member states within the EU. But the legal aspects of this within the EU framework could be complicated and may have to allow freedom of movement. We will have to await further details

Can you take a mortgage?

We expect that the visas will only be granted to investors bringing a minimum of €160,000 investment into the country. Borrowing the money from a Spanish bank doesn't really achieve the aims of the government. A likely no on this.

Conclusion:

With the Spanish property market at bottom prices, with clear signs of prices being recovering for 2014 – 2015, I think is a very good time for those interested in setting residence in Spain to start looking into some properties to buy in 2013. 

Do not hesitate to ask any question you may have on this. We'll help you confirm to all the legal formalities, prepare the documents and submit them to the Spanish embassy, and to the federal body in charge of these issues (Gobierno de España, Ministerio del Interior). Our competence in this area will significantly reduce the waiting time and risk of problems. 

Javier Herrera Llamas