Fiscal incentives and an investor-friendly climate make Spain an attractive investment destination in Europe, according to a senior Spanish official.
India and Spain are two countries separated by more than 7,900 km, both are from different continents, speak different languages and, people may think, there is nothing in common between them.
This is absolutely wrong. Spain and India have more things in common than general knowledge may presume. First of all, from a social perspective we share a strong family structure and identity. We are very open people seeking a joyful existence and we share enormous values of friendship and support. From the cultural perspective, both countries have a millenary history that has led to a diverse, multicultural society. Even Flamenco, our most famous traditional dance and music, is believed to have its origin in Rajasthan!
Our common values are a driver to partnership, joint fruitful business and success. But let us not deceive ourselves, there is still much more to do to not miss the huge opportunity that enhanced and deeper relations between our countries could bring us: from the synergies between our industries to the huge potential that bilateral trade and investment offers to boost growth and development.
To avert a risk of repeating well-known facts, I will not provide a brief here about our tourist hotspots and trendy places, the memorable festivals or our delicious cuisine - all of which make 82 million
visit Spain every year. On the contrary, I would like to take advantage of this opportunity to share with you some information on the Spanish economy and its attractiveness for foreign investors.
The Spanish economy suffered a prolonged and profound crisis between 2007 and 2012. Today, there is a wide consensus that the crisis is over and the best example of this is that Spain has been growing in the last three years well above the Euro area average.
Spanish GDP grew by 3.1 per cent in 2017 and is expected to outperform the larger developed countries and remain robust over the next few years, as it is now underpinned by a profound package of structural reforms.
During the last six years, the government of Spain has implemented the largest reform agenda approved in the history of our democracy. Our financial system has been restructured and is now leaner and better capitalised: from 50 banks in 2009, there are only 12 at present. A deep labour reform was passed in 2012, fostering labour flexibility and productivity at company level. An energy reform, an education reform, the Single Market Law (enabling a convergent nationwide product/service regulation across all regions), the Law on Fostering entrepreneurship and business environment, the Reform of the public administration, the liberalization of the retail sector... You name it!
All this political effort has borne fruit, enabling the Spanish economy to regain confidence in international markets and fostering its efficiency, flexibility and ability to compete. Spain now has a more balanced growth model, where the private sector pushes the economy forward while public deficit has been reduced by 6 percentage points of GDP since 2011.
GDP growth is no longer linked to current account deficits as in previous growth cycles. Spain has passed from being net borrower of roughly 10 per cent of GDP to becoming a net lender with a financing capacity of almost 2 per cent of GDP. This means growth in Spain is now more stable and sustained over time.
This trend is also being reflected in the labour market. Spain has generated 26.4 per cent of the total employment in the Euro Area since 2014, with 2,000,000 jobs being created and the unemployment rate reduced.
Companies are managing to rapidly expand their businesses and their staff, thanks in part to the increasing activity abroad. Spanish exports of goods have risen by 35 per cent in the last six years, reaching the highest-ever figure on record. Spanish exports of goods and services related to GDP in 2015 are higher than in the United Kingdom, Italy or France.
Spain is aware that the 12,500 multinationals based in Spain represent around 43 per cent of total exports and international companies are a priority for the Spanish government. Thus, we are offering new entrants a red carpet to do business in Spain.
Spain is one of the countries with the fewest regulatory restrictions on foreign investment, according to the FDI Regulatory Restrictiveness Index ranking issued by the Organisation for Economic Cooperation and Development (OECD).
Spain is also appealing to foreign companies because it offers state-of-the-art infrastructure, which includes the third-largest High-Speed Rail Network in the world, after China and Japan, and the largest EU Highway Network. Not to mention that three out of 10 of the largest container ports in Europe are located in Spain, taking advantage of our strategic location for maritime transport and logistics between the Mediterranean Sea and the Atlantic Ocean.
Regarding the internal market, Spain provides access to the 500+ European unique market (i.e. access to the Intra-European duty-free market, free movement of goods and services, capital and persons and, among 19 countries, and a single currency: the EURO).
In addition, Spain offers a great platform to access Latin and South America. Spain is the world´s second-largest investor in Latin America and we share common historical, cultural and linguistic roots. Spanish companies have invested in strategic sectors in Latin America and are leaders in different segments, while multinational companies are increasingly choosing Spain as a convenient location for their Latin American headquarters.
Another attractive reason to invest in Spain is that the country offers very favourable fiscal incentives for R&D, compared to all OECD countries. Companies in Spain receive on average 0.35 Euro of tax relief per Euro invested in R&D.
But even if you cannot benefit from the R&D promotion policies, in Spain you will find a much lower tax pressure than in the EU on average (34.4 per cent vs. more than 40 per cent). The general corporate income tax rate is 25 per cent, but can be reduced up to 20 per cent for small and medium enterprises (SMEs). In any case, there is a reduced corporate tax rate for newly created companies at 15 per cent for the first two years that the company is generating profit. Also worth noting is that Spain has Double Taxation Agreements with 93 countries, including India.
These incentives are not restricted to taxation. Regional and central governments may offer investors financial aid, such as non-refundable subsidies, subsidies for the repayment of loans, of up to 35 per cent (10-20 per cent more for SMEs) based on the selected regional location for productive investments.
Finally, I would like to highlight a new regime aimed at facilitating the grant of resident and work
for entrepreneurs and investors. In the case of start-ups, not only is there no investment threshold, but also programmes such as Rising
in Spain to help set up a new company and make it a success.
Finally, another good reason to select Spain for investments is that you won't be alone. Indian investment in Spain has been growing and presently stands over $900 million, with about 50 Indian companies having a presence in the country. In some cities in Spain, there are large communities of Indian nationals and everywhere you will find an open-hearted society willing to make your life easier.
Juan del Alcazar is the Economic & Commercial Counsellor, Economic & Commercial Office, Consulate General of Spain in Mumbai.
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