Considerations on the suspension of the liberalization regime of foreign direct investments in Spain

Published on 28th Sep 2021

As a consequence of the crisis triggered by Covid-19, on March 2020 the Spanish Government decided to adopt certain measures in order to control foreign investment in Spain. Under the Royal Decree-Law 8/2020 of 17 March, on urgent complementary measures to cope with COVID-19's economic and social impact, the liberalization of direct investment in Spain was suspended and, therefore, an authorisation, which before was only required for very specific sectors, was then necessary to carry out foreign investments.

Investor and foreign investment

Originally, only residents outside the European Union (EU) and the European Free Trade Association (EFTA) needed a prior authorisation for foreign investment. The concept of "foreign investor" is determined by the place of residence of the ultimate investor in the Spanish company, so that it also applies to investments made by entities whose residence is located in Spain or in any other EU or EFTA country but whose beneficial owner (i.e. natural or legal persons who hold or control more than 25% of the capital or the investor's voting rights, or when they control the investor through any other means) lives outside the EU or EFTA.

In November 2020, few months after the state of emergency was declared, under Real Decree-Law 34/2020 of 17 November, on urgent measures to support business solvency and the energy sector and on tax matters, the Government restricted even more the freedom to carry out foreign investment in Spain and extended the requirement of an authorisation to invest in Spain to foreign residents in EU or EFTA when the beneficial owner is an EU or EFTA resident. The extension of these restrictions regarding EU and EFTA residents is expected to end next 31 December 2021.

The requirement of a prior authorisation is applicable to "direct investments", which, according to Law are defined as those investments as a result of which the investor: (i) holds a stake equal to or higher than 10% of the share capital of a Spanish company; or (ii) acquires the control of such company according to the criteria set forth in Article 7.2 of Law 15/2007, of 3 July, on Protection of Competition (i.e. when as a consequence of the transaction the investor can exercise a key influence on the company through the ownership of either property or voting rights).

Scope of application

Direct foreign investments subject to prior authorisation shall meet the following requirements:

Objective – by sectors (Art. 7bis.2 of Law 19/2003, of 4 July, on the legal regime of capital movements and economic transactions abroad and on certain measures to prevent money laundering (Law 19/2003))

When it may affect public order, public health and public safety, an authorisation for direct foreign investments will be required for the following strategic sectors:

  • Critical infrastructures (energy, transport, water, aerospace, defence, etc.).
  • Critical technologies and dual-use items (artificial intelligence, cyber security, telecommunications, robotics, etc.).
  • Supply of basic consumable goods, specifically energy and food safety.
  • Sensitive information, specifically personal data.
  • Media.

Additionally, the regulation enables the Government to suspend the liberalization regime for other sectors when public safety, public order and public health may be affected.

Subjective – depending on the type of investor and only in case of non-European investors (Art. 7bis.3 of Law 19/2003)

Regardless of the sector and only in the case of non-European foreign investors, foreign investment will be subject to a prior authorisation in the following cases:

  • If the foreign investor is controlled (directly or indirectly) by the government of another country.
  • If the foreign investor has invested or has taken part in activities related to sectors affecting security, public order and public health of a member State.
  • If there is a serious risk that the foreign investor is engaged in criminal or illegal activities.


Pursuant to Art. 7bis.6 of Law 19/2003, the Government has set certain thresholds below which investment transactions remain liberalized:

  • EU or EFTA investors: they are exempt from the obligation to apply for an authorisation to carry out investments under EUR 500 million in not-listed companies. In the case of listed companies, there is no minimum threshold.
  • Investors outside EU and EFTA: they are exempt from applying for an authorisation to carry out investments under EUR 1 million in both listed and non-listed companies. Furthermore, a simplified procedure has been implemented for investments between EUR 1 and 5 million.

Competent body to resolve and deadlines

In case of ordinary proceedings, the Council of Ministers shall issue a resolution within a 6 months deadline. In case of simplified proceedings, the Directorate General for Trade and Investment (in Spanish "DGCI") shall pass a resolution within 30 business days. In both cases, failure to obtain a resolution within the referred periods will imply negative administrative silence.

In practice, the Sub-directorate General of Foreign Investments has set a previous scrutiny procedure to determine in advance whether a transaction needs the authorisation of the Council of Ministers or not. This procedure takes usually between 1 and 3 months and starts with the submission to the electronic inbox of the Sub-directorate General of Foreign Investments of a scrutiny questionnaire form, which is available at the Ministry of Industry's website

Consequences of the lack of authorisation

According to Law 19/2003, failure to apply for the mandatory foreign investment authorisation is considered a very serious infringement and it establishes that such investments carried out without the applicable authorisation shall be invalid and therefore, rendered null and void. Additionally, fines up to the amount of the investment may be imposed (with a minimum of EUR 30,000), as well as potential public or private admonishments.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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