Spanish Law and Institutions.

Analysis from an Economic Law

Perspective
Pedro Bueso Guillén, Katia Fach Gómez, Esther Hernández Sáinz, Mercedes Fuster
Gómez, José Felix Muñoz Soro and Jesús Astigarraga1

Country background
Spain is a country located in southwestern Europe, with a current population of
around 47 million inhabitants. Spain has an extremely rich historical past. 2 Historically,
Jews, Arabs and Christians coexisted within the Spanish territory. However, in 1492,
the Spanish Catholic kings completed the conquest of the territory of the Iberian
Peninsula, which until then had been partially in the hands of various Arab kings. The
cultural and linguistic heritage of the centuries of Arab domination is still particularly
present in the south of the Spanish peninsula (Andalusia), a vast area that, being
geographically close to North Africa, currently maintains important trade flows with
African countries such as Morocco and Algeria. The expulsion of the Jews and Arabs
from Spain in 1492 ended the religious pluralism, turning Spain into a Catholic
monarchy.

In that same year, the crown of Castile, with the intervention of Christopher Columbus,
claimed the territory of America and from that date the Spanish colonial empire was
gradually created. Eventually, this huge empire would encompass much of what is now
known as Central and South America and also various enclaves in the Pacific, such as
the Philippines. Under the administration of the Crown of Castile, this colonial empire,
one of the most extensive together with the British in the Modern Age, was mantained
1
Please use the following citation: Pedro Bueso Guillén, Katia Fach Gómez, Esther Hernández Sáinz,
Mercedes Fuster Gómez, José Felix Muñoz Soro and Jesús Astigarraga, “Spain”, International Economic
Law Encyclopedia, Edward Edgar, forthcoming.
Pedro-José Bueso Guillén, Prof. Dr., LL.M. Eur is Tenured Professor (Profesor Titular-PT) of Commercial
and Business Law at the University of Zaragoza (Spain) and a member of the Regional Government of
Aragon Reference Research Group on "Legal Management of Innovative Business, Instruments and
Organisations - LegMiBIO (SR12_20 R). Katia Fach Gómez, LL.M., is Tenured Professor (PT) in Private
International Law at the University of Zaragoza, a member of the Instituto Universitario de Derecho
Europeo e Integración Regional (IDEIR), and a member of both the Regional Government of Aragon
Reference Research Group on "Legal Management of Innovative Business, Instruments and
Organisations - LegMiBIO (SR12_20 R) and Spanish research project DER2017-85585-P. Mercedes Fuster
Gómez is Tenured Professor (PT) of Tax Law at the University of Valencia (Spain). Esther Hernández Sáinz
is Tenured Professor (PT) of Commercial and Business Law at the University of Zaragoza (Spain) and a
member of both the Regional Government of Aragon Reference Research Group on "Legal Management
of Innovative Business, Instruments and Organisations - LegMiBIO (SR12_20 R) and Spanish research
project PID2019-104019RB-I00. José Félix Muñoz-Soro works for the Aragonese Foundation for Research
& Development (ARAID) and is a member of both the Reference Research Group of the Regional
Government of Aragon on "Legal Management of Innovative Business, Instruments and Organisations -
LegMiBIO (SR12_20 R) and Spanish research project RTI2018-095843-B-I00. Jesús Astigarraga is Full
Professor (Catedrático) of Applied Economics at the University of Zaragoza (Spain) and Principal
Investigator (PI) of the research projects PID2020-115261RB-I00 and H26_20D.
2
More information may be found in sources such as https://www.britannica.com/place/Spain/History

1
thanks to the exchange of precious metals and raw materials from America to the
metropolis in exchange for receiving manufactured goods in the colonial territories.
The manufactured products, -- mostly textiles, were fabricated not only in Spain but
also in the other states of Europe -mainly France and England.

The precious metals -gold and silver- from the mines of Peru and Mexico were
essential for the maintenance of the whole of the Spanish monarchy. As a
consequence, the dissolution of the empire and the birth of the current Latin American
republics in the second and third decades of the 19th century turned Spain into a
particularly impoverished country. These new republics began a long period of political
and economic maturation that gradually separated them from their old metropolis
through an intensification of trade flows both within Latin America and with the United
States and the main European trading powers of the epoch. At the end of the 19th
century, Spain lost its last colonial enclaves -Cuba and the Philippines- and Spain
focused on a commercial strategy prioritizing its commercial connections with the
European world.

This dynamic of commercial openness with Europe suffered a serious setback due to
the Spanish Civil War (1936-1939), whose beginning was a military coup against the
democratic government of the Second Spanish Republic. The war drastically reduced
the Spanish´s foreign trade rates during those years. The dictatorship of General
Franco (1939-1975) established an autarkic economic system in Spain, isolating the
country not only politically but also economically from its traditional commercial allies.
The lack of political freedoms and the poverty forced hundreds of thousands of
Spaniards to emigrate to the rich countries of central and northern Europe. Their
remittances contributed enormously to sustaining Spain's negative balance of
payments. This autarky of the Franco regime began to be combated from 1959 with
the so-called "stabilization plan" which, in the hands of relatively non-ideologized
technocrats, restarted Spain's commercial opening and the struggle to modernize the
economy. The industrializing processes that were germinating in Spanish regions such
as Catalonia and the Basque Country caused significant internal migratory flows
towards these two Spanish regions and may be considered the beginning of a
dichotomy, which continues to this day, of a northern Spain more akin to European
economic rates and welfare indexes and a more impoverished southern Spain.

The death of General Franco in 1975 opened the definitive modernizing economic and
political process of the contemporary Spain. Politically this process was based on the
1978 Constitution, which established a decentralized system allowing the Spanish
Autonomous Communities to have important legal-political powers. Since 1978, Spain
has been a democratic country with a mixed economic system of European influence.
Spain's entry into the European Union in 1986 definitively underpinned this process of
democratization and economic modernization. During the last decades, Spain has
received significant economic support from the EU, which might explain why its
population is, according to statistics, one of the most pro-European.

2
On the international level, Spain’s relationship with Latin America is economically
important, politically complex and culturally intense. Spain cannot be understood
without the Ibero-American community of nations to which it belongs, nor would that
international community exist without its Spanish identity. For this reason, the weight
of Spanish companies and subsidiaries of Spanish companies established in Latin
America is quantitatively and qualitatively greater than in any other region of the
world (leaving aside the internal market of the European Union).

 Head of State: The King of Spain (at present, Felipe VI). Currently, the rules of
succession to the Spanish throne are subject to some debate. The Constitution
sets out that the Crown will go to “successors” of Juan Carlos I (the present
King’s father), following the regular order of primogeniture and representation,
always preferring the previous line to the later ones; in the same line, the
closest degree to the most remote; in the same degree, the male to the female,
and in the same sex, the older person to the younger 3. The rule that male
successors have priority , has been seen as counter to gender equality. There is
no law, however, ending the male preference, as two females are currently the
next in line to the monarchy, making the question irrelevant for the moment.
 Head of Government: The President of the Government (“Presidente del
Gobierno”). The Presidente is elected by the Congress of Deputies, as a
principle, for the whole legislature period of the Parliament, i.e., for up to four
years. Ministers are proposed by the President and formally appointed by the
King. The Vice-President is the government’s second in command, assuming its
duties when the President is absent or incapable of exercising power. There can
be more than one Vice-President who are then referred to with a cardinal
number. The person for the post is usually handpicked by the President from
the members of the Cabinet and appointed by the King before whom it takes
oath.
The Council of Ministers (“Consejo de Ministros”) is the main collective
decision-making body of the government, and it is exclusively composed of the
President, the Vice-Presidents and the ministers.

 Form of Government: Parliamentary monarchy4 with a bicameral legislature.

The legislative branch is the Spanish Parliament (“Cortes Generales”), made of
a Congress of Deputies (“Congreso de los Diputados”), at present with 350
members, and a Senate (“Senado”), with 265 members at present. With the
exception of some senatorial seats, which are elected indirectly by the
legislatures of the autonomous communities, the Cortes Generales are elected
through a universal, free, equal, direct and secret vote. The present number of
members of the Congress of Deputies has been set the by the electoraral

3
Art. 57 of the 1978 Spanish Constitution (hereinafter CE). Permalink ELI:
https://www.boe.es/eli/es/c/1978/12/27/(1)/con
4
Art. 1.3 CE.

3
 legistlation5, and the number of members of the Senate may vary upwards or
downwards before each re-election, when the number of inhabitants of the
different Autonomous Communities changes, since the Autonomous
Parliaments appoint a permanent Senator and another one for every million
inhabitants6. The judiciary is composed of judges and magistrates who are
independent, irremovable, liable and subject to the rule of law. Judges and
magistrates are admitted to the judiciary through various selective processes in
charge of the Spanish General Council of the Judiciary (“Consejo General del
Poder Judicial”) that assess their legal knowledge and competences, and that
aappoints them. The selection process may vary depending on the judicial
body. The term of office is life-long.
 Form of State Spain is divided into 17 autonomous communities (“Estado de las
Autonomías”, “Estado Autonómico”) or regions (“Comunidades Autónomas”7,
which are subdivided into 50 provinces (“Provincias”) and two Autonomous
Cities: Ceuta and Melilla, located North of Morocco.Spain is not a federal
State8, but rather a governmental entity resulting from a process of
decentralising powers from the central State to the autonomous communities.
This decentralisation is asymmetrical. As a starting point, the Spanish
Constitution sets out a list of powers exclusive to the central State, and a
further list of those that could be devolved to the autonomous communities 9.
As these lists of powers are not exhaustive, the list of exclusive powers
assumed by an autonomous community and those shared with the central
State may vary from one autonomous community to another. The distribution
of powers is set out in the respective autonomy statutes (“Estatutos de
Autonomía”), which are Organic Laws (“Leyes Orgánicas”), passed by the
Spanish Parliament10. In addition, both the central government and the
autonomous communities are divided into provinces (“Provincias”), themselves
made up of local entities (“Entidades Locales”), such as municipalities.
 Legal system: Civil Law.
 How legislation is passed: At the central state level, the legislative process can
be started by the government (by filing a governmental bill or “Proyecto de
Ley”); by the Congress of Deputies and by the Senate (by filing a non-
governmental bill or “Proposición de Ley”); by the assemblies of the
autonomous communities (through a request to the Congressional Steering
Committee – “Mesa del Congreso”); or by popular initiative (which requires at
least 500,000 signatures and is not allowed on matters concerning organic acts,
taxation, international affairs, or the prerogative of granting pardons. 11 The

5
Art. 162 of the Organic Act No. 5/1985, of June 19th, on the General Electoral Regime (hereinafter
LOREG). Permalink ELI: https://www.boe.es/eli/es/lo/1985/06/19/5/con
6
Art. 165 and 166 LOREG.
7
Art. 137 CE.
8
Art. 145.1 CE.
9
Art. 148 and 149 CE.
10
See below, “Hierarchy of legal authority”.
11
Art. 87 CE.

4
 Spanish Parliament passes laws in a two-reading procedure, with the Congress
of Deputies making the final decision 12. Once Parliament has passed legislation,
it is enacted by the King, who orders its publication in the Official Gazette
(“Boletín Oficial del Estado”)13. The King is obliged in any case to enact the
legislation passed by Parliament.
The government may also issue legislation in the form of legislative decrees
(“Decreto Legislativo”) through parliamentary delegation 14, or in the event of
urgent and extraordinary need, in the form of executive orders (“Real Decreto-
ley”)15. However, that governmental legislative activity cannot affect matters
reserved to Organic Laws in the Constitution16.
The autonomous communities have their own parliaments (single chamber
legislatures) which pass acts. The autonomous cities of Ceuta and Melilla are
exceptions, with the Spanish Parliament legislating for them. Autonomous
governments may issue legislation based on a delegation or on urgent and
extraordinary needs, in the same way as the central Parliament.
 Hierarchy of legal authority: The Spanish Constitution is at the top of the
hierarchy of legal instruments, followed by Organic Laws, which can only be
passed by the Spanish Parliament and affect the organisation of basic state
institutions, fundamental public rights and freedoms, the regulating of the
autonomous communities and electoral matters. An absolute majority of the
members of both the Congress of Deputies and the Senate is required to pass
Organic Laws17. Next come ordinary laws (“Leyes Ordinarias”), which are passed
by either the Spanish Parliament or one of the autonomous parliaments,
depending on the attribution of power on the issue, by a simple majority.
Finally, legislative decrees and executive orders share the same rank as
ordinary laws.
 How administrative law is managed: The administrative branch has the power
to adopt regulations18. Where the central State is concerned, the Council of
Ministers19 issues royal decrees (“Reales Decretos”), and the different ministers
can issue orders (“Órdenes Ministeriales”). In addition, there are different
classes of lower-ranking administrative provisions, such as decisions
(“Resoluciones”), instructions (“Instrucciones”) and circular provisions
(“Circulares”) that authorities and agencies may issue. The autonomous
communities have the same hierarchy of administrative legal authority.
Secretaries of State are higher bodies in the general state administration that
are directly responsible for undertaking government activity in a specific sector.
Together with ministers, they are an essential link between the government

12
Art. 90 CE.
13
Art. 91 CE.
14
Art. 82-85 CE.
15
Art. 86 CE.
16
Art. 81 CE.
17
Art. 81 CE.
18
Art. 97 CE.
19
Art. 100 CE.

5
 and the civil service. They manage and coordinate the general directorates
under their authority and are accountable to the minister for implementing
objectives20.
 Relationship of legislation with international Law: Spain can be said to follow a
moderate monistic approach to international law. The Spanish Constitution
governs the procedure for giving the State’s consent to be bound by
international treaties and agreements. It requires prior authorisation from the
Spanish Parliament in cases of treaties or agreements that affect the State’s
territorial integrity or fundamental rights and duties; that entail financial
obligations for the Treasury; and those that involve modifying or repealing a
law or require legislative measures for their execution. With respect to the
remaining treaties or agreements, the Spanish Parliament has to be informed
of their conclusion immediately21. As the Spanish Constitution states, if an
international treaty contains provisions contrary to a provision of the Spanish
Constitution, it will require a prior constitutional review by the Constitutional
Court22. If a treaty is found to be contrary to the Spanish Constitution, the
treaty cannot be signed or the Consitution has to be amended before signing
the treaty. Validly concluded international treaties or agreements need to be
published in the Official Gazette to be enforceable in Spain, after which they
form part of the internal order. Their provisions may then only be repealed,
modified or suspended in the ways provided for in the treaties or arrangements
themselves, or in accordance with the general rules of international law. The
denunciation of international treaties and conventions follows the procedure
that is in place for their approval.23
Further, and with a view to Spain’s entering the (at that time) Economic
European Community, the Spanish Constitution has a special rule for the
conclusion of treaties assigning the exercise of constitutional powers to an
international organisation or institution. In such cases, the treaty can only be
authorised by an Organic Law. The Parliament or the Government, as the case
may be, is responsible for ensuring compliance with these treaties and with the
resolutions emanating from the international or supranational bodies that have
been assigned powers.24

 Place of international treaties in the legal system: As defined by the Spanish

courts, customary international law has authority below that of the
Constitution but above that of laws. In the case of treaties and agreements, as
outlined above, the prior control established by the Spanish Constitution
guarantees that no treaty can ever be contrary to it; in any event, the
20
See Art. 62 of Act No. 40/2015, of Oct. 1st, 2015, on Legal Regulation of the Public Sector. Permalink
ELI: https://www.boe.es/eli/es/l/2015/10/01/40/con; and art. 7 of the Act No. 50/1997, of Nov. 27th, on
the Government. Permalink ELI: https://www.boe.es/eli/es/l/1997/11/27/50/con.
21
Art. 94 CE.
22
Art. 95 CE.
23
Art. 96 CE.
24
Art. 93 CE.

6
 Constitution prevails over treaties due to their infra-constitutional rank. A valid
treaty’s specific rank depends on the issue governed by the treaty and the
corresponding national provision, as it ranks higher than such provisions. The
rules of European Union law are meta-constitutional; that is, they are beyond
the scope of the Constitution because they cover some issues that the
Constitution has yielded to the European Union law.
 Role of courts: The Constitutional Court (“Tribunal Constitucional”) is
responsible for the constitutional review of acts and regulations having the
force of law, whether issued by the central State or an autonomous
community. The Constitutional Court is made up of 12 members, whom the
King appoints; four are proposed by the Congress of Deputies, four by the
Senate, two by the government, and two by the General Council of the
Judiciary.25
Constitutional appeals (“recurso de inconstitucionalidad”) can be brought
before the Court by the President of the Government, the Spanish
Ombudsman26, 50 deputies, 50 senators, autonomous community governments
or autonomous parliaments27. When ruling on such appeals, the Constitutional
Court may declare that an act, a treaty or a regulation having the force of law is
unconstitutional after its enactment. As per the Court’s negative legislative
power, however, it cannot issue a new act or rule instead 28. Ordinary courts
may raise constitutional issues (“cuestión de inconstitucionalidad”) when they
consider that an act or a regulation having the force of law and making up the
ratio decidenda of a case, may be unconstitutional29. Constitutional Court
rulings have to be published in the Official Gazette and have res judicata value
from the day following publication. Decisions declaring the unconstitutionality
of an act or a regulation having the force of law, have full effect with respect to
all persons, except if they are limited to the subjective estimation of a right 30.
Constitutional proceedings exist alongside writs to protect citizens’
fundamental rights (“recurso de amparo”)31.
The Supreme Court (“Tribunal Supremo”) ranks above the ordinary courts as
the last resort for civil, criminal, administrative and labour courts (by means of
cassation appeals, “recurso de casación”). However, in some cases, the last
resort is the High Courts of Justice (“Tribunales Superiores de Justicia”) of the
respective autonomous community. While these High Courts have jurisdiction
over the autonomous communities, they do not constitute autonomous
community judiciaries, as there is only one Judiciary in Spain. The Provincial
Courts (“Audiencias Proviciales”) rank below the High Courts, followed by the

25
Art. 159 CE. More information:
https://www.mjusticia.gob.es/en/justicia-espana/organizacion/consejo-general-poder-judicial
26
Art. 54 CE.
27
Art. 162.1(a) CE.
28
Art. 161.1(a) CE.
29
Art. 163 CE.
30
Art. 164 CE.
31
Art. 161.1(b) CE.

7
 courts of first instance for different jurisdictional issues: the “Juzgado de
Primera Instancia”, deals with civil matters, with some specialising in
commercial issues (“Juzgado de lo Mercantil”); the “Juzgado de Instrucción”
and the “Juzgado de lo Penal” deal with criminal matters; the “Juzgado de lo
Contencioso-Administrativo” with administrative matters, including taxation;
and the “Juzgado de lo Social” with labour issues. In addition, there are some
central specialised courts, such as the National Court (“Audiencia Nacional”),
which has jurisdiction over the entire Spanish territory and is especially
important in certain criminal and administrative matters. 32 Where international
arbitration is concerned, the civil courts of the first instance can support the
work of arbitral tribunals taking evidence, grating interim reliefs and enforcing
awards. The civil chambers of the High Courts of Justice also deal with the
judicial control of awards (applications to set aside awards and the recognition
of foreign awards).
 Membership in international economic bodies includes: EU, UN (UNCTAD),
WTO, G-20, IMF, World Bank, BIS, IOSCO, IAIS, OECD, IADB, ICC, Central
American Integration System (SICA) (observer), Latin American Integration
Association (LAIA) (observer).

Trade33
Foreign trade represents approximately two-thirds of Spain’s GDP. In recent years, the
main destinations for Spanish foreign trade were European Union countries. Countries
receiving Spanish exports thus included France (with nearly 15%) and Germany (just
over 10%), with Italy, Portugal, and the United Kingdom following. Imports came
primarily from Germany (nearly 12%) and France (10%), with China third and Italy
fourth. Spain’s trade is relatively diversified, with its main export being cars (just over
10%), and another 8% of exports composed of petroleum products other than crude
oil, vehicle parts and medicaments. The main imported product was crude oil (8% of
total imports), followed by cars and vehicle parts, medicaments and petroleum gas.
The IMF estimates Spanish exports to have dropped by a remarkable 25.5% in 2020,
with the reduction in imports following a similar trend, mainly as a consequence of the
COVID-19 pandemic. As the worldwide health situation was expected to improve
during 2021, so should Spanish exports (expected to rebound by 10.1%) and imports
(10.6%). The country has a structurally negative trade balance for goods due to high
fuel price levels and high added-value goods imports. In 2019 goods exports decreased
by 3.6% year-on-year to USD 333.6 billion, while imports slowed down even further
(4.8%) to USD 371.1 billion. However, Spain is a net exporter of services (USD 157.4

32
https://www.poderjudicial.es/portal/site/cgpj/menuitem.7f36112237f0e77203f08712dc432ea0/?
vgnextoid=6880f20408619210VgnVCM100000cb34e20aRCRD&vgnextfmt=default&vgnextlocale=en&la
ng_choosen=en
33
As a member state of the European Union, external trade policy is the exclusive competence of the
European Union. Please see the chapter on the European Union on this topic.

8
billion of exports vs USD 86 of imports recorded in 2019), and thus the country’s
overall trade balance was positive (2.8% of GDP)34.
 Who is responsible for trade policy?
The Secretary of State for Trade (“Secretaría de Estado de Comercio” - SEC) which is
part of the Ministry of Industry, Trade and Tourism (“Ministerio de Industria, Comercio
y Turismo” – MINCOTUR),35 is responsible for trade policy. With regard to the
European Union, the preparation, coordination, consultation, representation and
monitoring of the Spanish government’s entire European policy is outside the remit of
the Secretary of State for Trade, falling instead to the Secretary of State for the EU
(“Secretaría de Estado para la Unión Europea”). That Secretariat is part of the Ministry
of Foreign Affairs, EU and Cooperation36. Nevertheless, the Secretary of State for Trade
includes a Deputy Director-General for Trade Policy for the European Union as part of
the General Directorate for Trade Policy, in charge of monitoring interaction between
the trade policies of Spain and the European Union.

SEC consists of four General Directorates: The General Directorate of Trade Policy, the
General Directorate of International Trade and Investments, and the General
Directorates for Institutional Collaboration and Coordination and for Enterprise
Internationalisation. The last two come under the umbrella of ICEX (“Instituto de
Comercio Exterior” – Institute for Foreign Trade), specifically ICEX Spain Exports and
Investments (“ICEX España Exportación e Inversiones”) 37. ICEX is a national state public
business entity38 whose mission is to promote the internationalisation of Spanish
companies and foreign investment39. In addition, the Secretary of State for Trade has a
Deputy Director-General of Studies and Evaluation of Instruments of Trade Policy, and
a Deputy Director-General of Internalisation Strategy 40. Together with ICEX, the
Spanish Chamber of Commerce’s role in foreign trade is to support and foster foreign
trade among Spanish businesses, providing information, training, and other aid to
companies through its advisory programmes. Furthermore, the Spanish Chamber of
Commerce is responsible for issuing certificates of origin and other certifications
related to international trade. It also offers mediation and arbitration services in
international trade disputes41.
34
For further information, see: https://santandertrade.com/en/portal/analyse-markets/spain/foreign-
trade-in-figures?url_de_la_page=%2Fen%2Fportal%2Fanalyse-markets%2Fspain%2Fforeign-trade-in-
figures&&actualiser_id_banque=oui&id_banque=0&memoriser_choix=memoriser (visited on Dec. 21st,
2021).
35
See: https://comercio.gob.es/en-us/SecretariaDeEstado/Paginas/default.aspx (visited on Dec. 21st,
2021).
36
See: http://www.exteriores.gob.es/Portal/es/Ministerio/FuncionesEstructura/Estructura/Paginas/
SecretariaDeEstadoParaLaUnionEuropea.aspx (visited on Dec. 21st, 2021).
37
See: https://www.icex.es/icex/es/index.html (visited on Dec. 21st, 2021).
38
A public business entity (“Entidad Pública Empresarial” - EPE) is a type of public body belonging to the
General State Administration of Spain that has its own legal personality, its own assets and autonomy of
management.
39
See https://www.investinspain.org/en/index (visited on Dec. 21st, 2021).
40
See: https://comercio.gob.es/es-es/SecretariaDeEstado/Documents/ORGANIGRAMA-
S_E_COMERCIO.PDF (visited on Dec. 21st, 2021).
41
See https://www.camara.es/en (visited on Dec. 21st, 2021).

9
 How are subnational governments involved in the trade policy process?
Autonomous communities are involved in promoting the internationalisation of
regional companies. One example is “AREX Aragón Exterior,” in the autonomous
community of Aragón42. Furthermore, autonomous communities have powers to
regulate internal trade in their regions. This distribution of powers can give rise to
trade barriers between the autonomous regions, splitting the Spanish market. Due to
this, the Spanish Act No. 20/2013 on Ensuring Market Unity was issued in 2013 43. The
Act seeks to guarantee the constitutional principle of free movement of goods and
services, freedom of establishment, and the equality of the basic conditions for
undertaking an economic activity44. Despite having been challenged by several
autonomous communities and partially annulled by the Constitutional Court 45, it is still
the legal mechanism establishing a free internal Spanish market. The Spanish National
Commission of Markets and Competition (“CNMC”) is in charge of enforcing this Act,
hearing administrative claims, reporting cases of obstacles or barriers to market unity
and challenging Acts and provisions that are contrary to market unity. 46
 How are non-governmental entities involved in the trade policy process?
There are no special procedures or channels for NGO participation in the trade policy
process, apart from lobbying the legislative and/or the government as in any other
matter.
 Is there a direct effect of trade agreements?
After being published in the Official Gazette, trade agreements have a direct effect in
Spain. (See above, country background, relationship of legislation with international
law).
 What branch is responsible for negotiations of FTAs/WTO?
The Executive branch via MINCOTUR.
 Who is responsible for managing FTA/WTO membership?
The Executive branch via MINCOTUR

Investment

Introduction

Spain ranked 30th out of 190 countries in the World Bank’s 2020 Doing Business
Report.47 Investment in Spain is quite diverse in scope, but comes mainly from its
European Union neighbors. Foreign investment is significant in both services and goods

42
See https://www.aragonexterior.es/inicio/english/ (visited on Dec. 21st, 2021).
43
Permalink ELI: https://www.boe.es/eli/es/l/2013/12/09/20/con.
44
See Art. 139 CE.
45
Discussed in: https://www.osborneclarke.com/insights/the-essence-of-the-law-on-the-guarantee-of-
market-unity-has-been-declared-unconstitutional-by-the-spanish-constitutional-court (visited on Dec.
21st, 2021).
46
See https://www.cnmc.es/en/ambitos-de-actuacion/unidad-de-mercado#funciones (visited on Dec.
21st, 2021).
47
This WB report measures regulations that enhance business activity and those that constrain it.
https://www.doingbusiness.org/en/doingbusiness. https://archive.doingbusiness.org/en/scores

10
sectors, including financial and insurance services; real estate; manufacturing;
scientific, professional, technical, and administrative support service activities;
wholesale and retail trade; transportation and storage; and the energy sector. The
Netherlands, Luxembourg, the United Kingdom, France, Germany and Italy represent
nearly 70% of Spain’s FDI stock. 48 According to FDI promotion websites, Spain’s main
strengths in terms of FDI attractiveness include the importance of tourism, quality of
life, an efficient transport network, a restructured financial sector, and cultural
proximity to Latin America. On the other hand, the country suffers from high debt
levels (public, private and foreign), a growing trade deficit, rising inflation, low
productivity levels in certain sectors, high structural unemployment, a complex legal
regulation system with regard to the 17 autonomous communities, and threats to
state unity from internal secession movements. 49 These factors presumably reduce the
levels of FDI from what would otherwise flow in.

Despite its adherence to rule of law ideals, the Kingdom of Spain has recently been the
target of numerous investor complaints. In the ICSID database alone, the Kingdom of
Spain currently appears as a defendant in 41 pending or concluded cases. 50 This
number does not include the approximately one dozen further known investment
arbitrations filed against Spain before other arbitration institutions such as the
Stockholm Chamber of Commerce and the Permanent Court of Arbitration. 51 According
to the latest report from the Spanish Attorney General of the State-Directorate of the
State Legal Service, the total amount claimed from the Kingdom of Spain in these
energy arbitrations is over 9.6 billion euros.52
Many of the arbitrations stem from the repeal of legislation on Spain’s renewable
energy incentives. Following Law 54/1997 of 27 November 1997, lawmakers began to
construct a very favourable “special regime” for electricity generation from non-
consumable renewable energy, which was further specified in later regulations such as
Royal Decree “RD”) 436/2004 and RD 661/2007. This set of incentives attracted many
foreign investors to Spain, but subsequent macro-economic circumstances (such as the
2008 financial crisis) generated a significant tariff deficit. This led to the “Spanish

48
At the end of 2020, total foreign investment in Spain had grown by 9% in gross terms (reaching 28,871
million euros) and fallen by 1.9% in net terms (17,008 million euros). Information provided by the
Secretaría de Estado de Comercio. Dirección General de Comercio Internacional e Inversiones.
Subdirección General de Inversiones exteriores. “Inversiones exteriores directas. Flujos 2020”
https://comercio.gob.es/InversionesExteriores/Publicaciones/Paginas/default.aspx.
49
Information taken verbatim from the “Spain: Foreign Investment” report.
https://santandertrade.com/en/portal/establish-overseas/spain/foreign-investment.
50
https://icsid.worldbank.org/cases/case-database.
51
The ISDS Navigator of the UNCTAD Investment Policy Hub indicates that Spain is involved in 53 cases
as respondent state and 60 as claimant home state. https://investmentpolicy.unctad.org/.
52
As the report indicates, and taking into account various circumstances, this sum is likely to increase (in
some of the most recent actions the amount claimed remains unspecified; the sums initially set by the
plaintiff investors may be increased by subsequent procedural writings, and if more unfavourable
awards are issued against Spain, they will also include payment of interest and possibly costs). Latest
report of the General State Attorney-Directorate of the State Legal Service 2019.
https://www.mjusticia.gob.es/es/ministerio/organigrama/abogacia-general-estado/publicaciones.

11
renewables saga”, which was triggered when the Spanish government issued a series
of normative provisions (RD 1565/2010, Royal Decree-Law (“RDL”) 14/2010, Law
2/2011, RDL 1/2012, Law 15/2012, RDL 2/2013, RDL 9/2013, Law 24/2013, RDL
413/2014, and Ministerial Order IET / 1045/2014) modifying the concept of
“reasonable profitability” applicable to the renewable energies’ investor”. These
regulatory changes gave rise to dozens of arbitration claims against Spain based on the
alleged violation of provisions such as the Fair and Equitable Treatment (“FET”) clause
of the Energy Charter Treaty. Many of these arbitrations are still pending, and the
concluded cases have had mixed results. 53

 Who is responsible for foreign investment policy. Structure of investment

agency/legislature. Is there a foreign investment promotion agency?

The Secretary of State for Trade (“Secretaría de Estado de Comercio” – SEC), which is
part of the Spanish Ministry of Industry, Commerce and Tourism (MINCOTUR), is
responsible for foreign investment policy. One of the SEC Directorates, the General
Directorate of International Trade and Investments, itself is divided into six general
secretariats (SGs), one of which deals specifically with foreign investments (“SG de
Inversiones Exteriores”)54. Other SGs include the SGs for Asia, Europe outside the
European Union and Oceania; Latin America and North America; Mediterranean
countries, Africa and the Middle East; Financial Promotion of Internationalization; and
Economic and Commercial Offices Abroad and the Territorial Trade Network.
MINCOTUR’s foreign investment website specifies that the Ministry aims to promote
both foreign investment in Spain and Spanish investment abroad. The Ministry’s remit
with regard to foreign investments covers areas such as registering investment and
preparing statistics and reports, negotiating bilateral and multilateral protection
instruments, providing authorisation in certain cases, managing the National Contact
Point, and facilitating investor and entrepreneur mobility.55
Also featuring on the MINCOTUR organisation chart is ICEX, a state-owned business-
oriented agency of MINCOTUR’s Secretary of State for Commerce. ICEX’s headquarters
are in Madrid, and it has a network of 31 branches throughout Spain and almost 200
economic and trade offices abroad.56 The ICEX website contains a large section
devoted to promoting foreign investment, providing Spanish investors with
information on investing abroad, business training, market selection, business
53
Amélie Noilhac, “Renewable energy investment cases against Spain and the quest for regulatory
consistency”, 2020, http://www.qil-qdi.org/renewable-energy-investment-cases-against-spain-and-the-
quest-for-regulatory-consistency/; Maximilian Schmidt, 2021, “The Renewable Energy Saga from
Charanne v. Spain to The PV Investors v. Spain: Trying to See the Wood for the Trees”,
http://arbitrationblog.kluwerarbitration.com/2021/02/01/the-renewable-energy-saga-from-charanne-v-
spain-to-the-pv-investors-v-spain-trying-to-see-the-wood-for-the-trees/.
54
, https://www.mincotur.gob.es/es-es/Organizacion/Organigrama/Paginas/organigrama-
ministerio.aspx.
55
Information literally extracted from
https://comercio.gob.es/Inversionesexteriores/Paginas/Index.aspx.
56
https://www.icex.es/icex/es/navegacion-principal/que-es-icex/index.html.

12
opportunities and identifying partners, as well as other support services.57 There is also
an Invest in Spain section, which is in English and aimed at foreign investors.58

 Is there a foreign investment law?

Spain has various legal norms that address different aspects of international
investment, such as Royal Decree 664/1999 59 on foreign investment and Law 19/2003
on the legal regime for capital movements and foreign economic transactions, 60 which
established some investment controls, as explained below. In addition, Law 14/2013 of
27 September 2013, on support for entrepreneurs and their internationalisation,
regulates certain cases in which, for reasons of economic interest, the granting of visas
and residence permits is facilitated and expedited in order to attract investment to
Spain61.

 Is there a foreign investment screening mechanism for the protection of national

interests?
Spanish law establishes a liberal regime for capital movements in Spain with a few
exceptions for certain foreign investments which are subject to control. The EU
principles of free establishment and non-discrimination for foreign investors are
constrained in some aspects by Spanish regulations, such as Royal Decree 664/1999
and Law 19/2003 mentioned above, which stipulate that foreign investments are
subject to control in Spain if they are: a) investments that by their nature, form or
conditions of implementation, affect or even may affect the exercise of public power,
public policy, public health and safety; b) investments from outside the EU or EFTA in
certain sectors considered sensitive (infrastructure and critical technologies, dual-use
sectors, supply of essential inputs, sectors with access to sensitive information and the
media) and the investor is under the control 62 of a foreign government; c) investment
in activities directly related to national defence, such as the production or trading of
arms, ammunition, explosives and war material, and d) investments in activities
related to arms and ammunition for civil use.
The MINCOTUR website provides a form for foreign investors to fill out in these cases
(Screening Procedure for Foreign Direct Investments), to be submitted to the
Subdirectorate General for External Investment of the Directorate-General for
International Trade and Investment. 63 The decision is taken by the Council of Ministers
on the proposal of the Minister of Economy and Finance and, where appropriate, of
57
https://www.icex.es/icex/es/navegacion-principal/implantacion-e-inversion-exterior/index.html.
58
https://www.investinspain.org/en/index.
59
https://www.boe.es/eli/es/rd/1999/04/23/664.
60
https://www.boe.es/eli/es/l/2003/07/04/19.
61
https://www.boe.es/eli/es/l/2013/09/27/14/con .
62
Control shall be presumed to arise from contracts, rights or any other means which, having regard to
the legal and factual circumstances, confer the possibility of exercising decisive influence on an
undertaking, and in particular by means of: (a) rights of ownership or use of all or part of the assets of an
undertaking, (b) contracts, rights or any other means of exercising decisive influence on the
composition, deliberations or decisions of the organs of the undertaking. Art. 7.2, Ley 15/2007, de 3 de
julio, de Defensa de la Competencia, https://www.boe.es/eli/es/l/2007/07/03/15/con
63
Information taken verbatim from https://comercio.gob.es/InversionesExteriores/Paginas/control-
inversiones.aspx.

13
the head of the competent department for the matter in question, following a report
from the Foreign Investment Board (“Junta de Inversiones Exteriores”). 64
For both the screening mechanism, the foreign investor must request prior
administrative authorisation for any transaction that falls under its scope of review.
There is no deadline for filing it, although it should always be done before completion.
There is no timetable for the process of reviewing a transaction except that the Council
of Ministers shall issue a formal decision within six months of the notification to the
Ministry for Industry, Trade and Tourism. The lack of an express decision shall be
deemed to have a negative effect (negative administrative silence).
Since the COVID-19 pandemic, Spain has issued a series of regulations suspending the
liberalisation regime for certain foreign direct investments, with the aim of protecting
Spanish companies from opportunistic purchases during the crisis.65

 How are subnational governments involved in foreign investment?

The Spanish Constitution sets out a distribution of competences between the State and
the autonomous communities with regard to regulating certain sectors. When dealing
with foreign investment, the Spanish national government provides various types of
financial aid and tax benefits for activities pursued in certain priority industries -such as
technological development or research companies, given these industries’ potential
impact on the national economy as a whole. 66 There are also some privileged
geographical areas: the Canary Islands grant tax advantages, including reduced rates of
corporate tax and VAT and exemptions for transfer taxes and stamp duties; the
Spanish territories of Ceuta and Melilla have no VAT, and imports, production, and
services are taxed at a lower rate.67 The autonomous communities also have their own
regional bodies to attract foreign investment. For example, a 2020 survey shows that
three-quarters of FDI registered in the first half of the year was in the Madrid region. 68
This autonomous community has created the “Invest in Madrid” platform that
centralises recruitment and support for foreign investors willing to invest in the area. 69
Additionally, Spanish subnational governments may take administrative decisions that
affect international investments. Not surprisingly, several investment arbitrations
64
The Foreign Investment Board is the inter-ministerial collegiate body, attached to the Directorate
General for Trade Policy and Foreign Investment, with reporting functions in foreign investment matters.
The Foreign Investment Board is made up of the Director General for Trade Policy and Foreign
Investment ( President), a representative from each of the ministerial departments, with the rank of
Deputy Director General, and the Deputy Director General for Foreign Transaction Management, who
will act as Secretary of the Board. Royal Decree 664/1999, Art. 9.
65
More information on the issue is available at: https://www.ashurst.com/en/news-and-insights/legal-
updates/rdl-8-2020---suspension-of-direct-foreign-investment/;
https://uk.practicallaw.thomsonreuters.com/6-601-0066?
transitionType=Default&contextData=(sc.Default);https://santandertrade.com/en/portal/establish-
overseas/spain/foreign-investment.
66
https://www.investinspain.org/en/doing-business/aids-and-incentives.
67
Information taken verbatim from
https://santandertrade.com/en/portal/establish-overseas/spain/foreign-investment.
68
https://multinacionalesmarcaespana.org/wp-content/uploads/2019/10/Informe_aportacion.pdf.
69
https://www.comunidad.madrid/inversion/relacion-inversores/invest-in-madrid-te-ayuda-impulsar-
tu-proyecto.

14
against the Kingdom of Spain have their origin in measures adopted by subnational
governments. (e.g., ICSID Case No. ARB/12/17, PCA Case No. 2016-26 and ICSID Case
No. ARB/97/7).

 What branch is responsible for negotiations of IIAs?

The Executive branch via MINCOTUR.

 How many IIA memberships? Is there any reporting to Congressional committees

after treaties are ratified?
MINCOTUR classifies the IIAs that currently bind Spain into three groups 70:
a) Agreements for the Promotion and Reciprocal Protection of Investments (APPRIs;
which is the Spanish acronym for BITs). Spain currently has 63 bilateral texts on
investment protection and promotion in force. 71 Taking into account the provisions of
EU rules allowing Spain to enter into revising its BIT network to eliminate any
incompatibilities between extra-EU APPRIs and EU law, Spain amended the Spain-
Kazakhstan APPRI in 202172. Also in 2021, the Kingdom of Spain and the Republic of
Colombia signed a new APPRI to replace the existing 2005 BIT. The new text’s lengthy
Section IV (articles 19-25) is entitled “Investor-State Dispute Resolution” and addresses
new issues that are currently being debated by both UNCITRAL Working Group III and
in academic circles, such as third-party funding, cost allocation, and claim
consolidation.
b) EU Protection Agreements: MINCOTUR refers to just three texts (CETA, the EU-
Singapore IPA and the EU-Viet Nam IPA)73, but the UNCTAD Investment Policy Hub
refers to more (some of which are not yet in force; the EU-UK Trade and Cooperation
Agreement, the Armenia-EU EPA, etc.)74.
c) Multilateral Agreements: MINCOTUR cites two texts: the Energy Charter Treaty and
the OECD Convention on Combating Bribery of Foreign Public Officials in International
Business Transactions.

 Model BIT?
The UNCTAD Investment Policy Hub reports a Spanish Model BIT for 2008, but no text
is provided.75
70
https://comercio.gob.es/InversionesExteriores/AcuerdosInternacionales/Paginas/default.aspx.
71
Article 4 (1) of Regulation (EU) No 1219/2012 of the European Parliament and of the Council
establishing transitional arrangements for bilateral investment agreements between Member States and
third countries, https://eur-lex.europa.eu/legal-content/ES/TXT/?
uri=uriserv:OJ.C_.2020.179.01.0001.01.SPA&toc=OJ:C:2020:179:TOC#ntr*2-C_2020179ES.01000101-
E0003.
72
Iruretagoiena Agirrezabalaga, I., “La enmienda del Acuerdo para la promoción y protección recíproca
de inversiones de España y Kazajstán: primeras notas de una partitura interpretada bajo la batuta de la
Unión Europea”, La Ley. Mediación y arbitraje, No. 7, 2021.
73
The Congress of Deputies has to process authorizations for the ratification of these conventions, as
the recent EU-Singapore IPA showed.
https://www.congreso.es/public_oficiales/L14/CONG/BOCG/C/BOCG-14-C-71-1.PDF.
74
https://investmentpolicy.unctad.org/international-investment-agreements/countries/197/spain?
type=tips.
75
https://investmentpolicy.unctad.org/international-investment-agreements/model-agreements.

15
 ICSID Membership
The ICSID Convention entered into force in Spain on 17 September 1994. 76 With regard
to Article 54(2), the Kingdom of Spain appointed the courts of first instance (“juzgado
de primera instancia”) as competent for the purpose of recognising and enforcing
awards rendered pursuant to the Convention.

o Who appoints arbitrators/conciliators to the ICSID list?

In 2019, through a joint instruction approved by the State Secretariat for Economy and
Business Support, the State Secretariat for Commerce, and the Secretary of State for
Justice, the Kingdom of Spain published an open call to fill four ICSID conciliator and
four arbitrator positions. The instruction specified a 6-year term of office, and that the
candidates who were eligible for both positions should have experience in the field of
law, particularly in investment law, trade, industry or finance. The instruction also
stipulated that, in accordance with Organic Law 3/2007 provisions for effective
equality between men and women, the principle of a balanced number of men and
women would be observed in appointing the arbitrators and mediators, unless there
were well-founded and objective reasons for not doing so. 77 The candidates were
assessed by an inter-ministerial working group named the Commission for the
Evaluation of Candidacies for the Appointment of ICSID Arbitrators and Mediators. The
process culminated in the appointment of four female and four male arbitrators and
conciliators, whose term ends on 4 February 2026.78

o Who has to defend the State (as host) in an investor-state dispute

settlement? [involvement of the justice department? Or state
department?]

The International Arbitration Department, which is part of the General Subdirectorate

of Litigation Services of the State Attorney General (“Abogacía General del Estado”),
represents the Kingdom of Spain in investment arbitrations in which the State appears
as a defendant as a result of claims filed against actions performed by both the
General Administration of the State and its autonomous bodies, public entities that are
accountable to them, and constitutional organs (Article 9 of Law 52/1997 on legal
assistance to the State and Public Institutions).79
The latest report from the State Attorney General-Directorate of the State Legal
Service, published in 2021, details all the actions carried out by the International
Arbitration Department in energy arbitrations. The report distinguishes between
completed arbitrations resulting in a favourable award to the Kingdom of Spain;
76
https://icsid.worldbank.org/about/member-states/database-of-member-states. BOE number 219,
13th September 1994.
77
https://www.mjusticia.gob.es/eu/ciudadania/empleo-publico/acceso-convocatorias-perfiles/arbitros-
conciliadores-espana.
78
Panel Members appointed by Spain: Manuel Conthe Gutiérrez, Antonio Hierro Hernández-Mora,
Carmen Núñez-Lagos y García-Bellido, Deva Villanúa Gómez, Katia Fach Gómez, Javier Fernández-
Samaniego, Gonzalo Stampa Casas y Mercedes Tarrazón Rodón.
https://icsid.worldbank.org/about/member-states/database-of-member-states/member-state-details?
state=ST127.
79
«BOE» núm. 285, de 28/11/1997. https://www.boe.es/eli/es/l/1997/11/27/52/con.

16
arbitrations terminated by the opposing party’s withdrawal; cases in which the final
award is pending, but there is a decision of jurisdiction, responsibility and principles for
the calculation of quantum or damages to be compensated; and terminated cases with
an award that partially upheld the foreign investors’ claims and which are in the
annulment or execution phase.80

 Member of New York Arbitration Convention on the Recognition and Enforcement

of Foreign Arbitral Awards?

Spain joined the New York Convention on 12 May 1977 81. Many Spanish court
decisions interpret and apply the Convention 82 , and Spanish scholars have also studied
this crucial text extensively.83

 Recognition of sovereign immunity exception for commercial activity?

Spain ratified the United Nations Convention on Jurisdictional Immunities of States and
their Property on 21 September 201184. There are Spanish Supreme Court decisions
that deny enforcement immunity over foreign state assets in Spain85.

 Investment Insurance
MINCOTUR provides different financing mechanisms for Spanish companies that wish
to expand internationally. The Fund for the Internationalisation of Enterprise (Fondo
para la Internacionalización de la Empresa – FIEM) aims to promote the globalisation
of Spanish companies through the direct financing of their export and investment
operations abroad, so that they can compete with foreign companies. The Spanish
Development Finance Company (Compañía Española de Financiación del Desarrollo –
COFIDES) provides medium- and long-term financing for viable private investment
projects that contribute, with profitability criteria, both to the development of the
countries receiving the investments and the internationalisation of the Spanish
economy and companies that promote sustainable investment. Finally, the Spanish
Export Credit Insurance Company (Compañía Española de Seguros de Crédito a la
Exportación – CESCE) is a commercial credit management company that promotes
international growth and is at the head of a group of companies providing integral
solutions for commercial credit management in parts of Europe and Latin America. 86
With regard to insurance for international investments, CESCE is also the export credit
agency (ECA) that manages export credit insurance on the Spanish State’s behalf.
80
Memoria de la Abogacía General del Estado-Dirección del Servicio Jurídico del Estado 2019.
https://www.mjusticia.gob.es/es/ministerio/organigrama/abogacia-general-estado/publicaciones
81
https://www.newyorkconvention.org/list+of+contracting+states.
82
https://www.newyorkconvention.org/court+decisions/decisions+per+country.
83
Fach Gómez, K/ López Rodríguez, AM., (eds.), 60 Years of the New York Convention: Key Issues and
Future Challenges, Kluwer, 2019; López Rodríguez, AM/ Fach Gómez, K (eds.), Reconocimiento y
ejecución de sentencias arbitrales extranjeras en España y Latinoamérica, Tirant lo Blanch, 2019.
84
https://treaties.un.org/Pages/ViewDetails.aspx?src=IND&mtdsg_no=III-13&chapter=3&clang=_en.
85
For furhter information, please see decisions such as ROJ: STS 3012/2019 – ECLI:ES:TS:2019:3012.
86
Information taken verbatim from:
https://comercio.gob.es/Financiacion_para_internacionalizacion/CESCE/Paginas/default.aspx.

17
Along with issues such as providing liquidity and covering non-payment or contract
termination risks, the agency helps to cover the responsibilities of Spanish companies
that interact with state agencies and private companies abroad that require bank
guarantees or sureties. It also covers various risks (expropriation, economic loss due to
political violence, and inability to transfer dividends) that can damage investments
abroad.87

Financial Regulation
Financial services generate 3.8% gross value added and 1.8% employment in the
Spanish economy88 – lower figures than in other Eurozone countries. Banks play a
leading role in the Spanish financial market, as most financial services are provided by
commercial banks or financial service providers. Banks also lead large financial
conglomerates, of which insurance companies are often a part.

The Spanish financial system has strong links with the Eurozone, but also with Latin
American countries. The most important Spanish banks have subsidiaries or branches
in Latin American countries. There are also relevant links between the Spanish and
Latin American supervisory authorities through different international organisations.

Spain has advanced financial legislation that complies with the main international
standards, largely as a result of the implementation of EU financial markets law.
However, the effectiveness and enforceability of these rules, especially with regard to
the protection of investors and financial consumers, are hampered by the supervisory
authorities’ lack of resources to sanction offenders and the slowness of the justice
system.

 Unitary or sector-specific or “twin peaks/functional” regulator?

Financial supervision in Spain is sectoral, with each financial sector having its own
regulator. Three different authorities carry out the regulation and supervision of
financial markets, financial service providers, and other market participants in Spain.
Oversight of the banking sector and credit institutions is the responsibility of the Bank
of Spain (“Banco de España” – BdE) 89; insurance companies and pension funds are
supervised by the General Department of Insurance and Pension Funds (Dirección
General de Seguros y Fondos de pensiones – DGSFP) 90 in the Ministry of Economic
Affairs and Digital Transformation; and securities markets are supervised by the
87
https://www.cesce.es/es/buscador-de-soluciones. More information on this subject, including policy
limits and restrictions on policy coverage: Rocío Uriarte Chávarri “Agencias de crédito a la exportación:
Una comparativa entre CESCE y sus principales "competidoras"”, Boletín económico de ICE, Información
Comercial Española, Nº 3123, 2020, pages 29-38; Alejandro Ruiz Iglesias, “Los instrumentos de apoyo
financiero a la internacionalización diez años después de la crisis”, Información Comercial Española, ICE:
Revista de economía, Nº 906, 2019 (Ejemplar dedicado a: La crisis financiera. Diez años después), pages
155-163.
88
Data taken from Spanish National Statistical Institute (INE), https://www.ine.es/index.htm.
89
More information is available on the website: https://www.bde.es/bde/es/.

18
Securities Markets National Commission (Comisión Nacional del Mercado de Valores –
CNMV)91. The oversight powers of payment and settlement systems are shared
between the BdE and the CNMV.

Each authority is in charge of customer protection (whether consumers or not) and the
prudential regulation and supervision of financial providers operating in its sector.
However, the system has some of the features of functional supervision, because
certain products or services are subject to a specific regulator, no matter which
financial entity provides them. For example, the CNMV is the competent authority for
supervising the sale of and advice on packaged retail investment products, even if
banks or insurance companies sell them.

Banking
Spanish banking legislation is essentially in line with international standards, mainly
due to the implementation of EU law. In recent years public opinion has pushed for
better protection of bank customers and improved supervision of banks in order to
avoid the government needing to use public funds for bailouts and restructuring in the
event of a crisis. The courts have encouraged legal reforms aimed at increasing
transparency92, following numerous rulings declaring common clauses in mortgage
loan contracts to be unfair93.

The main challenges to be faced by the banking sector in the coming years are
increasing the resilience of credit institutions, controlling the new risks emerging from
digitalisation (e.g. fraudulent practices, cyber-attacks), preventing the financial
exclusion of people with difficulties in accessing new technologies, and incorporating
climate change risks into credit institutions’ decision-making processes. In addition, the
sector’s profitability has been weakened by the impact of the global financial crisis and
the COVID pandemic crisis, as well as by the competition from Big Tech. To address this
challenge, banks need to become more efficient by cutting costs and making more
intensive use of new technologies.

 Status of Central Bank [Independent? Dependent?]

The Bank of Spain is the Spanish national central bank and therefore participates in the
Eurosystem. It has oversight of the country’s banking system, along with the European

90
More information is available on the website:
http://www.dgsfp.mineco.es/es/Paginas/Iniciocarrousel.aspx.
91
More information is available on the website: https://www.cnmv.es/portal/home.aspx.
92
The best example is Law 5/2019 on credit agreements relating to residential property,
https://www.boe.es/eli/es/l/2019/03/15/5/con.
93
For example, Supreme Court Rulings on floor clauses of 9 May 2013 (ECLI:ES:TS:2013:1916), 22 April
2015 (ECLI:ES:TS:2015:1723) or 5 November 2020 (ECLI:ES:TS:2020:3593); Supreme Court Rulings on
cost clauses of 23 January 2019, (ECLI:ES:TS:2019:104), 24 de July de 2020 (ECLI:ES:TS:2020:2495) or 17
November 2020 (ECLI:ES:TS:2020:3793); Supreme Court Rulings on abusive clauses in multi-currency
mortgages of 23 July 2020 (ECLI:ES:TS:2020:2626), 27 November 2020 (ECLI:ES:TS:2020:4015) or 10
december 2020 (ECLI:ES:TS:2020:4068),

19
Central Bank, within the framework of the European Single Supervisory Mechanism 94.
Law 13/1994, Autonomy of the Bank of Spain, grants the bank institutional, financial,
and functional independence95.

 National and/or subnational regulators?

Regulating the banking sector is the responsibility of the State within the framework of
EU regulations, although the EU has significant regulatory powers in this area. Spain’s
national competences are implemented through Parliament (first level), the Ministry of
Economic Affairs and Digital Transformation (second level), and the Bank of Spain
(third level). The Bank of Spain issues technical standards, taking into account the
binding Technical Standards and Guidelines developed by the European Banking
Authority.

The regional governments have the power to regulate certain organisational aspects of
savings banks and banking foundations. However, this regulation is currently of little
practical relevance since almost all savings banks were converted into banks during the
2008 financial crisis.
 What role does the legislator play in international standard-setting?
The Bank of Spain plays a very active role in the development of international
harmonised banking standards through its participation in several international bodies
and it also promotes their incorporation into national legislation . The Bank of Spain
participates in the Eurosystem, together with the European Central Bank and its
European counterparts. It is a member of the European System of Financial
Supervision (ESFS) and collaborates with the European Banking Authority.
The Bank of Spain is also an active member of the Center for Latin American Monetary
Studies (“Centro de Estudios Monetarios Latinoamericanos” – CEMLA), the Association
of Supervisors of Banks of the Americas (“Asociación de Supervisores Bancarios de las
Américas” – ASBA), and the Executive Secretary of the Central American Monetary
Council (“Secretaría Ejecutiva del Consejo Monetario Centroamericano” – SECMCA), all
of which play an important role in promoting the convergence of supervisory practices.
The Bank of Spain also pursues international cooperation, either bilaterally – involving
activities carried out directly with the counterpart institution – or multilaterally,
through participating in activities promoted by other international institutions or
agencies.
 Who represents the country in the IMF?
Spain is represented in the IMF by the Governor of the Bank of Spain.
 Does the country have a seat on the IMF Executive Board?
Spain does not have a permanent seat on the IMF Executive Board, but it is one of
a group of countries entitled to appoint a Director at the Executive Board, together
with Colombia, Costa Rica, El Salvador, Guatemala, Honduras and Mexico.
94
See the European Union Chapter.
95
See art. 1 Ley 13/1994, de 1 de junio, de Autonomía del Banco de España,
https://www.boe.es/eli/es/l/1994/06/01/13/con.

20
 What is/are the targets of the Central Bank?
Along with the European Central Bank and the other Central banks in the
Eurosystem, the Bank of Spain works to keep prices stable in the euro area and to
preserve financial stability, and contributes to the safety and soundness of the
European banking system.
It also provides treasury services and acts as a financial agent for government debt.
The Bank of Spain is in charge of the supervision of credit institutions that are
considered less significant, in accordance with Regulation (EU) 1024/2013. It
supervises solvency and compliance with the specific rules of credit institutions and
other entities like electronic money institutions, payment institutions and currency
exchange establishments.
Finally, it is responsible for the oversight of the retail payment system and the
large-value payments in the euro system (TARGET-2 Bank of Spain).

 Member of Bank for International Settlements (BIS)?

Yes
o Who represents the country in the BIS?
Bank of Spain represents Spain in the BIS.
o Accept the Basel Core Principles (BCPs)?
Through its Central Bank Spain has accepted the Basel Core Principles and also the
consolidated Basel III Framework, which comprises all the current standards of the
Basel Committee on Banking Supervision. The Basel III Standards have been
implemented almost in their entirety in Spain through the transposition and
application of the EU Regulations and Directives on Capital Requirements for banking
institutions that comply with these principles96.

o Member of Basel Committee on Banking Supervision (BCBS)?

The Bank of Spain is a member of the Basel Committee on Banking Supervision.

Insurance
The insurance sector in Spain is well developed and mature. It is the 7 th largest in
Europe, with an aggregate gross written premium volume of more than 25,107 million
euros in 202097. The insurance sector accounts for 5.4% of Spanish GDP. A special
feature of the Spanish insurance market is that the reinsurance market is relatively
undeveloped, due to the existence of the Insurance Compensation Consortium (CCS).
This public institution provides coverage for certain extraordinary or catastrophic risks
(for example, floods, earthquakes, volcanic eruptions and damage caused by uninsured
96
According to the Basel Committee on Banking Supervision Eighteenth progress report on adoption of
the Basel regulatory framework, July 2020 most Basel III standards had been implemented and were in
force in Spain. The deadline for those not yet implemented is January 2023.
97
EIOPA data. See at https://www.eiopa.europa.eu/document-library/insurance-overview-report/
european-insurance-overview-2021.

21
vehicles) through funds obtained from a compulsory surcharge imposed on all
insurance policies, which is fixed in relation to the sum insured.

The Spanish insurance market has weathered the 2008 financial crisis and the COVID
crisis well. Despite the ensuing difficulties, Spanish insurance companies maintain solid
levels of solvency and profitability without their operational capacity being affected.

Spanish insurance legislation is essentially in line with international insurance and

pension fund standards, mainly due to the implementation of EU law. The main
challenges to be faced in the coming years are the digitalisation of the insurance
sector, the revision of supervision and solvency regulations, the development of state-
promoted occupational pension funds, and the coverage of large business groups’
risks.

 National or subnational regulators?

Regulating the insurance market is the responsibility of the State within the framework
of EU regulations, as the EU has significant regulatory powers in this area. Spain’s
competences are implemented through Parliament (first level) and the Ministry of
Economic Affairs and Digital Transformation (second level). The General Department of
Insurance and Pension Funds (Dirección General de Seguros y Fondos de Pensiones –
DGSFP) has the power to develop these laws and regulations on insurance and pension
funds, especially in technical aspects. The DGSFP is the national institution responsible
for regulating, supervising, and controlling insurance companies, pension funds, and
their management entities. It is not an independent authority, as it is part of the
Ministry of Economic Affairs and Digital Transformation, and so it cannot set its own
budget. The DGSFP is the agency empowered by insurance law 98 to supervise insurance
company activity, with the exception of mutual insurers that operate solely within one
autonomous community. The latter are supervised by the regional authorities.
Social insurance services are not subject to DGSFP supervision because social insurance
is an integral part of the Spanish social security system, providing financial protection
in the event of disability, injury at work, illness, maternity, unemployment, and old age
(state pension).

 What role does the legislator play in international standard-setting?

In the area of financial markets, the Spanish supervisory authorities -and not the Parlament-
take a leading role in the implementation of international standards. The DGSFP plays a very
active role in the development of international insurance standards through its
participation in several international bodies.At a European level, it is a member of the
European System of Financial Supervision (ESFS) and collaborates with the European
Insurance and Occupational Pensions Authority (EIOPA). It also participates in the
OECD Insurance and Private Pensions Committee, and is a member of the International
Association of Insurance Supervisors (IAIS), the International Organization of Pension
98
The most relevant law is Ley 20/2015, de 14 de julio, de ordenación, supervisión y solvencia de las
entidades aseguradoras y reaseguradoras, https://www.boe.es/eli/es/l/2015/07/14/20/con.

22
Supervisors (IOPS)99 and the Latin American Insurance Supervisors Association 100. All
these international organisations contribute to harmonising insurance regulation and
strengthening international supervisory cooperation and convergence.

 Member of the International Association of Insurance Supervisors (IAIS)?

Spain is a member of the IAIS.
o Who represents the country?
Spain is represented at the IAIS by the DGSFP.

o Accept the Insurance Core Principles (ICPs)?

Spain accepts the Insurance Core Principles and Common Framework for the
Supervision of Internationally Active Insurance Groups (the latest version in 2019) and
works hard to implement them in its jurisdiction. Furthermore, the pursuit of Solvency
II as the practical implementation of the IAIS International Capital Standard (ICS) is part
of EIOPA objectives, and consequently, the DGSFP also works to achieve this.

o How many international significant insurance groups?

There are a significant number of players in the Spanish insurance market, with most
major international groups being represented. More than 200 insurance companies
have DGSFP authorisation to operate in Spain, as well as around 70 branches of foreign
companies, of which more than 95% are based in EU member states. In addition, 803
entities from the European Economic Area are authorised to operate in Spain under
the freedom to provide services101, although not all of them have real activity there.
The insurance market presents a medium-high degree of concentration, with the top
10 biggest premium writers having a market share of 60% 102. Foreign insurance groups
have a prominent presence in the Spanish insurance market, making cross-border
cooperation with other regulators an important factor in DGSFP’s supervisory
approach.

Some of the largest insurers operating in Spain are insurance groups or belong to
financial conglomerates led by a bank. The supervision of these large cross-sectoral
financial groups entails the application of a specific prudential regime and close
cooperation between the authorities according to Law 5/2005 of 22 April 2005 on the
supervision of financial conglomerates103.

99
http://www.iopsweb.org/.
100
https://www.assalweb.org/.
101
Data taken from DGSFP, Seguros y fondos de pensiones. Informe 2020 (Madrid, 2021), 36-47.
102
Data taken from EIOPA, European Insurance Overview 2021, 7.
103
Ley 5/2005, de 22 de abril, de supervisión de los conglomerados financieros,
https://www.boe.es/eli/es/l/2005/04/22/5/con.

23
 Stock exchanges
Spanish stock exchanges are not very important on the international scene. Their
market capitalisation accounted for 84.5% of nominal Spanish GDP in December 2020.
The COVID crisis has led to a significant contraction in securities market activity due to
the economic downturn and the uncertainties surrounding it.
Spanish stock exchanges are characterised by a high degree of banking penetration, as
commercial banks and their subsidiaries are the main investment services providers.
They also show a clear trend towards internationalisation. Foreign securities and debt
are often traded on Spanish stock markets. Assets under management and foreign
Collective Investment Schemes’ shares sold in Spain are growing every year and now
account for more than 20 % of the total. Non-residents play a very important role in
the Spanish equity market in terms of trading and ownership, as foreign investors hold
more than a 50% stake in the overall capital of listed companies. Spanish legislation is
essentially in line with international securities markets standards, mainly due to the
implementation of EU law. The main challenges to be faced by the sector in the coming
years are digitalisation, the regulation of crypto assets, BREXIT, and the promotion of
sustainability and the fight against climate change through green bonds and securities.

 How many stock exchanges?

There are different kinds of stock exchanges in Spain. Therefore, it is important to
distinguish between regulated markets and multilateral trading facility (MTF) systems.
The most important regulated markets are the four stock exchanges in Madrid,
Barcelona, Bilbao and Valencia. They are all interconnected electronically, giving rise to
a continuous market, the Spanish Stock Exchange Interconnection System (Sistema de
Interconexión Bursátil Español - SIBE), that ensures a single point of liquidity for each
security in real-time. The SIBE is not a truly independent securities market, but a
trading system managed by the company “Sociedad de Bolsas”, a subsidiary of the
holding company Bolsas y Mercados Españoles, Sociedad Holding de Mercados y
Sistemas Financieros, S.A.U. (BME),104 which links the four Spanish stock exchanges by
means of a computer network. The most important securities are traded on this
electronic trading system.
Other regulated markets are the futures and options official market (MEFF Exchange)
and the corporate debt and private fixed income official market (AIAF Exchange). There
is no commodities exchange in Spain.
MTF systems are operated by an investment firm or a market operator and permit
them to bring together multiple third-party buying and selling interests in financial
instruments according to non-discretionary rules. Their operation rules are more
flexible than in regulated markets. Spain has four MTFs:
1) The LATIBEX MTF, on which Latin American securities are traded.

104
Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A.U.

24
 2) The SENAF MTF, an electronic market for the wholesale trading of Spanish
government debt securities.
3) BME Growth, oriented towards small and medium-sized growth companies and
which trades shares of companies in any activity sector, although there is
currently a greater presence of companies in the technology, biotech and
health, engineering, telecommunications and renewables sectors.
4) The Alternative Fixed Income Market (MARF SN), where mainly institutional
investors trade medium-sized companies’ corporate bonds and commercial
paper.

The companies that manage all of these securities markets or MTFs in Spain (BME
Clearing, Iberclear and others) are part of a single corporate group whose holding
company is BME105. Since June 2020, BME has been wholly owned by Six Group AG, a
Swiss company that also controls the Swiss Stock Exchange and the Six Digital
Exchange, the world’s first fully digital market infrastructure based on DLT technology.

 National and/or subnational regulators?

Regulation of the securities markets sector is the responsibility of the State, within the
framework of EU regulations, as the EU has significant regulatory powers in this area.
These competences are implemented through Parliament (first level), the Ministry of
Economic Affairs and Digital Transformation (second level) and the CNMV (third level).
The CNMV adopts technical rules.

 What role does the legislator play in international standard-setting?

The CNMV plays a very active role in the development of international harmonised
securities market standards through its participation in several international bodies. It
is a member of the European System of Financial Supervision (ESFS) and collaborates
with the European Securities and Markets Authority.
The CNMV is also an active member of the IOSCO and two other relevant regional
organisations: the Association of Mediterranean Regulators and the Ibero-American
Securities Market Institute (IIMV). These international organisations contribute to
harmonising securities market regulation and strengthening international supervisory
cooperation and convergence.
 Member of the International Organization of Securities Commissions (IOSCO)?
CNMV is a member of the International Organization of Securities Commissions.
o Who represents the country in the IOSCO?
Spain is represented on the IOSCO by the Chairman and the Vice-chairman of de
CNMV.

105
There is more detail at https://www.bolsasymercados.es/esp/Home.

25
Fintech
Spain aims to facilitate financial innovation while ensuring consumer security and
market stability. To this end, it has regulated sandboxes through Law 7/2020 of 13
November 2020 for the digital transformation of the financial system 106. This law
regulates controlled test spaces in which technological innovation projects can be
implemented in the financial system. Pilot projects and tests will be carried out on a
provisional and experimental basis under financial authorities’ control. In May 2021,
the supervisory authorities approved initial testing for the first 18 pilot projects, most
of them based on DLT or AI technologies. For example, CNMV approved testing a
project related to the issuance and custody of tokenised units of an investment fund.
DGSFP approved testing a smart death insurance scheme; an insurance that uses a
combination of blockchain, AI technology and cryptography, and a pilot project for a
retirement pension system via consumption through an application that allows citizens
to save money for their future occupational pensions through purchases and
challenges. Bank of Spain approved a project on NeuroDecision Technology that
applies AI technology to bank risk management107.
The law regulates access to the test spaces and the development of the tests
themselves (arts. 4 to 9 Law 7/2020), allowing confidentiality and business secrecy
clauses to be imposed on participants (art. 14 Law 7/2020).
A series of guarantees are also established for participants. First, their informed
consent must be obtained before taking part in tests (art. 10 Law 7/2020) and second,
they have a penalty-free right of withdrawal which they may exercise at any time (art.
11 Law 7/2020). This law also regulates the project promoters’ liability regimes for
possible damages suffered by participants as a result of non-compliance with the test
protocol, culpable or negligent conduct or technical or human failure during the course
of the tests (art. 12 and 13 Law 7/2020).
The competent sectoral supervisory authority monitors the tests and has the power to
suspend them or force their termination (Articles 15 and 16 Law 7/2020).
Authorisation for carrying out the activity or an extension of the license held by the
financial institution may be requested once a test has been completed (Art. 18 Law
7/2020).

Cryptocurrencies and other crypto assets

Spain has not adopted any specific regulation on cryptocurrencies except in relation to
money laundering and terrorist financing108. In accordance with the latest amendment
to Law 10/2010, providers engaged in exchange services between virtual currencies
and fiat currencies and custodian wallet providers must be entered in a specific

106
See in https://www.boe.es/eli/es/l/2020/11/13/7/con.
107
See all approved projects in
https://www.tesoropublico.gob.es/sites/default/files/resolucia3n_admitidos_sandbox_csv.pdf.
108
See Royal Decree Law 7/2021 which amended Law 10/2010, of 28 April, on the prevention of money
laundering and terrorist financing, https://www.boe.es/eli/es/lo/2021/05/26/7/con.

26
register at the Bank of Spain to prevent money laundering and terrorist financing. The
Spanish tax agency (AEAT) has also issued several binding rulings on the tax
implications of activities involving virtual currencies.
Virtual currencies are considered neither legal tender, electronic money, nor a
payment instrument in Spain. The Supreme Court has ruled that bitcoin is not legal
tender, but an intangible asset for consideration or exchange 109. The CNMV considers
that virtual currencies issued as securities tokens through an Initial Coin Offering are
transferable securities when they assign rights equivalent to or similar to those of
shares, bonds or other financial instruments governed by Spanish securities law. In any
event, the CNMV and the Bank of Spain warned that these are very risky investments
and that there is a significant risk of fraud110.
The government wishes to encourage the introduction of a digital euro as a public
digital currency in Spain111.

Tax
Article 133 of the Spanish Constitution provides for three tiers of public administration
with recognised powers in the field of taxation: the State, the autonomous
communities and local corporations.

In accordance with both the “Reserva de Ley” principle, as regulated in articles 31.1
and 133 of the Spanish Constitution, and the Constitutional Court doctrine, only the
law can establish (create ex novo) a tax or modify its essential elements (such as
exemptions, allowances and rates)112. Both the State and the autonomous
communities have the capacity to enact laws and can therefore raise taxes or alter
their essential elements. Local councils can only apply taxes that the State or the
autonomous communities have created.
The State and the autonomous communities thus raise their own taxes (state taxes
and autonomous community taxes113). However, in accordance with Organic Law
8/1980 on autonomous community funding, of 22 September 1980 (Ley Orgánica de
Financiación de las Comunidades Autónomas – LOFCA), the State has delegated the
possibility of regulating certain elements of state taxes to the autonomous
communities (including exemptions, deductions, tax credits and tax rates) 114 and the
power to administer some state taxes (management, inspection, collection and

109
Supreme Court Ruling 326/2019 of 20 June 2019 (ECLI:ES:TS:2019:2109).
110
The CNMV and the Bank of Spain have published several warnings about the risks of investing in
cryptocurrencies See the last one: CNMV-Banco de España, Comunicado conjunto de la CNMV y del
Banco de España sobre el riesgo de las criptomonedas como inversión (9 de febrero de 2021),
https://www.cnmv.es/portal/AlDia/Comunicaciones-Publicas.aspx.
111
See Proposal on the promotion of a study group on the introduction of a digital euro as the public
digital currency of the European Union 25 May 2021 (BOCG. Congreso de los Diputados, serie D, núm.
286, de 04/06/2021, available at https://www.congreso.es/busqueda-de-iniciativas).
112
See also article 8 of Law 58/2003, of December 17, General Tax Law.
113
Article 6.1 of Organic Law 8/1980, of September 22, on Autonomous Community Financing (LOFCA).
114
Article 19. Dos, para. 1, LOFCA.

27
review)115, in accordance with the provisions of articles 133.2 and 157.1 a) of the
Spanish Constitution116.
 The state taxes for which regulatory capacity (the possibility of regulating
exemptions, allowances, deductions and rates) has been ceded to the
autonomous communities are mainly personal income tax, inheritance and gift
tax, wealth tax, transfer tax, and stamp duty, which means that the tax burden
borne by the taxpayer depends on the autonomous community in which they are
resident.
 The state taxes of which administration (management, inspection, collection and
review) has been assigned to the autonomous communities are mainly
inheritance and gift tax, wealth tax, transfer tax and stamp duty, which means
that autonomous agencies manage these taxes117.
 The regulation and administration of corporate income tax, non-resident income
tax, value-added tax and excise taxes are the exclusive responsibility of the
State118. In this case, the State Tax Administration Agency (Agencia Española de la
Administration Tributaria/AEAT), a body under the Ministry of Finance and the
Public Service, is responsible for tax administration.
 The regulatory competence for personal income tax (the possibility of regulating
own exemptions, allowances, deductions and rates, in addition to those
established by state law) is assigned to the autonomous communities 119, so the
tax burden is different depending on the autonomous community. However, the
administration of the tax is the exclusive remit of the AEAT120.

A) TAXES CREATED BY STATE LAW:

The main taxes created by the State can be classified as direct and indirect taxes.
Direct taxes are levied on wealth and the obtaining of income and include:

 Impuesto sobre la renta de las personas físicas 121 (personal income tax/PIT) for
individuals who are residents in Spain for tax purposes (i.e. spend more than 183
days in a calendar year in Spain, or use Spain as their main base or centre of
activities or economic interests). Residents are generally subject to PIT on their
worldwide income, which is taxed at progressive rates after statutory reductions.
o PIT is not levied on income from employment obtained by persons who are
Spanish tax residents for work that is performed outside Spain, up to
€60,100, subject to certain requirements122. However, there is a special tax
regime for foreigners working in Spain on an employment contract with a

115
Article 19. Dos, para. 3, LOFCA.
116
The LOFCA also establishes the possibility of transferring the proceeds obtained from the paying of
certain state taxes to the autonomous communities, in order to finance part of the communities’ public
expenditure. See articles 4.1.c) and 11 of the LOFCA.
117
The autonomous communities can regulate some elements of gambling duty, the tax on certain
means of transport and the tax on hydrocarbons.
118
Article 19. Dos, para. 4, LOFCA.
119
Article 19. Dos, para. 1, LOFCA.
120
Article 19. Dos, para. 4, LOFCA.
121
Law 35/2006, of November 28, on Personal Income Tax (PIT) and Royal Decree 439/2007, of March
20, which approves the regulation of Personal Income Tax.
122
Article 7, p) of Law 35/2006 on PIT.

28
 Spanish company, which is subject to certain requirements, such as being
resident in Spain for tax purposes (spending more than 183 days a year in
Spain) but not having been resident there in the last ten years. Employees
on assignment in Spain pay 24% tax on income up to €600,000 and 47% for
income over this, except on dividends, interest and capital gains (between
19% and 26%).123
o Tax relief and tax rates are regulated by both State and autonomous
community law.

 Impuesto sobre la renta de no residentes124 (Non-resident income tax/NRIT):

non-resident companies (without permanent establishment) and individuals are
subject to NRIT only on their Spanish-source income, and withholding tax is the
mechanism by which the Spanish tax authorities collect the final tax amount. The
rate of withholding tax depends on the nature of the income. A general tax rate of
19% is applied for European Union (EU) and European Economic Area (EEA)
residents (24% tax rate for non-EU or EEA residents). Interest, dividends or capital
gains are chargeable at a rate of 19% 125. The withholding rate may be removed or
mitigated under applicable EU legislation or a tax treaty signed by Spain. Foreign
companies with a permanent establishment in Spain are taxed at a rate of 25% on
the tax base126

 Impuesto sobre sociedades127 (corporate income tax/CIT): resident companies

are taxed on their worldwide income. This tax is levied on the profit companies
(corporations) obtain from their activities, specifically on net profit. The general
CIT rate in Spain is 25%128 , but other tax rates and special tax regimes are
applicable in the following cases, amongst others:
o Law 22/2021, of 28 December 2021, on the General State Budget for the
year 2022 (in force from the tax periods starting on 1 January 2022),
introduced a minimum taxation rule for those CIT taxpayers with a net
turnover in the 12 months prior to the date on which the tax period begins
of at least 20 million euros and for taxpayers who are taxed under the
special tax consolidation regime for CIT purposes, regardless of the net
turnover amount. According to this rule, the above-mentioned taxpayers’
net tax due (defined as tax due after applying tax relief and deductions) may
not be less than the result of applying 15% to the taxable income reduced or
increased for additions/reductions related to the tax loss levelling-off
reserve (eligible small entities) and reduced by the special investment
reserve of the Special economic and tax regime of the Canary Islands. The

123
Article 93 of the Law 35/2006 on PIT and articles 113 to 120 of the Royal Decree 439/2007.
124
Royal Legislative Decree 5/2004, of March 5, approving the Codified Text of the Law on Non-
residents Income Tax (NRIT) and Royal Decree 1776/2004, of July 30, which approves the regulation of
Non-residents Income Tax.
125
Article 25 of Royal Legislative Decree 5/2004 on NRIT.
126
Article 19.1 of Royal Legislative Decree 5/2004 on NRIT.
127
Law 27/2014, November 27, on Corporate Income Tax (CIT) and Royal Decree 634/2015, of July 10,
which approves the regulation of Corporate Income Tax.
128
Article 29.1 of Law 27/2014 on CIT.

29
 minimum taxation rule will not be applicable to taxpayers taxed at 10%, 1%
or 0% CIT tax rates or to SOCIMIs.
o Newly created companies129 are taxed at 15% for both the first tax period in
which they obtain a profit, and the following tax period, with some
exceptions (i.e. companies that do not carry on business activity).
o Companies for the holding and managing of foreign companies’ shares
(called Entidades de Tenencia de Valores Extranjeros – ETVEs130), which are
resident in Spain and that by law are not equity companies 131 (i.e. companies
that do not carry out business activities) are granted some tax benefits,
subject to certain requirements: the distribution of profits by the holding
company to non-resident companies or individual shareholders is not
taxable in Spain if such profits come from income generated from non-
resident companies. Additionally, dividends and capital gains arising from
the transfer of shares may benefit from a tax exemption in Spain to avoid
double taxation. This exemption is reduced by 5% for management fees
related to these units132. The broad Spanish tax treaty network, specifically
with Latin America, and the ETVE’s European nature makes it an efficient
mechanism for structuring multinational groups.
o Small and medium-sized companies 133 are eligible for tax relief, such as
accelerated depreciation/amortisation and more favourable bad debt
provision treatment. To be eligible for this relief, turnover in the previous tax
year must not exceed €10 million, and, by law, the company must not be
considered an equity company. If a group is involved, the turnover of all
group companies must be taken into account for this purpose. The general
rate CIT (25%) is applicable.
o Real estate investment trust regime (SOCIMI) 134. There is a special tax
regime for listed companies that invest in the property market (Sociedades
Cotizadas Anónimas de Inversión en el Mercado Inmobiliario – SOCIMIs) and
meet certain requirements. SOCIMI are subject to zero taxation of CIT.
However, if dividends are paid out to shareholders who meet certain
requirements (participation equal to or greater than five per cent of the
share capital and taxation below ten per cent), a special levy is applied. This
consists of a special 19 per cent tax rate on the amount of dividends paid to
shareholders. In addition, SOCIMIs are taxed on undistributed profits at a
rate of 15%135.
129
Article 29.1 of Law 27/2014 on CIT.
130
Article 107 et seq, of Law 27/2014 on CIT.
131
Definition of an equity company according to article 5.2 of Law 27/2014 on CIT.
132
Articles 21.10 and 21.11 of Law 27/2014 on CIT. The amount to which the exemption is applicable has
been modified as a result of the approval of the 2021 General State Budget Law.
133
Article 101 of Law 27/2014 on CIT.
134
Law 11/2009, of October 26, which regulates the quoted Anonymous Companies of Investment in
the Property Market (SOCIMI)
135
Law 11/2009 (SOCIMI) amended by DA 2 of Law 11/2021 on Measures to Prevent and Combat Tax
Fraud, in force since 1 January 2021. Under the special regime for SOCIMIs, income may be taxed at a
CIT rate of 0% and no withholding tax is applied on dividens distributed. However, a special duty of 19%
on dividends paid to the foreing investor will be applied If the shareholder participates in a minium of
5% of the share capital and the dividend received is exempt from taxation or is subject to a tax rate of
less than 10% in the investor´s country of residence (using 217 Tax Form). In addition, since January of

30
 o Special economic and tax regime for the Canary Islands. Due to their
remoteness and isolation, the Canary Islands have traditionally enjoyed a
special economic and tax regime with specific economic and tax measures
that differ from those levied on the rest of Spain 136. As a result, they have
one of the most favourable tax regimes in Europe.
o Restructuring operations137. As a rule, asset transfers carried out through
restructuring operations have no tax implications ( from a direct, indirect, or
any other Spanish tax perspective) for the parties involved (transferor,
beneficiary and shareholder) until a subsequent transfer that is not
protected by this regime takes place138.
o A special tax regimen also exists for tax groupings 139, companies that lease
housing140, lease transactions141, collective investment institutions142 and
venture capital companies and funds143.

Tax relief under CIT law is also applicable144. However, most of the relief that was
put in place to promote certain investments has been abolished. Some of the
types that have been retained are tax exemption/deduction to prevent domestic
and international double taxation, a tax credit for R&D, technological innovation,

2022, SOCIMIs are taxed on undistributed profits at a rate of 15%.

136
Due to their remoteness and isolation, the Canary Islands have traditionally enjoyed a special
economic and tax regime with specific economic and tax have one of the most favourable tax regimes in
Europe. It was authorized by the European Commission in January 2000 and it is regulated in the Law
number 19/94 of the 6th of July, 1994. The regime is applied to any entity or branch which intends to
carry out an industrial, commercial or service activity included in the list of authorized activities.The
Canary Islands Special Zone (ZEC) is a low tax zone created within the framework of the Canary Islands
Economic and Tax Regime (REF) for the promotion of the economic and social development of the
Islands and to diversify their production structure. ZEC Entities are subject to the CIT in force in Spain, at
the reduced rate of 4% and this tax rate is not affected by the minimum taxation rule. Dividends paid by
ZEC subsidiaries to parent companies resident in another country as well as the interest and other
income from transfers to third parties of capital and capital gains from property, obtained without a
permanent establishment are exempt from withholding if some requirements are met.
137
Article 76 et seq, of Law 27/2014 on CIT.
138
The special tax regime for restructuring operations is a tax neutrality regime implemented under EU
Directive 2009/133. As a general rule, under this regime, asset transfers carried out through such
transactions do not have any tax implications (either from a direct, indirect, or other Spanish tax
perspective) for the parties involved (transferor, beneficiary, and shareholder), until a subsequent
transfer takes place that is not protected by this regim. The operations that can be taxed under this
regime are mergers, spin-offs, non-monetary contributions, exchanges of shares and change of address
of a European company or a European cooperative company from one member state to another in the
EU. Each of them must comply with a series of requirements for the application of the regime.
139
Article 55 et seq, of Law 27/2014 on CIT.
140
Article 48 et seq, of Law 27/2014 on CIT.
141
Article 106 et seq, of Law 27/2014 on CIT.
142
Article 52 et seq of Law 27/2014 on CIT. Law 11/2021 on Measures to Prevent and Combat Tax Fraud
introduced new eligibility requirements for the 1% corporate income tax rate, in particular, the
requirement that at least 100 shareholders must own stock with a net value of €2,500 or above during
three quarters of the tax period (€12,500 for SICAVs with segregated asset portfolios). The Law provides
for a transitional dissolution and liquidation regime that offers several tax benefits.
143
Articles 50 et seq. of Law 27/2014 on CIT.
144
Articles 35 et seq. of Law 27/2014 on CIT.

31
 investments made by port authorities or film productions and live performing arts
and musical shows, or for increasing employment.

 Impuesto sobre sucesiones y donaciones 145 (Inheritance and gift tax/IGT) This tax
is levied on the net value of goods and rights acquired by individuals that are
Spanish residents and non-residents (“worldwide tax income”) (In this case, it is
only levied on the acquisition of assets and rights, whatever their nature, that are
located, exercisable or have to be complied with in Spain). The autonomous
communities set a range of reductions to the tax base and deductions.

 Impuesto sobre el patrimonio146 (wealth tax/WT). Wealth tax is levied on Spanish

tax residents’ worldwide net assets and on non-residents’ goods and rights that
are located (or which may be exercised or have to be complied with) in Spain. A
minimum tax-exempt amount applies, and all autonomous communities can set
their own. If an autonomous community fails to set its own minimum threshold,
the amount stipulated by Spanish law (€700,000) applies. Habitual dwellings are
tax-exempt, in general, up to €300,000 and shares in family businesses can also be
exempt if certain requirements are met. Non-resident taxpayers are entitled to
apply the specific regulations approved by the autonomous community in which
the most valuable assets and rights are located, which may be exercised or have to
be complied with in Spain.

Indirect taxes are levied on goods and services and include:

 Impuesto sobre el valor añadido 147 (value added tax/VAT). VAT is charged at the
ordinary rate of 21% on goods and services. A reduced rate of 10% is charged on
basic items, and a super-reduced rate of 4% is levied on essentials (e.g., bread,
milk, books and medicine).
 Impuesto sobre transmisiones patrimoniales y actos jurídicos documentados,
(ITP Y AJD) 148, modalidad transmisiones patrimoniales onerosas (transfer
tax/TT), which is usually 5 to 11%, depending on the autonomous community, is
generally levied on inter vivos transfers, including real estate transfers and leases
that are VAT exempt (second and subsequent transfers of buildings may be
exempt from VAT and subject to transfer tax). Residential leases are VAT exempt
and therefore subject to transfer tax.
 ITP Y AJD149, modalidad actos jurídicos documentados (stamp duty/SD), is mainly
levied on notarial deeds and records of transactions that have an economic value
145
Law 29/1987, of December 18, on Inheritance and Gift Tax (IGT) and Royal Decree 1692/1991, of
November 8, which approves the regulation of Inheritance and Gift Tax.
146
Law 19/1991, of June 6, on Wealth Tax (WT) and Royal Decree Law 13/2011, of September 16, which
temporarily reestablishes wealth tax (modified by the first derogatory provision of Law 11/2020, of
December 30, of the 2021 General State Budget).
147
Law 37/1992, of December 28, on Value Added Tax (VAT) and Royal Decree 1624/1992, of
December 29, which approves the regulation of Value Added Tax.
148
Royal Legislative Decree 1/1993, of September 24, approving the Codified Text of the Law on tax on
capital transfers and documented legal acts and Royal Decree 828/1995, of May 29, which approves the
regulation of the Tax on capital transfers and documented legal acts.
149
Idem.

32
 and need to be entered in public registries (e.g., the company, land, and industrial
property registries). Stamp duty is incompatible with transfer tax and capital duty
but compatible with VAT. The general rate is between 0.75% and 2%, depending
on the region of Spain and the taxable event. Stamp duty is also levied on certain
commercial (e.g., bills of exchange, promissory notes), court, and administrative
documents.
 ITP Y AJD150, modalidad operaciones societarias (capital duty/CD). 1% capital duty
is levied on capital reductions and company dissolutions and is payable by the
shareholders. Capital duty is incompatible with transfer tax and stamp duty in
certain cases, but it is compatible with VAT.

Other indirect taxes are Impuestos especiales151 (excise duties/ED) on alcohol, tobacco
and energy, as well as environmental taxes on carbon, electricity, the production
value of electrical energy, and certain means of transport. EU legislative activities aim
to coordinate and harmonise VAT law and duties on alcohol, tobacco and energy with
the purpose of ensuring the proper functioning of the domestic market.

B) AUTONOMOUS COMMUNITIES TAXES

The autonomous communities also have tax-raising powers, by virtue of the Reserva
de Ley principle. However, articles 6. Dos and Tres and article 9 of the LOFCA set limits
on this power in relation to the state and local tax system, thus preventing the
autonomous communities from levying their own taxes on taxable events that are
already taxed, either by the State or locally, in order to avoid double taxation. In
practice, the taxes raised by the autonomous communities are mainly related to the
environment and vacant properties.152
C) LOCAL TAXES
The State has virtually exclusive power to set the local taxation system, 153 and it does
so through Royal Legislative Decree 2/2004, of 5 March 2004, which approves the
revised text of the Law regulating local finances. However, Local Corporations can
modify tax rates or apply deductions through tax ordinances, but within the margins

150
Idem.
151
Law 38/1992, of December 28, on Excise Duties and Royal Decree 1165/1995, of July 7, which
approves the regulation of Excise Duties.
152
Autonomous communities have regulatory and administration competence in state taxes, as
indicated. In adittion, also have tax-raising powers and can create their own taxes. However, articles
6.2, 6.3 and article 9 of the LOFCA set limits on this power, thus preventing the autonomous
communities from levying their own taxes on taxable events that are already taxed according to the
state law (both state and local taxes), in order to avoid double taxation and any conflict on fiscal
competence between the three tiers of public administration. In practice, the taxes raised by the
autonomous communities are mainly related to the environment and vacant properties. See
autonomous communities' own taxes in
https://www.hacienda.gob.es/Documentacion/Publico/PortalVarios/FinanciacionTerritorial/
Autonomica/Capitulo-III-Tributacion-Autonomica-2021.pdf.
153
Article 149.1.14 of the Spanish Constitution.

33
allowed by state law. The following local taxes have been created by the Royal
Legislative Decree 2/2004 and may be levied both on companies and individuals:

Impuesto sobre bienes inmuebles (property tax), levied annually by local

authorities on the property ownership.
 Impuesto sobre el incremento del valor de los terrenos de naturaleza urbana
(a local tax levied on increases in the value of urban land), chargeable when
urban property is sold.
 Impuesto sobre vehículos de tracción mecánica (vehicle tax), charged on the
ownership of motor vehicles.
 Impuesto sobre construcciones, instalaciones y obras (tax on construction,
installations and building works), levied on the cost of certain works that
require town planning licences.
 Impuesto sobre actividades aconómicas (business and professional activities
tax) is a local direct tax levied annually on the performance of businesses in
Spain; individuals and small/medium companies are exempt.
The local authorities are responsible for administering the tax (management,
inspection, collection and review).
D) FORAL REGIMES
There are special regimes in the Basque Country (Régimen de Concierto) and Navarre
(Régimen de Convenio) whereby these ancient regions set their own tax systems,
which are harmonised with the state system but have special features as regards tax
rates, deductions and tax credits.
OTHER INTERESTING ASPECTS OF TAX:

 In addition to taxes, duties and special local levies may be triggered in return
for public services or performances, such as parking and rubbish collection fees
and customs duties and tariffs on imported goods.
 Two new taxes were implemented in January 2021: the Impuesto sobre las
Transacciones Financieras (financial transaction tax/FTT)154 and the Impuesto
sobre Determinados Servicios Digitales (digital services tax/DST)155.
 Several amendments were introduced to the Spanish Controlled Foreign
Company rules3 (CFC rules), effective as of 1 January 2021.
 Special rules have been established for changes of tax residence to another EU
member state or EEA country (exit tax).
 Individuals and corporate entities with Spanish residence and non-residents
with permanent establishment, holding properties or interests abroad with a
value exceeding €50,000 must submit Form 720 to inform the tax authorities.
 Under the general regime, social security contributions are paid on salaries and
wages. The contribution rates as of January 2021 are 6.35% for employees,
depending on the type of contract, and 29.90% for employers, plus a variable
rate for occupational accidents (e.g., 1.5% for office work).

154
Law 5/2020 of October 15, on Financial Transactions Tax.
155
Law 4/2020 of October 15, on the Tax on Certain Digital Services.

34
National or subnational regulators?
The tax system in Spain is administered by the Agencia Estatal de Administración
Tributaria/AEAT (Inland Revenue), which is accountable to the Ministry of Finance.
However, if the tax administration is delegated to the autonomous communities, their
tax agencies are responsible for managing, inspecting, collecting and reviewing the tax.
Local authorities administer local taxes and have the power to regulate their own
municipal taxes within a framework established by state law.
Member of a regional tax organisation?
Spain is a member of the Intra-European Organization of Tax Administration 156, the
Inter-American Center of Tax Administrations (CIAT) 157, the Organization for Economic
Co-operation and Development (OECD)158, the World Customs Organization (WCO)159,
and the OLAF Anti-Fraud Communicators’ Network (OAFCN)160.

What role does the legislator play in the international standard-setting?

Pursuant to Article 94 d) of the Spanish Constitution, the State’s consent to be bound
by treaties or agreements involving financial obligations for the Treasury requires the
Spanish Parliament’s prior authorisation. The Spanish Parliament also approves laws
transposing European Directives.
How many double taxation avoidance agreements (DTAAs)?
At present, 103 double taxation avoidance treaties have been signed, and 99 are in
force161.
Member of Base Erosion and Profit Shifting (BEPS) Project?
Spain is a member of the OECD/G20 Inclusive Framework on BEPS and largely follows
the recommendations of the OECD’s BEPS reports.

 Signed the Multilateral Convention to Implement Tax Treaty Related Measures

to Prevent BEPS (“MLI Convention”)?

Spain signed the MLI on 7 June 2017 and has deposited its instruments of ratification
for the Convention, which will enter into force on 1 January 2022. However, it is not
yet possible to specify the date on which the amendments will take effect, since Spain
opted for the reservation provided for in Article 35.7 of the MLI162.

 Signed Multilateral Convention on Mutual Administrative Assistance in Tax

Matters?
156
https://www.iota-tax.org/.
157
https://www.ciat.org/.
158
https://www.oecd.org/.
159
http://www.wcoomd.org/.
160
https://ec.europa.eu/anti-fraud/.
161
The Spanish tax authorities keep an up-to-date list of treaties:
https://www.hacienda.gob.es/es-ES/Normativa%20y%20doctrina/Normativa/CDI/Paginas/
CDI_Alfa.aspx.
162
https://www.oecd.org/tax/treaties/beps-mli-position-spain.pdf

35
The Multilateral Convention on Mutual Administrative Assistance in Tax Matters,
amended by the 2010 Protocol, Paris on 27 May 2010, entered into force in Spain on 1
January 2013 (BOE 16 November 2012). This document’s ratification is of vital
importance, mainly for Spain’s cooperation with many countries outside the European
Union. Spain has signed bilateral agreements for information exchange in tax matters
with 16 jurisdictions163 , as well as an agreement with the USA to improve international
tax compliance and to implement the Foreign Account Tax Compliance Act (FATCA),
which entered into force on 9 December 2013. It has also signed the Multilateral
Competent Authority Agreement on the automatic exchange of financial information
(MCAA), which is based on Article 6 of the Multilateral Convention. The MCAA,
Directive 2014/107/EU and other EU agreements facilitate the exchange of financial
information with 79 jurisdictions164.

Permit Patent Boxes?

Article 23 of Spain’s Corporate Income Tax Law regulates a patent box regime that
reduces the taxation of income derived from certain intangible assets such as patents.
Know-how/trade secrets (along with trademarks and other non-qualifying IP rights)
have been expressly excluded from its scope since 2018165.
Commitments to Minimum Corporate Tax?

In accordance with the draft of the General State Budget Law for the year 2022, for tax
years beginning on or after 1 January of said year, a minimum taxation of 15% of the
taxable base will be applicable to corporations with a net turnover of at least twenty
million euros or for tax groups, regardless of their turnover.

Artificial Intelligence (AI)

The Ministry of Economic Affairs and Digital Transformation has the remit for
developing Artificial Intelligence (AI) in the Spanish government. The Ministry is
divided into three departments, one of which is “Digitalization and Artificial
Intelligence”, created in January 2020. The departments are the second tier of the
national government. The fact that the name of one of them includes the term
“artificial intelligence” indicates the importance attached to developing this technology
from a political point of view. The government of Spain has created a strategic
framework for actions to promote AI during the 2020-2025 period through the
National Artificial Intelligence Strategy (Estrategia Nacional de Inteligencia Artificial –
ENIA). This is part of the Digital Spain 2025 Agenda, which aims to mobilise public and
private investment worth 70 billion euros in 2020-2022. Preparatory actions for
163
https://www.hacienda.gob.es/es-ES/Normativa%20y%20doctrina/Normativa/AcuerdosII/Paginas/
AII_Alfa.aspx
164
Updated in October 2021. See https://www.oecd.org/tax/automatic-exchange/international-
framework-for-the-crs/exchange-relationships/#d.en.345426
165
Article 23 of Law 27/2014 on CIT.

36
drafting the ENIA included drawing up a map of AI technology capabilities in Spain,
according to which the sector using AI most intensively in 2020 was industry with 99
user entities, closely followed by health with 98.
The ENIA responds to the commitment shared by the Member States to position the
EU as a leader in AI as set out, among other documents, in the Artificial Intelligence for
Europe strategy (COM 2018/237), the Coordinated Plan on Artificial Intelligence 2019-
2027 (COM 2018/795) and the White Paper on Artificial Intelligence (COM 2020/65).
On the other hand, ENIA has been integrated into Spain’s recovery and resilience plan
(2021), setting the objectives of making Spain a leading country in AI and a world
leader in the development of tools, technologies and applications for the projection
and use of the Spanish language in AI.
The ENIA is organised around six hubs: 1) boosting scientific research, technological
development and innovation in AI; 2) promoting the development of digital capabilities
and fostering talent; 3) developing data platforms and technological infrastructures
that support AI; 4) integrating AI into value chains to transform the economic fabric; 5)
enhancing the use of AI in public administration and national strategic missions, and 6)
establishing an ethical and regulatory framework to reinforce the protection of
individual and collective rights for the purpose of guaranteeing inclusion and social
welfare. The State plans to invest 600 million euros of public money in implementing
ENIA actions over the 2021-2023 period, to which the Next Tech fund to boost
entrepreneurship in digital enabling technologies will be added. This public investment
is expected to make it possible to mobilise private investment of around 3.3 billion
euros. Among the ENIA’s actions, the “SpAIn Talent Hub” programme, managed by the
Institute for Foreign Trade (ICEX), is worth highlighting in order to attract academic and
professional talent, as well as foreign investment, through the creation of company
headquarters or centres in Spain. Another measure in this line is a programme for
homologating international degrees and accreditations.
With regard to grants to promote AI, in early 2021, the Ministry of Economic Affairs
and Digital Transformation conducted a public consultation to ask companies and
institutions to submit expressions of interest anonymously. The aim was to find out
organisations’ needs in AI, robotics, digital twins and similar enabling technologies in
order to match the Recovery, Transformation and Resilience Plan grants to these
needs. The NextGenerationEU instrument funds the plan. Organisations were asked to
supply information as to the expected benefits and impact that would result from the
possible project, as well as estimated net job creation, the sector in which it would be
carried out, and how it would contribute to the digital transition objective. A call for
proposals named “R&D Missions in Artificial Intelligence 2021” has now been launched
on the basis of the information obtained. The projects must have a budget of between
10 and 20 million euros, a maximum duration of 3 years, be developed entirely in
Spain, and be framed in one of the following strategic sectors: agriculture, health,
environment, employment, and energy in the 21st century.

37
Another action put in place by the Spanish government is the Plan for the
Advancement of Language Technology (Plan TL in Spanish), which was developed in
2015 and had validity until 2020. This sectoral initiative aimed to promote one of the
technologies that make up AI, the development of natural language processing (NLP),
machine translation and conversational systems in Spanish and in the co-official
languages (Catalan, Basque and Galician). To this end, the creation of common NLP
and machine translation platforms was promoted, as well as data resources (language
infrastructures) and software resources, such as applications, platforms and
demonstrators. A serious hindrance for Spain in this area of AI is that it is not part of
the two EU research infrastructures aimed at the application of AI to the social
sciences and humanities, which are CLARIN (www.clarin.eu) and DARIAH
(www.dariah.eu). A number of research groups from all over Spain have created a
network, INTELE (http://ixa2.si.ehu.eus/intele/) with the aim of asking the government
to decide to participate in these networks, which would allow the use of existing
resources and promote the development of new functionalities applied to Spanish and
other co-official languages.
The Ministry of Education and Vocational Training is working with education
departments in three autonomous communities (which are also responsible for
education) to develop the “School of Computational Thinking and Artificial
Intelligence” project. It aims to provide open education resources and training to help
Spanish teachers incorporate AI skills into their teaching through programming and
robotics activities. For its part, the Ministry of Economic Affairs and Digital
Transformations has launched in March 2022 an Expression of Interest to fund existing
or newly created university chairs dedicated to research, dissemination, teaching and
innovation in Artificial Intelligence (AI) within the framework of the AI Chairs
Programme project. In this line, it has also promoted the creation of the “Chair of AI
and Democracy”, in collaboration with the Democratic Governance Institute and the
European University Institute. As well as research and teaching, the Chair aims to
develop schemes whose purpose will be to provide grants for university trainees to
analyse cases of AI application in government agencies.
The autonomous communities also have competences in fostering economic
development and research. Consequently, they have become involved in promoting AI
in their respective regions, and two of them have their own strategic plans. One is
Catalonia, where in February 2020, the regional government (Generalitat de
Catalunya) approved the Catalonia.AI plan (Artificial Intelligence Strategy of Catalonia),
the first of its kind in Spain. The strategy was launched with a budget of 10 million
euros for the first three years and provides for an action plan that is also organised
around six hubs: 1) ecosystems; 2) research and innovation; 3) talent; 4) infrastructure
and data; 5) AI adoption, and 6) ethics and society. Valencia was the second
community to develop a strategic plan, also in 2020, in which the autonomous
government (Generalitat Valenciana) drafted the Artificial Intelligence Strategy of the
Valencian Community. As a result of the actions provided for in its AI strategy, the
Catalan government has promoted the creation of the “Centre for Innovation in Data

38
Tech and Artificial Intelligence (CIDAI)”, with an annual budget of 3 million euros, of
which the Generalitat will provide 1.2 million. It is a public-private consortium in which
companies such as Microsoft and Everis will participate, together with the Catalan
government and the Barcelona City Council. It has also created a cluster called
“Catalonia.AI Alliance” and a research and innovation in AI network (Artificial
Intelligence Research Alliance of Catalonia). Finally, the Generalitat de Catalunya has
created the “Catalan Observatory for Ethics in Artificial Intelligence (OEIAC in Catalan)”
in collaboration with the University of Girona and as part of Catalonia’s AI strategy.
In Euskadi (the Basque Country), another autonomous community in Spain, the SPRI
Group, which is the Basque Government’s agency for business development, and 17
other entities have formed the “BAIC Association (Basque Artificial Intelligence
Centre)”, with the aim of promoting the development of AI in Euskadi. The Centre is
also a space for public-private collaboration with a strong focus on the industrial
applications of AI, as evidenced by the fact that its promoters include major industrial
groups such as CAF, Deusto Seidor, Euskaltel, Gestamp, Hupi Ibérica, Iberdrola, Inzu
Group, ITP Aero, Mondragon Corporación, Onkologikoa, Petronor, Sener, and Versia.
Scientific-technological agents and training centres, such as Tecnalia, Vicomtech and
the Basque Centre for Applied Mathematics (BCAM), are also members of the BAIC
Association. The Basque Government has also promoted the “Applied Artificial
Intelligence 2021 Program”, which is aimed at companies. Its budget is 3 million euros,
and its objective is to support projects for applying AI-based services and business
solutions. The other autonomous communities are somewhat less advanced in the
sphere of AI promotion; for example, the regional government of Andalusia (Junta de
Andalucía) is finalising a map of AI capabilities, which is intended to serve as a starting
point for formulating public policies to promote AI, and other regions such as Aragon
are currently drawing up their own strategic plans.
Finally, some local councils are also participating in initiatives to promote AI. One
example is Madrid City Council which opened the first municipal AI centre in July 2021.
The centre has a physical headquarters, and its missions include developing an AI
cluster, becoming an independent entity to access European funds, and developing the
AI Map of Madrid. For its part, Barcelona City Council launched the “Global
Observatory of Artificial Intelligence” together with London and Amsterdam in June
2021, with the aim of monitoring the ethical application of AI in cities, an initiative
promoted within the Cities Coalition for Digital Rights framework, which was founded
in 2018 by Barcelona, Amsterdam and New York. The new Observatory will collaborate
with UN-Habitat and the Barcelona Centre for International Affairs (CIDOB).

39