Incentives for investment in Spain

4.1 Granted by the State

Regional incentives are financial subsidies granted by the Spanish State to productive investment projects carried out in certain regions of Spain to promote the pursuit of business activity in previously-determined areas of Spain. The aim is to help alleviate existing territorial imbalances and to reinforce the endogenous potential for development of regions with a lower level of growth.

The State administration grants such aid in accordance with the demarcation of eligible areas and maximum aid intensities stipulated by the European Commission for regional aid. The functions relating to regional incentives are attributed to the Directorate-General of European Funds, under the Secretariat of State of Budgets and Expenses of the Ministry of Finance.

As indicated, these incentives consist of financial aid to be used to finance investment projects that create jobs, to be executed in areas with the lowest level of development, or in those whose special circumstances so recommend, provided that they entail (I) the startup of a new industrial establishment; (II) the expansion or (III) the modernization of an existing industrial establishment.

Although the general regulations for this type of aid are found in Law 50/1985, of December 27, 1985, on regional incentives for the correction of territorial imbalances, and in its implementing Regulations approved by Royal Decree 899/2007, of July 6, 2007, the geographic demarcation of the eligible areas and the specific definition of the maximum financing limits, as well as of the specific industry requirements regarding economic sectors, eligible investments and conditions, are regulated in the respective Royal Decrees demarcating each one of the economic development areas.

Unavoidably, the Royal Decrees demarcating economic development areas have had to be brought into line with the “Guidelines on regional State aid for 2014-2020” published on July 23, 2013 in the Official Journal of the European Union (OJEU), as well as by the “Regional Aid Map for Spain (2014-2020)” approved by the Commission on May 21, 2014.

Indeed, suffice it to recall that within the framework of the Guidelines, the European Commission approves an aid map for each Member State, stipulating the maximum limit of financial aid or subsidies that can be received by each region under regional incentives during the reference period.

The above notwithstanding, within the context of the mid-term review envisaged in the Guidelines for the year 2016, the Commission published Communication 2016/C 231/01 asking the States to present their proposals for the amendment of their respective regional maps. This was done in the case of Spain on July 28, 2016, when the amendment to the Spanish regional aid map for the period between January 1, 2017 and December 31, 2020 was approved by the Commission in a Decision dated November 7, 2016.

In particular, according to the amended aid map for the Kingdom of Spain, the Spanish region for which the greatest incentives are envisaged continues to be the Autonomous Community of the Canary Islands, with a maximum aid intensity percentage per investment project of up to 35% of the eligible investment.

The Autonomous communities of Castilla-La Mancha, Extremadura, Andalucía, the Murcia Region, and the Autonomous City of Melilla are other Spanish regions eligible for regional incentives with a maximum aid percentage of up to 25%, since their GDPs were found to have fallen to below 75% of the average for the EU-28 over the period examined.

Similarly, the provinces of Soria and Teruel continue to feature prominently, with the grant of aid to these regions of up to a maximum intensity of 15% of the net eligible investment being permitted through the end of the period and, accordingly, through December 31, 2020.

Finally, the maximum aid intensity percentage for the Autonomous Community of Galicia was reduced to 15% of the eligible investment for 2017, and was set at 10% for the sub-period 2018-2020. The maximum intensity for the Autonomous City of Ceuta, on the other hand, has been reduced to 15% (Chart 1).

Chart 1


Source: http://www.dgfc.sepg.minhap.gob.es/sitios/dgfc/es-ES/ipr/ir/ia/Paginas/IncentivosRegionalesCA.aspx

In any case, during this period the Autonomous Community of Madrid, the Basque Country, Navarra and Cataluña, as well as the municipality of the provincial capital of Valencia, the municipality of Zaragoza and certain municipalities of the Islands of Mallorca and of the Autonomous Community of La Rioja continue to be regarded as regions ineligible for subsidies, pursuant to the state legislation on regional incentives and the Royal Decrees demarcating economic development areas.

As stated, the aforementioned amendments to the regional aid map were incorporated into Spanish legislation through the appropriate amendments to the respective Royal Decrees, approved on December 30, 2016.

The Royal Decrees stipulate the maximum intensity of permitted aid (stipulated as a percentage of the eligible investment), distinguishing among beneficiaries, according to whether they are large, medium-size and small enterprises, as shown on the following Table 16.

Table 16

Canaria Islands 40% 35% 45% 55%
Extremadura 40% 25% 35% 45%
Castilla-La Mancha, Andalucía, Murcia1 40% 25% 35% 45%
Melilla 20% 25% 35% 45%
Soria y Teruel / Ceuta 15% / 20% 15% 25% 35%
Galicia 30% 15% 25% 35%
ROther areas + previous category from 2018 From 10% to 20% 10% 20% 30%
1  Castilla-La Mancha, Andalucía, Murcia and Melilla, from December 30th, 2016.

Having regard to the foregoing, the following is an explanation of the main characteristics of the regional incentives analyzed:

4.1.1 Eligible economic sectors

These are stipulated in each Royal Decree demarcating the respective geographical area.

The main eligible sectors, however, notwithstanding what is established in the definition under each Royal Decree of demarcation, are as follows:

  • Processing industries and production support services, particularly those which apply advanced technology, pay attention to environmental enhancement and enhance the process or the product.
  • Industries favoring the introduction of new technologies and the provision of services in the information technologies and communication subsectors.
  • Services which significantly enhance trade networks and structures.
  • Specific tourist facilities with an impact on development in the area which are innovative, especially in terms of environmental improvement, and contribute significantly to the area’s endogenous potential.

4.1.2  Types of eligible investments

The types of investment eligible for incentives are new or first-time use fixed assets, referring to the following investment items:

  • Civil engineering.
  • Capital equipment, excluding external transportation items.
  • In the case of SMEs, up to 50% of the costs incurred on the project’s preliminary studies, which could include: planning, project engineering and project management of the projects.
  • Intangible assets, provided that they do not exceed 30% of the total eligible investment, are used exclusively at the center where the project is carried out, are able to be inventoried and amortized and are acquired at arm’s length from third parties not related to the purchaser.
  • Other material investments, on an exceptional basis.

The possibility of including lands as an eligible fixed asset were eliminated by the Regulations implementing the Regional Incentives Law when the regional financing Guidelines for the previous period (2007-2013) came into force.

4.1.3 Eligible projects

—  Definition

  • Projects for the creation of new establishments that give rise to the commencement of a business activity and also generate new jobs (which must be maintained for at least two years after the end of the term stipulated in the Individual Resolution granting the aid) and are of an amount not less than the minimums stipulated in the Royal Decrees of demarcation (generally, at least €900,000).
  • Project for the expansion of existing activities with a significant increase in production capacity or commencement of new activities in the same establishment which entails the creation of new jobs and the maintenance of existing jobs during the same period stipulated in the preceding paragraph.
  • Project for the modernization of the business which meet the following requirements:

–  The investment must be an important part of the tangible fixed assets of the establishment being modernized and must entail the acquisition of technologically advanced machinery which produces a notable increase in productivity.

–  The investment must give rise to the diversification of an establishment’s production in order to attend to new and additional product markets or must entail a fundamental transformation of the overall production process of an existing establishment.

–  Existing jobs must be maintained during the aforesaid periods.

Replacement investments consisting of (I) the technological updating of a machine outfit which has already been depreciated, implying no fundamental change to the product or production process; (II) the remodeling or adaptation of buildings as a result of the aforesaid investments, in compliance with safety or environmental provisions or by statutory imperative; and (III) the incorporation of cutting edge technology without fundamental changes to the process or to the product, are excluded.

—  Requirements

  • The project must relate to an eligible sector and activity and be located in one of the designated areas.
  • It must be technically, economically, and financially viable.
  • Generally, at least 25% of the investment must be self-financed. However, depending on the features of the project, a higher rate may be required in the Royal Decrees of demarcation.
  • The company developing the project must have a minimum level of equity, which will be stipulated in the Individual Resolution granting the incentive and must be maintained through the last day on which the subsidy is in force.
  • The application for regional incentives must be submitted before the investment in question begins to be made.

    In this connection, the investment will be begin to be made upon the commencement of the construction works entailed in the investment, or upon the first firm commitment for the order of equipment or any other commitment making the investment irreversible, whichever comes first. The purchase of lands and preparatory work such as the obtainment of permits and the performance of preliminary viability studies are not regarded as the commencement of work. The applicant must prove to the Autonomous Community, using the standardized form known as the “solemn declaration of non-initiation of investments”, that the investments had not been initiated prior to the filing of the application for regional incentives. The Autonomous Community may also request a notarial certificate as evidence of the foregoing (acta notarial de presencia) or perform an on-site inspection of the land, with a view to ensuring that the investment has not been initiated.

  • The aid should serve as an “incentive”—i.e. the applicant undertaking the project would not have done so without the aid—and an explanation must be given of the impact that would be produced on the decision to invest or on the decision regarding location if the regional incentives were not received (large companies must submit documentary evidence).
  • The aid applicant must report accordingly, if it has discontinued the same activity or another similar activity in the European Economic Area within the two years preceding the application date, or if it plans to discontinue said activity within two years after completion of the investment for which the aid is requested. In such case, the potential grant of aid will require prior analysis, and prior notice must be served on the European Commission, so that it can decide whether to authorize or to reject its grant.

4.1.4 Types of incentive

The regional incentives available for grant consist of:

  1. Non-returnable subsidies for the approved investment.
  2. Subsidies for the interest on loans obtained by the beneficiary from financial institutions.
  3. Subsidies for the repayment of those loans.
  4. Any combination of the foregoing.
  5. Reductions in the employer’s social security contribution for common contingencies during a maximum number of years, to be determined by regulation, subject to the provisions of the legislation on incentives for hiring and for fostering employment.

In the cases under letters b), c) and d) above, there is also a possibility of regional incentives being converted into a percentage of the subsidy on the approved investment.

The form of incentive most commonly granted, however, is the non-returnable subsidy.

4.1.5 Project assessment

Projects must be evaluated using the methods stipulated in each Royal Decree of demarcation, which will also determine the percentage of subsidy to be granted for each project. Notwithstanding the specific provisions of each Royal Decree, the main parameters to date considered by the relevant bodies are as follows:

  • Total amount of the eligible investment.
  • Number of jobs created.
  • Contribution to the area’s economic development and use of its production factors.
  • Added value of the project (if newly created) or increase in productivity in other cases.
  • Use of advanced technology.
  • Location in an area considered a “priority” (defined as such in the demarcation Royal Decree).

4.1.6 Compatibility of different incentives

No investment project can receive other financial aid if the amount of the aid granted exceeds the maximum limits on aid stipulated for each approved investment in the Royal Decrees of demarcation of eligible areas.

Therefore, the subsidy received is compatible with other aid, provided that the sum of all the aid obtained does not exceed the limit established by the Royal Decree of demarcation and EU rules do not preclude it (incompatibilities between Structural Funds).

4.1.7 Application procedure

—  Documentation:

  • Standardized application form addressed to the Ministry of Finance, although it is required to be presented to the competent body of the corresponding Autonomous Community, which will be in charge of processing it.
  • Documentary evidence of the applicant’s personal circumstances or, in the case of an incorporated company, its registry data. If the company is in the process of being incorporated, the projected registry data and the data of the developer acting in its name.
  • Standardized explanatory investment project memorandum, together with documentation evidencing compliance with all environmental requirements.
  • Formal declaration, on a standardized form, of other aid applied for or obtained by the applicant for the same project.
  • Evidence of the company’s compliance, as of the date in question, with its tax and social security obligations or, as the case may be, authorization from the Directorate-General of European Funds to obtain the certificates to be issued by the State Tax Agency and by the Social Security General Treasury. In the case of a company being incorporated, the obligation will be deemed to refer to the developer.

—  Where to submit:

The appropriate body of the Autonomous Community where the project is to be carried out.

—  Agency granting the aid:

The Government Delegate Committee for Economic Affairs if the eligible investment exceeds 6,010,121 million euros.

In all other cases the Ministry of Finance (in particular, through the Sub-directorate General of Regional Incentives, under the Directorate-General of European Funds).

—  Decision deadline:

The maximum deadline for deciding on applications and serving notice thereof is 6 months from the date on which the application is registered with the Ministry of Finance (although this deadline may be extended).

If the initial term and, as the case may be, any extended term ends without a decision have been issued, the aid application may be deemed to have been rejected.

—  Acceptance of the grant of aid:

Express notice of acceptance of the aid must be served by applicants on the relevant agency of the Autonomous Community, within the first 15 business days after the date on which notice of the decision to grant the aid is received.

If no notice is served by the end of such period, the grant of aid will be rendered null and void and the dossier will be shelved.

—  Submission of decisions at the Mercantile Registry:

If notice of acceptance is served, the beneficiary must file the Decision granting the aid with the Mercantile Registry within one month from the date of acceptance.

All decisions subsequent to the grant of incentives (extensions, amendments, etc.) must also be filed by the same deadline.

In general, compliance with this requirement must be evidenced to the relevant Autonomous Community agency within four months after acceptance of the related decision. If evidence is not submitted by the deadline, the Directorate-General of European Funds will render null and void the grant of aid not filed with the Mercantile Registry.

4.1.8  Execution of the project and alterations subsequent to grant

Investments may be initiated without having to wait for the final decision to be adopted, provided that applicants can prove, suitably, as stipulated by the Ministry of Finance, that such investments had not been initiated before the application was filed, without this being able to influence the decision finally adopted.

In general, subsequent incidents in the project (i.e., alteration of the initial project, change in the locating of the project, etc.) will be resolved by the Directorate-General of Community Funds. Nonetheless, if the alteration of the project entails changes in the activity or a variation in the amount of the incentives granted, the amount of the investment approved or the jobs to be created, in excess of the limits set in article 31.1 of the Regulations of the Incentives Law, they will have to be resolved by the same body that granted the aid.

Applications for alteration of the projects must be submitted to the relevant Autonomous Community agency and addressed to the Ministry of Finance, and must specify the conditions which have been altered since the filing of the initial application. The deadline for deciding on applications and serving notice thereof will be six months following their receipt by the Directorate-General of European Funds.

4.1.9 Payment procedure

Following issue of a report confirming the degree of compliance with the requirements imposed by the relevant agency on the project in question, the beneficiary must file a request for payment of the subsidy (on a standardized form) together with the other required documentation (evidence of performance of tax obligations and obligations to social security, etc.) at the relevant Autonomous Community agency from which it will be referred to the Directorate-General of European Funds.

4.1.10 Payment system

Subsidies may be paid using the following methods:

  • Final payment: after the end of the term, the beneficiary may only request payment in full of the subsidy granted or to which he is entitled if there have been cases of breach.
  • Payment in full: during the term, the beneficiary may only request a single payment of the total subsidy after the entire investment has been made and subject to the submission of the related bank guarantee. This payment may only be requested subsequent to the dates of compliance, once each and every one of the conditions imposed on the holder have been verified and prior to the end of the term.
  • Payment in part: during the term, the beneficiary may request payments of the subsidy as he justifies the partial making of the investment, provided that this is authorized in the individual decision to grant the subsidy.

For more information, please consult the website of the Ministry of Finance (http://www.dgfc.sepg.minhafp.gob.es/sitios/dgfc/es-ES/ipr/Paginas/inicio.aspx).

4.2 Regional Aid granted by the Autonomous Communities

Some Spanish Autonomous Communities also provide similar incentives, on a smaller scale, for investments made in their regions. Only some of these incentives are compatible with EU and State regional incentives. Specifically, if State regional incentives have been applied for in connection with a given project, the limits established in each Royal Decree of demarcation must be taken into account.

In fact, some Autonomous Communities grant investment incentives in areas not covered by state legislation but which are included in EU regional financial aid maps.

Most Autonomous Community incentives are granted on an annual basis, although the general conditions of the incentives do not usually change from year to year.

In view of the impossibility of including a detailed description of the aid granted by each Autonomous Community, we summarize below their main and traditional features (which are generally very similar to those of State regional incentives).

Nonetheless, bear in mind that the incentives granted by the Autonomous Communities have also been affected by the content of the Guidelines on regional State aid and by the limits and maximum aid intensity percentages established in the new regional aid Map, recently amended for the 2014-2020 period, and the regulation of these incentives should therefore be adapted to the new framework established.

4.2.1 Types of project

Opening of new establishments, expansion of activities, modernization and technological innovation. The creation of new jobs is normally required.

4.2.2 Main industries

In general, the main eligible industries are industrial support services, processing industries, tourism, culture, industrial design, electronics and computing, renewable and environmental energies.

4.2.3  Project requirements

They are basically the same as those imposed at State level.

4.2.4 Types of incentive

The main incentives are:

  • Nonrefundable subsidies.
  • Special conditions for loans and credit.
  • Technical counseling and training courses.
  • Tax incentives.
  • Guarantees.
  • Social security relief.


The Canary Islands Autonomous Community has traditionally enjoyed a regime of commercial freedom involving less indirect tax pressure and exclusion from the sphere of certain State monopolies. These conditions have given rise to an economic and tax system which is different from that existing in the rest of Spain.

Of course, an attempt has been made to reconcile these special circumstances with the requirements of Spanish membership of the European Union.

In this regard, the Central Government has been increasing flexibility as much as possible in connection with the functioning of regional incentives and localization of investments on the Canary Islands, imposing no further limitations than those stipulated in EU legislation and giving preferential treatment to investments in the peripheral islands by requiring a minimum level of investment lower than that established for the rest of Spain.

These efforts led the European Commission to authorize the creation of the Canary Islands Special Zone (Zona Especial Canaria or “ZEC”) in January 2000, with a view to attracting and encouraging the investment in the Canary Islands of international capital and companies which make a decided contribution to the economic and social progress of the Canary Islands. Use of the benefits of the ZEC is currently in force through December 31, 2026, and may be extended when authorized by the European Commission (please also see Chapter 3 and www.zec.org).

It is important to note that incentives aimed at upgrading and modernizing the banana and tomato growing and fishing-related industries are also available under the Community Program to Support Agricultural Production on the Canary Islands.

Along these same lines, please note the approval of the Integral Strategy for the Canary Islands Autonomous Community by decision of the Council of Ministers dated October 9, 2009, the main objectives of which were implemented in Additional Provision Fourteen of the Sustainable Economy Law as a guide for initiatives of the Government and of the General State Administration on the Canary Islands. In particular, under the former Strategy priority was to be given to initiatives connected with the policy to internationalize the Canary Island economy, renewable energies, ground, airport and port infrastructures, subsidies for goods transport to or from the Canary Islands, the fostering of tourism and the contribution to the development of industrial sectors and of telecommunications on the Canary Islands.

In particular, from the standpoint of internationalization, the Sociedad Canaria de Fomento Económico, S.A. (PROEXCA) was formed under the Department of Economy, Industry, Trade and Knowledge of the Canary Island Government, with a view to fostering the internationalization of the Canary Island enterprise and attracting strategic investments to the Islands. PROEXCA acts as an official agent for the promotion of investments on a regional scale, serving companies which seek to invest in the Islands and which offer them high added value and sustainability.