Although it is not the aim of this publication to address incentives for Spanish investment abroad, this section is included in view of the obvious interest that Spanish investment abroad has sparked in foreign investors as a platform for international expansion.
In this context, please note that the official financial instruments approved by the Spanish government to provide official support for the internationalization of business are, inter alia:
- FIEM (enterprise internationalization fund, managed by the Ministry of industry, trade and tourism through the Office of the Secretary of State for Trade).
- FIEX (fund for investments abroad, managed by COFIDES).
- FONPYME (operating fund for SME investments abroad, managed by COFIDES).
- FINTEC (line of financing for investments in the electronics and the Information and communication technologies industry, managed by COFIDES).
- FINCONCES (line of financing for investments in the infrastructure concession industry, managed by COFIDES).
- FINTUR (line of financing for investments in the tourism industry, managed by COFIDES).
- FINING (line of financing to support the internationalization of engineering companies, managed by COFIDES).
- FINCHEF (line of financing to support the gastronomy industry outside Spain, managed by COFIDES).
- FINFOOD (line of financing to support the internationalization of companies in the agro-food industry, managed by COFIDES).
- Pyme Invierte (managed by COFIDES).
- Country Lines (managed by COFIDES).
- Commercial Start-up line 3.0 and Commercial Start-up 4.0 for Young Entrepreneurs (managed by COFIDES).
- Programs for the Conversion of Debt into Investment managed by the Ministry of Economy and Business.
- The ICO Internationalization and Support for Exports Lines.
Of all the foregoing financial instruments, particular regard must be had to the FIEM, the FIEX and the FONPYME, as well as to the lines of financing for investments in the electronics and the information and communication technologies industries or in the infrastructure concession, tourism, gastronomy or the agro-food industries, the Commercial Start-up Lines 3.0 and 4.0 for Young Entrepreneurs and, lastly, the lines promoted by ICO in connection with internationalization, such as “Línea ICO-Internacional 2018” (2014 ICO International Line) and the “Línea Exportadores a Corto, Medio y Largo plazo” (Short-, Medium- and Long-term Exporters Line).
The FIEM is an instrument intended for the direct financing of international contracts for the supply of goods and services or the execution of projects undertaken by Spanish companies in order to support direct investment by Spanish companies abroad. Its aim is to promote export operations by Spanish companies and direct Spanish investment abroad.
The FIEM finances (I) transactions and projects of special interest to the strategy to internationalize the Spanish economy; (II) the technical assistance required by such transactions and projects and (III) technical assistance and consultancy services of special interest to the internationalization strategy, the objective of which is the preparation of viability, feasibility and pre-feasibility studies, studies related to the modernization of economic sectors or regions, and consulting services aimed at institutional modernization of an economic nature or by regions.
In this connection, a transaction or project, technical assistance or consultancy service is deemed to be of special interest to the internationalization strategy where (I) it promotes the internationalization of Spanish SMEs; (II) it entails the direct investment or exportation of goods and services of Spanish source and manufacture in a sufficiently significant percentage of the financing or (III) otherwise, where there are circumstances justifying the interest.
In this respect, operations or projects which entail the creation of, or participation in, a productive or concessionaire company or entity (i.e. special purpose entities, provided that there are Spanish companies investing in them), are eligible for financial support to supplement other sources of public financing.
In any case, the following will not be financed (I) exports of defense, paramilitary and police materials to be used by the armed forces, police forces and security forces or the anti-terrorist services or (II) projects related to certain basic social services such as education, health and nutrition.
Potential recipients of financing from this Fund are foreign central governments and foreign Public, Regional, Provincial and Local authorities, as well as enterprises, groupings and consortiums of foreign publicly-owned and private enterprises, not only from developed countries but also from developing countries. In exceptional cases, FIEM aid may be granted to international organizations, provided that there is a clear commercial interest, from the point of view of internationalization of the Spanish economy, in the corresponding contribution. In this connection, please note the list of 39 countries which are to be given priority according to the 2017 Guidelines1.
The purpose of the FIEX is to foster the internationalization and business activities of Spanish companies and, in general, the Spanish economy, through direct short-term and minority interests in the equity of companies located, in juridical terms, outside Spain, specifically through holdings in the capital (equity) or quasi-equity instruments (coinvestment loans, etc.).
The maximum amount of the financing is €30 million subject to a minimum amount of €250,000.
The FONPYME is intended to finance direct short-term and minority holdings in the capital stock or equity of Spanish companies located in Spain, for their internationalization, or of Spanish companies located outside Spain, through any participative financial instruments. Additionally, as introduced by Royal Decree 321/2015, of April 24, 2015, direct short-term and minority holdings may also be acquired in “capital expansion funds” or vehicles with official support, whether already existing or to be established, or in private investment funds, which foster the internationalization of the Spanish enterprise or economy. The maximum amount of the financing is €5 million, with a minimum of €75,000 per transaction.
If the project being funded is located in a country in which COFIDES can operate, the Fund’s participation may be instrumented, if so approved by the Company’s Board of Directors and the Fund’s Executive Committee, through joint financing with COFIDES, using identical or differing financial instruments. Under the joint financing arrangement, different remuneration schemes can be established for each of the support instruments. The percentage of the COFIDES funding in transactions funded with FONPYME will be decided on a case by case basis by its Board of Directors.
This instrument is aimed at funding, on the medium- and long-term, private and viable projects for investment abroad undertaken by enterprises in the electronics and the information and communication technologies industry in which there is a Spanish interest.
The activities at which this line is targeted are those which require, due to enterprise’s international expansion, a permanent establishment to be set up in the country in which the investment is made, whether through new production or commercial facilities, the expansion of existing facilities or the acquisition of foreign enterprises in the same industry (i.e. consumer electronics, electronic components, telecommunication industries, digital contents, etc.).
The financial support will take the form of (I) holdings in capital; (II) instruments similar to quasi-capital; (III) ordinary loans to the Spanish enterprise; (IV) ordinary loans to the project enterprise and (V) multi-project loans.
The maximum financing provided is €30 million and cannot exceed 50% of the long-term needs of the project, up to the limit of the contribution made by the backer, the minimum amount being €72,000.
This line is used to fund projects for investment abroad in concessions of infrastructures and public services owned mostly by Spanish enterprises, under concession or under a public-private partnership (PPP).
Eligible for this funding are projects under concession aimed at, inter alia, the design, construction, operation, maintenance, management and exploitation of a public good or service, the performance of which requires the incorporation of long-term financial resources (i.e. infrastructure for transportation, water and waste, energy, services management, telecommunications).
The financial support may be given in the form of holdings in capital or instruments similar to quasi-capital.
The maximum financing is €30 million and cannot exceed 50% of the long-term needs of the project, up to the limit of the contribution made by the backer, the minimum amount being €75,000.
This line is used to fund viable private projects in the tourism industry, in which there is a Spanish interest either through holdings in capital, co-investment loans or other medium-term and long-term instruments.
Eligible for this funding are investment projects outside Spain which promote some type of tourist activity (e.g., hotels, theme parks and amusement parks).
The maximum financing is €30 million and cannot exceed 50% of the investment volume of the project. The minimum amount is €75,000.
This line is used to promote the internationalization of engineering companies, financing international expansion projects promoted by this type of company which require a permanent establishment in the country in which the investment is made, whether (I) through new commercial establishments, (II) through an expansion of existing subsidiaries, or (III) via the acquisition of foreign companies in the industry.
The aid will be used to fund property, plant and equipment plus a percentage of working capital linked to the investment, and the financial support can take a number of forms: (I) minority and temporary holdings in in the project company, (II) co-investment loans, (III) ordinary medium-term and long-term loans in the project company, (IV) ordinary medium-term and long-term loans in the Spanish company, or (V) multi-project loans in various counties.
The maximum financing will depend on the guarantees offered, and may be up to 80% of the investment, starting with a minimum budget of €75,000. Additionally, up to 80% of the projected expenses of the commercial start-up process can be financed, provided that this is less than €1 million.
This line is used to fund international expansion projects which entail the opening of establishments related to gastronomy outside Spain, granting priority to projects developed in the countries included by the Spanish commercial authorities under the Integral Market Development Plan (Plan Integral de Desarrollo de Mercados or PIDMs).
The financial support can take the form of co-investment loans or ordinary loans, either to the subsidiary outside Spain or to the parent in Spain.
Maximum financing ranges between €75,000 and €5 million, although, depending on the guarantee offered, it can be up to 80%. These resources can be used to finance non-current assets plus a percentage of the current assets related to the investment. If expenses are to be financed, the limit will be up to 50%, provided that this is less than €1 million.
This line is created with a view to boosting the internationalization of agro-food companies. Although all countries are eligible, priority is given to projects developed in the countries listed by the Spanish commercial authorities under the Integral Market Development Plan (Plan Integral de Desarrollo de Mercados or PIDMs).
The financing can take any of the following forms: (I) shares in a company’s capital, (II) subordinate loans, (III) participating loans, (IV) co-investment loans, (V) ordinary loans or (VI) multi-project financing.
Maximum financing ranges between €75,000 and €30 million, and the resources can be used to finance non-current assets plus a percentage of the current assets related to the investment. The amount of the financing will depend on the guarantees offered, and can be up to 80% of the investment. Additionally, if there is a need to finance expenses, the limit will be up to 50%, provided that this is less than €1 million.
j. Pyme Invierte (SME Invest):
This line offers financing to Spanish SMEs that wish to undertake either a productive investment project outside Spain, with a term of more than 3 years, or a start-up of commercial activities outside Spain:
Maximum financing will vary according to the SME’s objectives:
- In productive investments, the amounts will vary between €75,000 and €10 million.
- In start-ups of commercial activities, the investment will range from €75,000 though €1 million.
k. Commercial Start-up Lines 3.0 and 4.0 for Young Entrepreneurs, are two lines which offer financing for the start-up of commercial activities abroad by Spanish companies, through (I) co-investment loans (with remuneration linked to the results of the project) or (II) ordinary loans made to the Spanish company, to the subsidiary or the branch located abroad.
Such funds are intended primarily for the financing of expenses associated with the start-up of the company’s commercial activities (structural costs, wages and salaries and promotions expenses assumed by the subsidiary). Depending on the guarantees offered, the percentage financed can be up to 80%.
The limit to this financing is €1,000,000 for Line 3.0 and €500,000 for Line 4.0 Young Entrepreneurs, while the minimum amounts financed are €75,000 and €50,000 respectively.
The difference between the two lines is basically that to obtain financing under the 4.0 Young Entrepreneurs Line, the company must belong to a Young Entrepreneurs Association. Similarly, for financing under the 4.0 Young Entrepreneurs Line, the requirement that the company have audited financial statements may be replaced by the requirement that it present a limited review of its accounts.
l. “Country Lines” offer financing for investment projects in specific international areas with special characteristics, including most notably: US Line, India Line, EU Expansion Countries Line, Mexico Line, China Line, Brazil Line, Morocco Line, Sub-Sahara Africa Line, Russia Line, Australia Line, Indonesia Line, Singapore Line, South Africa Line, Egypt Line, Algeria Line, Chile Line, Turkey Line, Cuba Line and Golf Cooperation Council Countries Line, of which the following are most notable:
- US Line: aimed at providing financial support to viable private projects with a Spanish interest performed in the US, independent of the activity with which they are connected, although priority will be given to the following industries: (I) infrastructures; (II) renewable energies; (III) environment; (IV) biotechnology and (V) information technology.
- Brazil Line: aimed at providing financial support to viable private projects with a Spanish interest performed in Brazil, independent of the activity with which they are connected, although priority will be given to the following industries: (I) capital goods, (II) automobile parts, (III) renewable energies, (IV) transport infrastructures, (V) environment and clean-up, (VI) transmission of electricity, and (VII) tourism.
- China Line: aimed at providing financial support to viable private projects with a Spanish interest performed in China, independent of the activity with which they are connected, although priority will be given to infrastructures and public services industry, which includes: (I) renewable energies and cogeneration, (II) transport and telecommunications infrastructures, (III) environment and waste treatment, (IV) platforms of logistics services, and (V) water purification and treatment.
In all three lines the financial support is to be instrumented through holdings in capital, subordinate loans, participating loans and joint investment loans.
Maximum financing is €30 million and cannot exceed 70% (FIEX) and 80% (FONPYME) of the volume of the investment in the project, although for holdings in capital, the limit will be up to 49% of the enterprise’s capital stock. The minimum amount is €75,000.
m. “Línea ICO-Internacional 2018 Tramo I “Inversión y Liquidez”: (2018 ICO International Line Tranche I “Investment and Liquidity”):
“Línea ICO-Internacional 2017” is aimed at Spanish independent professionals and publicly-owned and private entities (i.e., not only enterprises with registered office in Spain but also those in which, despite having their registered office abroad, at least 30% of capital stock is Spanish-owned, foundations, NGO’s, public authorities) which carry out investment projects abroad. It will be in force until December 21, 2018.
The loans granted under this line may be used to finance operating expenses (payroll, payments to suppliers, purchases of goods) or certain production-related investments outside national territory:
- new or second-hand productive fixed assets;
- acquisition of vehicles, whose price does not exceed €30,000 (plus VAT). Industrial vehicles may be financed 100%;
- acquisition of companies;
- creation of enterprises abroad;
- value added tax (VAT) or analogous taxes, if the assets are acquired in Europe;
- liquidity up to the limit of 50% of the financing obtained.
The investment must not have been made prior to January 1, 2017 and must be made within not more than one year after the execution of the financing.
The maximum financing is €12.5 million or its equivalent in US dollars (USD) per customer per year, in one or more transactions. If the financing is used for “Investment”, it may be requested in the form of a loan or leasing arrangement, and where it is for “Liquidity”, it will be requested in the form of a loan or line of credit.
Depending on the eligible item, the repayment period and grace periods are 1, 2, 3 and 4 years with the possibility of up to 1 year’s grace for the repayment of principal if the financing corresponds 100% to “Liquidity”, and 1, 2, 3, 4, 5, 6, 7, 8, 9, and 10 years, with up to 1 year’s grace and 12, 15 and 20 years with up to 2 years’ grace if the financing is for “Investment”. Where loans comprise both “Investment” and “Liquidity”, any of the repayment periods listed for “Investment” may be chosen.
The APR on the operation may not exceed the following thresholds:
- For operations with a term equal to 1 year: a fixed or variable rate (euros or US dollars), plus up to 2.30%.
- For operations with a term of 2, 3 or 4 years: a fixed or variable rate (euros or US dollars), plus up to 4%.
- For operations with a term of 5 years or more: a fixed or variable rate (euros or US dollars), plus up to 4.30%.
This type of financing may be combined with other aid granted by the Autonomous Communities and other public institutions.
Lastly, with regard to fees, it is to be noted that the financial institutions can charge a fee at the start of the operation, although the cost of such fee plus the interest rate may not exceed the maximum APR which the institution is able to apply to the operation based on its term.
Similarly, credit institutions can apply a voluntary early repayment fee which is generally 1% of the amount cancelled if the transaction was executed at a fixed rate, or 0.50% if it was executed at a variable rate. In the event of mandatory early repayment, a penalty equal to 2% of the amount cancelled accrues.
n. Línea ICO Internacional 2018Tramo II “Exportadores Medio y Largo Plazo” (2018 ICO International Tranche II “Medium- and Long-Term Exporters Line”):
This financing may be requested by: (I) enterprises with registered office in Spain, for the sale of goods or services, with deferred payment, to enterprises with registered office outside Spain but with “Spanish interest”; and (II) enterprises with registered office outside Spain for the acquisition of goods or services, with deferred payment, from enterprises with registered office in Spain.
In particular, the following items are eligible for financing:
- Supplier facility: financing targeted at enterprises with registered office in Spain for the sale, with deferred payment, of new or second-hand goods or services to enterprises with registered office outside Spain.
- Purchaser facility: financing targeted at enterprises with registered office outside Spain, for the acquisition, with deferred payment, of new or second hand goods or services exported by enterprises with registered office in Spain.
- Supplementary financing: financing required by enterprises with registered office outside Spain which acquire goods or services exported by enterprises with registered office in Spain, the full amount of which was not entirely covered by a Purchaser facility.
The financing may take the form of a loan, with the possibility of disbursement in multiple operations, for a maximum amount of €25 million, or its equivalent in US dollars (USD), per customer, in one or more transactions.
The customer may choose between a fixed or variable interest rate in the currency in which the transaction is executed (euros or USD). The maximum annual cost of the operation may not, however, exceed the following thresholds:
- For operations with a term of 2, 3 or 4 years: a fixed or variable rate plus up to 4%.
- For operations with a term of 5 years or more: a fixed or variable rate plus up to 4.30%.
In turn, the repayment deadline and grace period will be agreed between the customer and the credit institution, the minimum term of the total financing being 2 years and the maximum 12 years, including, where appropriate, any grace period for the repayment of principal, which cannot be more than 3 years.
Lastly, it is to be noted that the credit institution may charge a fee at the start of the operation. It may also apply application costs or arrangement fees of up to 1% for transactions with a term of less than 5 years and up to 1.50% for transactions with a term of 5 years or more. Fees may also be charged for early repayment, whether voluntary (1% of the amount cancelled if the transaction was executed at a fixed rate, and 0.50% if it was executed at a variable rate) or mandatory (in which case it would incur a penalty of 2% of the amount cancelled).
Transactions may be executed until December 21, 2018.
o. Línea ICO Exportadores 2018: (ICO Short Term Exporter Line):
This line of financing may be requested by independent professionals and enterprises with registered office in Spain who wish to obtain liquidity through an advance on the invoices from their export activity. In particular, the financing is limited to invoices issued within the framework of a transaction consisting of the final sale of goods and services supplied to a customer located outside Spain or to those with a document agreed with an enterprise that has its registered office outside Spain, evidencing that the purchaser undertakes to acquire goods from the enterprise that has its registered office in Spain, independent of the name and form given to such document. Invoices must be payable not more than 180 days after the transaction’s execution date.
Financing is also available in the form of pre-financing of the company’s liquidity needs to cover the production and manufacturing costs of the goods or services to be exported. This transaction is required to be cancelled prior to the formalization of the transaction consisting of an advance on invoices relating to the goods which were pre-financed.
In both cases, up to 100% of the amount of the invoice or up to 100% of the amount from the sale of the goods will be financed, provided that it does not exceed a maximum of €12.5 million per customer and year, in one or more transactions.
The APR on the operation may not exceed the variable interest rate plus up to 2.30%.
The interest rate applied to the customer will be variable and, together with the dates and method of payment, will be agreed between the credit institution and the customer, pursuant to the provisions of the agreement executed.
Lastly, it should be mentioned that the credit institution can charge a fee at the start of the operation, although such fee plus the interest rate set may not exceed the maximum APR applicable to the operation. Also, the client may be charged a fee in the event of mandatory early repayment, equal to 1% of the amount cancelled.
Transactions may be executed until December21, 2018.
1 Priority countries according to the 2017 Guidelines.
- America: Argentina, Brazil, Canada, Chile, Colombia, the US, Mexico, Peru and Uruguay.</small
- Asia and Oceania: Bangladesh, China, Philippines, India, Indonesia, Kazakhstan, Myanmar, Pakistan, Uzbekistan and Vietnam.
- Sub-Saharan Africa: South Africa and Kenya.
- Middle East: the countries of the Golf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), Israel and Iran.
- Mediterranean: Morocco, Turkey and Egypt.
- HIP countries: Ivory Coast, Senegal, Ruanda, Uganda, Ethiopia, Madagascar and Tanzania.