Royal Decree 571/2023, of July 4, on foreign investment (published in the Official Gazette of the Spanish State on July 5, 2023) approves the long-awaited implementing regulation of Act 19/2003, on foreign direct investment. Its Chapter IV refers to the suspension of the general liberalization regime for certain foreign investments, with specific provisions for investments directly related to defense, arms, cartridges, pyrotechnic articles and explosives for civilian use and other material for use by the state security forces.
It will enter into force on September 1, 2023, although procedures initiated before that date will continue to be subject to the previous regime—namely Royal Decree 664/1999, of April 23, on foreign investment.
This implementing regulation seeks to provide greater legal certainty by helping define the strategic sectors or the investments subject to authorization based on the investor’s profile. It also reduces by half the duration of authorization procedures. We highlight in this document the most relevant developments, although the Spanish authorities already applied many of them as an interpretative criterion since the public hearing held in November 2021 for the draft regulation—similarly worded to the final version.
Key aspects:
- The maximum term to resolve authorization applications is reduced from six to three months.
- The exemption regime is modified. Investments in strategic sectors in companies with a turnover below €5 million are exempt, with certain exceptions—and time-limited transactions without influence capacity. Certain transactions in the energy sector are also exempt.
- As regards funds, management companies are the beneficial owners of the investments.
- Internal group restructurings and shareholding increases not involving a change of control are not considered direct investment.
- The new regulation helps define the activities included in certain strategic sectors.
- It further defines transactions subject to authorization based on the investor’s profile.
- It provides legal coverage for the prior consultation system.