Latin America is generally well-known for being the recipient of foreign investment… but what about LATAM investments outside of the region?
Statistics show LATAM investments have been increasing steadily and even exponentially over the last decades.
Research also shows that the main destination for LATAM investments abroad in Europe has been Spain and Portugal.
Why is that? Is it only due to linguistic and cultural identities? Not really…
There are mainly legal and tax considerations that explain the huge presence of LATAM investments in Spain. Here are just a few items that make Spain a particularly well-suited destination for LATAM investments:
- Straightforward access to EU, EMEA markets: Spain is an excellent choice for LATAM investments to access the EU and other EMEA markets with whom Spain has particularly strong commercial ties (especially North Africa and the Middle East).
- Moderate Taxation: Research shows that Spain has a tax pressure below the EU Average. The ratio between tax revenues, including Social Security, and GDP is 33.6% in Spain, vs. 40.6% in the EU-27. Corporate Tax Reductions for 2015 and 2016: Corporate Tax rate will be 28% on this 2015 (down from 30% in the last years) and 25% in 2016. Also, thanks to overall deductions, average corporate tax rate is actually at 19.3%.
- High Quantity -and Good Quality- of Double Taxation Conventions (DTCs) and Bilateral Investment Treaties: Spain has the largest network of Double Taxation Conventions with LATAM & the Americas (including USA & Canada) than any other European nation (19 vs. 13 of the UK, 12 of France, 8 of Italy, to name just a few). Spanish DTC are also in general terms more favorable for the LATAM investments than those signed by other European nations.
- Favorable R&D Taxation: According to the OECD, Spain is the country with the more advantageous tax regime on R&D after France. In particular, the so called “Patent Box” Tax Incentive allows a 60% tax reduction on gains deriving from the sale of patents, drawings and other intangible assets created by the company. It extends to the income from the sale of models, designs, formulas, plans or even know how. It is considered to be the most favorable system in the EU of its kind.
- Expats Beneficial Tax Regime: For expats coming to work to Spain, a tax flat rate of 24.75% for a maximum income of € 600,000 per year applies for five years. (This is the so-called “Beckham Law”)
- Good Quality of Life for Expats: According to FT, 7 out of the 10 most attractive cities to invest in Southern Europe are Spanish (2014-2015). Also, Spain is 9th in life quality for expats according to Expat Explorer Survey 2013 of HSBC.
- “ETVE’s”: ETVE is the Spanish acronym for “Holding Entities of Foreign Securities“. It stands for a holding regime that favors particularly LATAM investments, Brazil and Mexico being the second and fourth country to have invested the most in Spanish ETVEs. ETVEs are holding companies whose purpose is the management and administration of securities representing the equity of entities not domiciled in Spain. Foreign dividends and capital gains received by an ETVE from a company abroad are tax exempt. This facilitates the repatriation of dividends paid by subsidiaries. Also, dividend payments to non-resident parent companies are free of withholding tax in Spain unless the parent company is domiciled in a country that does not pay income tax or resident in a tax haven. ETVEs do also gain access to the extensive Spanish network of Double Taxation Treaties mentioned above.
- Golden Visas: Since September 2013, new immigration rules apply to promote foreign investment in Spain. Among them, Golden Visas are applicable to investors, entrepreneurs, persons with high academic qualifications, researchers and expats. “Investors” are foreigners who have made a significant capital investment in Spain either in real estate assets (over € 500,000) in shares in Spanish companies or financial deposits in Spanish banks (over 1 million €) in business projects they are to be developed in Spain considered of general interest, or in Spanish public debt (over € 2 million). Golden Visa allows such qualified individuals to obtain a Visa and/or Permission to live and work and Spain and free movement across the Schengen area. In the case of the investor, no obligation to effectively reside in Spain (it is only required to visit Spain once during the period of residence). Golden Visas also benefit from expedited processing: the visa petition is resolved within 10 business days and residence permits are resolved within 20 business days.
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