Doing Business in Spain:a legal tax perspective - May 2016

CUATRECASAS . GON<;:ALVES   PEREIRA

 

DOING BUS INESS IN SPAIN

A  LEGAL AN D TAX PERSPECT IVE

May 2016

© Cuatrecasas, GonQalves Pereira, S.L.P.

This guide provides general information to investors intending to operate in Spain on legal issues on which they may need advice.

It is not intended, and cannot be considered, as a comprehensive and detailed analysis of Spanish law or, under any ctrcumstances, as legal advtce from Cuatrecasas, Gon<;:alves Pereira.

This guide was drafted on the basis of information available as of May 2016. Cuatrecasas, GonQalves Pereira is under no obligation and assumes no responstblllty to update this Information.

All rights reserved. No part of this publication may be reproduced or transmitted, in any form or any

means. without written permission from Cuatrecasas. Gon<;:alves Pereira.

DOING BUSINESS IN SPAIN

A LEGAL AND TAX PERSPECTIV E

MAY 2016

CUATRECASAS , GON<;ALVES PEREIRA

CONTENT

CONTACT  INFORMATION	6
LIST OF ACRONYMS	7
1. SPAIN AT A GLANCE	8
1 1 ,       Unique gee-strategic position	8
1.2.     Spanish legal system	8
2. WAYS OF DOING BUSINESS	10
2.1.     Setting up a business	10
2.2.     Overview of limited liability companies	1i
2.3.     Incorporating new companies and acquiring "shelf companies"	16
2.4.     Corporate governance of limited liability companies	18
2.5.     Exchange control and foreign investment regulations	20
3.  TAKING SECUR ITY	22
3.1.     Preliminary ideas	22
3.2.      Overview of the most relevant types of security	23
3.3.     Special regime for financial guarantees	25
4. ANTITRUST	26
4 .1.       Restrictive practices	26
4 .2.     Merger control	27
4 .3.     Unfair competition	28
5. STATE A ID	29
6.  INTELLECTUAL PROPERTY  PROTECTION AND DATA PROTECTION	30
6.i.       Copyrights	32
6.2.     Industrial property rights	33
7.  TAX	39
7.1'      Overview of the Spanish tax system	39
7 .2.    Corporate income tax ("CIT")	41
7.3. Personal  income  tax  ("PIT")	46
7.4. Non-res1dent  1ncome tax  ("NRIT")	49
7.5. Value added  tax  ("VAT")	50
7.6.       Transfer tax	51
7 .7.      Tax treaties and limited taxes on Spanish-source income	52
7.8.     M&A-related taxation	52

1. LABOUR ISSUES                                                   55
   1. Employment law framework                                  55
   2. Employment agreements                                    55
   3. Salaries                                                56
   4. Working time                                            57
   5. Changes in labour conditions                                  57
   6. Termination of employment                                   59
   7. Transfer of undertaking                                     61
   8. Subcontractors and temporary employment agencies                 62
   9. Collective representation and organisational rights                    63
   10. Registration and social secur ity issues                           64

8.11 . Contracting employees who are non-residents of the EU              65

1. Health and safety at work                                    70
2. Labour fines and penalties                                   71

9.  SECURITIES REGULATION                                                                                        72

9.1 . Overview                                                72

1. Listed companies: obligations and recommendat ions                  73
2. Offering of securities and admission to trading                      79
3. Takeover bid regulation                                     80

1. REGULATED SECTORS                                             85

1 0.1 . Financial entities and investment companies                          85

1. Insurance                                                     86
2. Energy                                                86
3. Technology, media and telecommunications ("TMT")                  87

1. INSOLVENCY                                                        88
   1. . Definition of insolvency                                        88
   2. The insolvency procedure                                    88
   3. Effects on debtors                                             89
   4. Effects on creditors                                        90
   5. Clawback period                                          91
   6. Key pre-insolvency refinancing instruments                         92
2. DISPUTE SETTLEMENT                                             95
   1. Litigation: ju risdiction and civil procedure                          95
   2. Commercial arbitration and mediation                            97

CONTACT  INFORMATrON

HEAD OFFICES

BARCELONA

Paseo de Gracia. 111 08008 Barcelona, Spain Tel. 34 932 905 500

[email protected]

MADRID

Almagro, 9

28010 Maano, Spa1n

Tel. 34 915 247 iOO

madrld@cuatrecasas .com

This guide provides an overview or the key legal aspects for foreign Investors interested in investing in Spain. It is not intended to be comprehensive, but to address practical issues lhat will help investors considering an investment project in Spain .

Cuatrecasas, Gon9alves Pereira is a leading internat ional benchmark for all legal issues in Spain. It offers Its clients a value-added service for strategic crossborder transactions w ith 25 integrated offices in Europe, Amer ica, Asia and Africa characterised by a multidisciplinary approach that combines traditional legal practice with In-depth knowledge of the specialty and economic sector required in each case. Over 970 lawyers offer clients a value-added service in 34 areas of business law.

The firm and its lawyers receive prestigious national and International awards year after year, acknow ledging their reputation and technica l skills. Financial Times ranked Cuatrecasas, Gon9alves Pereira as one of the top four most innovative firms In continenta l Europe In the 201 5 FT Innovative Lawyers Awards, and as the most innovative European firm in corporate and commerc ial practice. In 201-4, Chambers

& Partners recognized Cuatrecasas as "Spain Law Firm of the Year. "

www.cuatrecasas.com

BME CIT

CNMC

CNMV EPO EU EUIPO EUT LDC MAB NIE NIF NRIT OECD OEPM PIT

SA SCA SMA SME SL TOB VAT

Bo/sas y Mercados Espanoles: a listed company that operates the Spanish stocK markets and financial systems

Corporate income tax

National Commission for Markets and Competition Spanish Securities and Exchange Commission European Patent Office

European Union

European Union Intellectual Property Office

European Union Trademark

Law for the Defense of Competition Alternative Stock Exchange Market Foreigner identification number

Tax identification number

Non-resident tncome lax

Organisation for Economic Cooperat ion and Development Spanish Patent and Trademark Office

Personal income tax

Publtc hmlted liability company Spanisll Compantes Act Securities Markets Act

Small and medium-sized company

Ptivate limited liability company

Takeover bid Value added tax

1. Unique geo-strategic position

Spain is attractive for foreign investment , not only because of its domestic market but also because of its privileged geo-strateglc position. It is the perfect bridge between Latin America , Europe and Africa . Spain became a member of the European Union ("EU") in 1986. It is the fourth economy in the euro and the fourth country by population with 46.4 million consumers and 68.2 million tourists in 2015. Its location provides an ideal gateway to Northern Africa and it is also a unique platform to channel Investments to Latin America. Strong cultural, economic and historical ties between Spain and Latin Amer ica led to a wave of Spanish investment in Latin Amer ica, and Spanish companies have become leaders in many strategic sectors of the continent. Furthermore, Spanish is a global language with over 500 million speakers .

In 2015, Spanish GOP rose by 3.2%, continuing the growth observed In 2014. GOP growth is estimated at approximately 2 .5% between 2016 and 2019. Structural reforms have improved Spanish competitiveness and exports and the country's infrastructures rank among the top ten countries with best infrastructure quality In the world (Global Competitiveness 2015-2016).

1. Spanish legal system

Spain is a parliamentary monarchy w ith three independent branches of government: the executive, the legislative and the judiciary. The head of state is the king who , among other tasks, represents the State in international relations . Executive authority is exercised by the government , whose action is directed by the president. The legislative power is exercised by the parliament, which has two chambers: the lower house of parliament and the upper house of parliament.

The jud iciary is represented by independent judges. The highest court in Spain is the Supreme Court. The Constitutiona l Court, which is not part of the judiciary,  has authority to interpret the Constitution.

Spain has a continental law system based on written law, while case law is used for interpretation purposes. EU membership has a decisive influence on Spain's legal system, as a substantial part of its commercial law is based on EU Law.

Doing Business in Spain              9

2.     WAYS OF DOING BUSINESS

1. Setting up a business

Limited liability companies

When setting up a business in Spain, foreign investors generally incorporate or acquire a limited liability company. The two main types of companies with limited liability in Spain are public limited companies {"SAs") and private limited liability companies ("Sls"). Both have a legal personality, separate and distinct from that of their partners, who are not personally liable for the company's debts.

Choosing between an SA or an SL is mainly determined by (i) the scale of the business, (ii) the legal requirements (only SAs can be listed), (iii) the future ability to raise capital, (iv) the rules on transferability that partners want to apply, and (v) the flexibility offered by SL regulations as opposed to SA regulations (see section 2.2).

Branch or representative office

As an alternative, you can establish a branch or open a representative office. A branch is a secondary establishment operating permanently as a representative of its parent company. Although it has a degree of independence from its parent company and carries out all or part of that company's business activities, it does not have a separate legal personality. Representative offices mostly carry out ancillary, accessory and instrumental activities (including information gathering , market prospection and local support) . Like branches, a representative off ice does not have a separate legal personality. This means that you, as the parent company of a branch or a representative office, will be liable for their obligations and debts.

10         Doing Business in Spain

Other alternatives

Another investment option is to assoc iate through a joint venture with a business already established and functioning in Spain. Venture partners often create an equity joint ventu re by incorporating a limited liability company or acquiring a stake in an existing company. However, Spanish law contemplates other joint venture alternatives:

• Temporary jolnt ventures ("UTEs"), with no separate legal personality besides that of its members, created to carry out specif ic projects or services, such as an engineering  or construct ion  project.
• Groups of economic interest (''AlE'') , aimed at facilitating, improving or increasing the economic activity of their members , who are held joint ly and severally liable, albeit subsidlarily to the AlE. A lEs are frequent ly created to provide centralised services for a group of companies.
• Silent partnership agreements , under wl1ich investors hold an interest in a business they do not manage by making contributions of money or in kind. These are not considered as capital contributions, but give Investors the righl to participate in the positive or negative results of the business.

Finally, there is the option of selling or providing goods or services in Spain without setting up a legal structure, by entering into a distribut ion, franchise or agency relationship with a third party established in Spain.

1. . Overview of limited liability companies

Main characteristics

The most common types of limited liability companies that operate in Spain are SAs and Sls, which are regulated by the Spanis h Companies Ac t ("SCA"). Limited liability of partners is common to these capital-based companies. In both cases, the part ners' and the company 's assets are Independent. These companies can be owned by a single shareholde r.

Doing Business In Spain             11

In 2015, 99% of the companies incorporated in Spain were SLs. Tradit ionally, small and medium -sized companies ("SMEs") have chosen the form of SL because its characteristics are more suitable:

• Lower capital requirements than an SA (€3,000 as opposed to €60,000).

• Statutory restrictions on the transfer of quotas are more stringent than for an SA. The capital of an SL is divided into quotas, i.e., non-negotiab le interests.
• More flexibility and greater autonomy to decide on the company's structure and organisation. SA regulations establish stringent mechanisms aimed at protecting the company's share capital and its creditors. In the case of an SL, these mechanisms are replaced by partners' and/or directors' liability; therefore , regulations are more flexible than for an SA.

In contrast, SAs have traditionally met the needs of larger corporations. Although their complex legal framework and the limited ability of shareholders to structure the company clash with the needs of small businesses, they offer large corporations the following advantage: investing in the company is easier since its capital is divided into shares that can be listed on stock exchanges and are naturally transferable.

It is worth noting that these characteristics of SAs and Sls can be interpreted in subtly different ways. We often find large corporat ions incorporated as SL, tailoring the statutory model, initially designed for SMEs, to suit their goals and interests. In this context, partners and shareholders agreements play an important role.

Differences between SAs and Sls

The following table identifies the most important differences between an SA and an SL. However, the information it provides is not fully comprehens ive.

12       Doing Business in Spain

Cap1ta1	S L		SA
Minimum requirement	€3.000		€60.000
Divided Into	Quotas, i.e.. non-negotiable		Shares Issued as bearer or
	interests.		registered shares. Shares
			can be negotiated on the
			stock market.
Disbursement	Fully paid-up on incorporation.		Initial outlay of 25% of the
			nominal value of each share .
			The outstanding amount must
			be paid according to the
			agreed t erms. In case of
			non-capital  contributions,
			within 5 years.
Voting rights	As privileges are allowed,		No voting rights or privileges
	it is easier for Sls to modify		are allowed. However, it is
	voting rights.		possible to issue shares
			without voting nghts or to
			Include voting caps limiting the
			number of votes that can be
			cast by each shareholder.
Contnbutions in kind	No expert report assessing		The value of the shareholders'
	the value of investments in kind is required. Partners (and		Investments In kind must be assessed by an expert.
	directors In the case of a capital		Although tt1is expert report
	increase) are joint and severally		prov1des greater certainty
	liable for the existence and the		and protects the interests
	value of the Investment in		of third parties, cost and
	kind against third parties and		time requirements are more
	the company.		cumbersome than for Sls.
Transfers
Restrictions on	Unless otherwise provided in		Restnctions on transferability
transfers	the by-laws, quotas can be		can only be applied to
	freely transacted between		regist ered shares and may not
	partners or with partners'		completely limit their transfer
	spouses. ascendants.		(exceptionally, a lock-up is
	descendants and group		allowed for two years following
	compan1es. In all other cases.		incorporation).
	transfers are subject to lhe
	restrictions provided in the by­
	laws or. failing that. in the SCA.

Doing Business in Spain              13

SL                                               SA

Treasury stock and financtal asststance

Denvative acquist tion

of treasury stock

Only allowed , With no set limit, in certain cases; when quotas are acquired (i) at no cost. (ii) as part of an estate acquired

in whole, (iii) mortis causa, or due to a (lv) partner exit or exclusion. (v) court award or (vi) capital reduction agreement.

Allowed subject to certain conditions and up to a maximum of 20% of the share capital. or 10% if the company is listed.

Financial ass1stance prohibition

Ftnancing sources Ltstlng and

issuing bonds or other negotiable Instruments

Oapttal decrease

Mandatory capital decrease

No exceptions to the prohibition of providing financial assistance for acquisition of 1ts own quotas or the shares or quotas of Its group companies.

Sls cannot be quoted . With some restrictions , Sls can issue or guarantee bonds and other securities that

acknowledge or create a debt, but S s are banned from issuing/guaranteeing bonds convertible into units

There is no compulsory capital decrease for losses.

Two exceptions to the financial assistance   prohibition:

• Aid to company employees.
• Ordinary operations earned out

by banks and credit entitles

SAs can raise funds through capital markets by issuing/ selling shares or issuing bonds and other securities that acknowledge or create a debt, Including bonds convertible into shares.

SAs have to reduce their share

capital when, for more than a year, losses reduce the net worth of the company below

two- thtrds of its share capital.

14          Doing Business in Spain

SL                                               SA

Publicity and opposition torm	The capital decrease resolut1on does not need to be published	Resolutions to reduce the share capital to reimburse
	and the opposition term is	contributions to shareholders
	not required (unless otherwise	must be published and some
	established in the by-laws).	cred1tors have one month
	Instead, partners are liable for	to object to the capital
	the company's debts for an	reduction until their credits
	amount equal to what they	are guaranteed.
	received in the capital

reduction, unless a reserve

This oppositiOn right does not

charged to profits or freely                     exist when (i) the reduction

disposable reserve is crealed               Is charged to profits or freely

for this amount.                                         disposable reserves. and

(li) a reserve is allocated for

an amount equal to the nominal value of the share capital decrease.

Corporate governance

General meeting                  There is no attendance quorum.            At first call there is a m1nimum However, no resolution can                                                                     attendance quorum: 25% of be passed unless the votes                                                                     the Issued share capital with represent one-third of the  voting rights. Resolutions are

company's existing voting rights            passed when approved by a

and a simple majority of the                   Simple majority of the votes at

voles are validly cast.                              the meeting.

Some resolut ions require a                    Some resolutions require a reinforced majority (more than                                                                     reinforced quorum and voting one- half of the voting rights tor                                                                     majorities (e.g., Increase and capital increase or decrease                                                                     decrease of share capital;

and by-laws amendments, and             amendment of by-laws: and at least two-thirds of the voting                                                                     Lransformat1on, merger and rights in the case of. inter alia,                                                    spin-of  .

merger or spin off).

The by-laws can increase the

The by-laws can increase the                 attendance quorum and voting voting majorities.                                                                     majorities.

Administrat ive body             Unless provided in the                           Minority shareholders are company's  by-laws, minority                                                                     entitled to be represented partners cannot be represented                                                                     in the board of directors 1n in the board in proport1on to                                                                     proport1on to their stake in their stake In the company.                                                                     the company.

Doing Business in Spain             15

1. Incorporating new companies and acquir ing ''shelf companies"

Wilen Investing in Spain, you can eitller incorporate a new company ("NewCo ") with documents that are specifically tailored to your requirements or buy a company that has already been incorporated but has not yet been traded ("shelf company"). The latter is more expensive , but helps accelerate the process of starting a new business in Spain.

Requirements for incorporating a limited liability company

This section describes the main steps required to incorporate a Spanish

limited liability company (either an SA or an SL).

• Powers of attorney.if you are going to be represented at the act of incorporation, you have to grant powers of attorney, duly apostilled in accordance with the Hague Convention procedure or legalised by a Spanish consul.
• Company name.You need to obtain a certificate of clearance to use the NewCo's proposed name.
• Tax identification numbers.All foreign shareholders and future non-resident directors of the NewCo will need to obtain a tax identification number ("NIF"), In the case of companies, or a foreigner Identification number ("NIE"), In the case of individuals .
• Cash contributions. Contributions made  in cash to the NewCo can be deposited in or transferred to a bank account in Spain, opened in the name of the NewCo under incorporatton. Alternattvely, cash contributtons can be delivered to the notary public, although this is not customary.
• Public deed of incorporation.You or your duly authorised representatives must

submit a deed of tncorporation before a Spant sh notary public.This deed tncludes;

1. the by-laws regulatmg the Internal affairs of NewCo Including, among others, the corporate object, registered office, the Issue and transfer of quotas/shares. administration forms, directors ' remuneration and the general meeting attendance quorums and vot ing majorities;

1. evidence of the contributions made either in cash or In kind;

16         Doing Business in Spain

(C)       tne appointment of directors, who can either accept tne1r appointment in person before the notary or by letter of acceptance ; and

(d)     the foreign investment declaration (see section 2.5).

In relation to the public deed of incorporation, Spain has adopted EU money laundering and terrorist financing regulations that require the founder(s) to provide the Identity of their "beneficial owners,'' if any. "Beneficial owners" are understood as the 1ndlviduals on whose behalf founders Intend to incorporate the NewCo and/or who (i) own or control, directly or indirectly, more than 25% of the founders' share capital or voting rights; or (ii) exerc ise direct or Indirect control over the management of the founder(s) . If nobody holds such a direct or indirect stake or control, the founders must state that there are no "beneficial owners."

Companies listed on an EU-regulated market or an equivalent market in

a third country are exempt from this disclosure requirement.

• Tax filings. You have to file the forms fo r registering in the tax census and obtaining the company's provisional NIF with the tax authorities. Once the NewCo has been duly registered with the Corporate Registry, it will be assigned a definitive NIF

Incorporating a company is exempt from transfer tax and stamp tax (see section 7.1 and 7 .6).

• Filing with the Corporate Registry. The public deed of incorporation must be submitted to the Corporate Registry for registration . Registration normally takes a maximum of 15 days.

NewCo can act from the date the deed of incorporation is filed, although it will only have full legal personality upon registration.

In recent years, legal reforms have aimed  to simplify  the procedure to set up companies in Spain. Currently, there are simplified electronic procedures to set up Sls. In brief , all the steps to incorporate an SL can be completed through single offices called "help desks for entrepreneurs,'' which perform the necessary procedures through an online service using the so-called "single electronic  document "

Doing Business in Spain            17

Requirements for acquiring a shelf company

As in the case of a NewCo, you will need to grant a power of attorney if you are going to appoint a representative. Besides, all foreign shareholders and future non-resident directors must obtain a NIF or NIE. See the previous section for details on these two steps .

• Sale and purchase deed. You and the seller must appear before a Spanish notary public to formalise the sale and purchase deed. The purct1ase price has to be paid by cheque at that time, unless it has been previously transferred to a bank account. The ''beneficial owner" of the parties to the deed must be disclosed (see details above).
• Foreign investment filings (please refer to section 2.5).

• Single member status. Most shelf companies are incorporated by a sole partner. Thus, when acquiring the company, you need to disclose the change in the identity of the company's single partner or the loss of this status If the shelf company has more than one partner. Either situation must be recorded in a public deed and registered with the Corporate Registry
• Other corporate actions. Once you have purchased the shelf company, you will appoint new directors and amend the by-laws to tailor the company to your needs (change of corporate name, purpose, registered office, transfer rules and management systems). These corporate resolutions must be formalised before a notary public and registered with the Corporate Registry.

1. Corporate governance of limited liability companies

There are four alternatives to organise the managing body of a limited liability company: (i) a sole director ; (ii) a number of joint and several directors that will act independently, each binding the company separately ; (iii) a number of joint directors, not exceeding two in the case of an SA. that will act jointly or unanimously; or (iv) a board of directors. The by-laws may include all these opt ions , allowing the General Meeting to opt for one of the structures .

18        Doing Business in Spain

Unless the by-laws provide otherwise, a director is not required to be a shareholder of the com pany. Individuals and legal entities can be appointed as directors. In the latter case, the legal entity has to be represented by an individual.

Directors of limited liability companies are under a duty of care and skill and must act bona fide in the best interest of the company. This means that, in carrying out their duties, directors are obliged by a duty of diligence and a duty of loyalty.

The duty of diligence is the standard of conduct required of directors regarding corporate management, which aims to establish their commitment to the company: they must handle corporate matters with the same diligence as a careful entrepreneur. Spanish law contemplates the business judgment rule, establishing criter ia that enable strategic business decisions, regardless of the end result for the company, to be considered correctly adopted in accordance with the diligence required of directors.

The duty of loyalty requires directors to defend the corporate interest over their personal and any other interests. Directors must act under the principle of personal liability and freedom of choice, and must avoid any situations that conflict with the company's interest (for example, carrying out transactions with related parties or performing competing activities). The general meeting or the board of directors , depending on the specif ic situation, can grant an exemption to the director in case of conf lict of interest when certain requirements are met.

Directors (and de facto or shadow directors) are liable to the company, to its shareholders and to the company's creditors for any damages they may cause due to any acts contrary to law or the by-laws, or carried out in breach of the duties associated with their position. Liability is also extended to the individual represent ing the company who acts as director, and to the most senior executive, only when the board has not delegated its powers .

Doing Business in Spain             19

The SCA establishes two types of directors' remuneration: (i) remuneration of directors "in their capacity as such," subjec t to the principle of statutory reserve (i.e., the remuneration system must be included in the by-laws) and approval by the general meeting; and (ii) remuneration for the directors' performance of executive duties , which should be recorded in an agreement signed by the particular director affected and the board. Specific rules apply to listed companies (see section 9.2).

1. Exchange control and foreign investment regulations

Exchange control and foreign investments are liberalised in Spain (except fo r spec ific sectors such as activities related to national defence). Thus, they are generally free from restr ictions, but must be notified to the relevant authorit y (the State Secretary for Tra de or the Bank of Spain) . These reporting obligations  are  imposed  fo r statist ical and tax  purposes  and to prevent infringements of law. Failure to comply w ith these reporting obligations may result in monetary fines.

Non-residents , for these purposes, are (i) individuals domiciled abroad or whose principal residence is abroad ; (ii) legal companies with registered offices abroad : and (iii) permanent establishments and branches of Spanish resident individuals or companies abroad.

Foreign investment in Spanish entities

Foreign investments in Spanish companies have to be notified to the State

Secretary for Trade within one month from when the Investment is made.

As an exception,when investments proceed from a tax haven and exceed 50%

of the share capital of the Spanish company, a prior declaration is required.

20        Doing Business in Spain

Reporting obligations of all foreign transactions and balances of financial

assets and liabilities

Spanish residents (individuals or entities) must inform the Bank of Spain of any transaction executed with non-residents or any asset or liability in countries other than Spain. Information regarding creditor and debtor positions llas to be supplied monthly, quarterly or yearly, depending on

(i) the volume of the transactions executed in the previous year by the

resident, and (ii) the balance of assets and liabilities as of December of

the previous year.

Payments or transfers of funds

With respect to payments or transfers of funds, residents must provide information to the1r bank when making or receiving payments or transfers of funds to or from a non-resident. Collections, payments and transfers of amounts under €50,000 are exempt from this requirement.

Doing Business In Spain            21

3.    TAKING  SECURITY

1. Preliminary ideas

Types of guarantees

There are two types of guarantees, depending on how t he obligat ion is secured:

1. In rem guarantees, w hereby an Item secures the rulrllment of obligat ions.

1. Personal guarantees, whereby a person guarantees the fulfilment of obligat1ons .

In the case of insolvency, these guarantees rank differently and there are

material differences in their enforcement.

Notarisation and registration

Guarantee or security documents must be issued before a notary public to be considered as enforceable titles. When executing a public deed, it is Important to remember that all non-resident parties or appearers must have a tax identification number (NIF or NIE) and that the identity of the "beneficial owner," if any, must be disclosed (see section 2.3 for further details).

Registration is required fo r and increases the costs of some types of guarantees, e.g. , real estate mortgage.

Principle of integrity

Broadly speaking. a security interest can only secure one main obligation and its ancillary obligat ions. If two different main obligations need to be secure d, two different guarantees must be created. Spanish law  does not provide for a so-called "universal guarantee" over all the debtor 's assets, although there are exceptions, for Instance floating mortgages (see section 3.2). Nor does it generally provide for the creation of a "floating" or "adjustable" lien or encumbrance.

22        Doing Business in Spain

Corporate benefit

Under Spanish law, the directors of a company must perform their duties at all times, with the diligence of an orderly businessperson, and must act as loyal representatives when defending corporate interest. Unlike other EU juris dictions, there is no specific  obligation  for companies to jus tify that they are act ing for corporate benefit when granting a guarantee or security, although it is advisab le to do so according to the characteristics of a specif ic transaction or to uphold the effectiveness of the security or guarantee if the grantor becomes Insolvent.

Blanket prohibition on financial assistance

Spanish limited liability com panies cannot give f inancial assistance to acquire their shares  or quotas, or those of their parent compan ies. Two limited exceptions apply only to SAs: (i) ordinary operations carried out by banks and credit entities, and (ii) financing for employees.

This blanket prohibition covers indirect assistance , meaning situations where the company is not providing consideration in the traditional sense, but is covering another party's obligation, e.g., if the company guarantees a bank loan in favour of an individual for purchasing shares in the company. The rules prohibiting financial assistance are particularly relevant in the context of acquis ition finance.

1. Overview of the most relevant types of security

In this section , we provide an overview of some of the options available when taking security in Spain. This description , however, is not fully comprehensive and other types of security are available under Spanish law.

Doing Business In Spain       23

Pledge over shares and credit rights

Pledges over shares and credit rights (such as bank accounts , receivables and insurance policies) are the most common type of security given. These pledges:

• only secure obligations that can be valued In cash;

• must be formalised before a notary public to be considered as an enforceable title upon execution. If the pledge is incorporated under a law other than Spanish law, wl1ich is unadvisable tor pledges ot assets located in Spain, a document equivalent to a Span1sh notarised agreement or deed must be s1gned;
• do not need to be entered on a registry to be valid, except pledges over listed shares; and
• entail a transfer of possession. In case of pledge over shares , such transfer takes place by means of endorsement or registration 1n the partners/shareholders book or book entry reg1stry, as the case may be.

Non-possessory pledge

A non-possessory pledge is granted over movable assets that cannot be the object of (i) a cllattel mortgage, because their specific identity cannot be registered, or (ii) an ordinary pledge, given the legal or financial impossibility of transfer to the creditor or to a third party.

Credit rigllts, and even future credit rights, can be used in a non-possessory pledge, as long as they are not represented by securities or considered financial instruments.

A non-possessory pledge must be entered on the Chattel Registry to be valid.

Real estate mortgage

Real estate is frequently used as security by means of a real estate mortgage. As an exception to the principle of integrity, a mortgage can secure several obligations as long as they are specified or specifiable and the procedure for settling each obligation is established . In addition, there

24         Doing Business in Spain

is also a specific exception for "floatmg" mortgages set up for finance

companies and governments.

Mortgage agreements must be drafted in Spanish, executed before a notary public and filed with the pertinent Land Registry, making this type of security more costly.

First demand guarantee

This guarantee imposes an obligation on the guarantor to pay the beneficiary on first demand. This guarantee is independent from the underlying contract that it guarantees and operates strictly in accordance with its terms. Therefore, the guarantor's payment obligation becomes a principal obligation that is not affected by disputes over the underlying contract between the obligor and the beneficiary, who is usually entitled to payment simply on submitting a claim for payment.

1. Special regime for financial guarantees

Spanish regulation on financial collateral agreements provides for a simple and quick procedure for enforcing financial guarantees. These are some of the most relevant features of these guarantees:

• They  do not need to be formalised  before a notary public to be enforceable

against third parties.

• Security can be created by outright  transfer of title to the asset or right

concerned , or by creating a pledge.

• The creditor can negotiate a nght of replacement and use of the financial

collateral as 1f it were the owner, w1thout  losing rank of privilege.

• The collateral can be enforced through direct sale." When expressly agreed, the creditor can retain the collateral.
• These guarantees are not affected by the general1nsolvency regime .

To grant a financial guarantee, the parties, the collateral and the secured obligations must fulfil several specific requirements.

Doing Business In Spain           25

4.     ANTITRUST

Businesses in Spain are subject to EU and Spanish antitrust law. Spanish law applies to anticompetitive agreements or conduct with effects In Spain, EU law also applies to those which may affect trade between Member States.

The relevant Spanish statutes are the Law for the Defense of Competition C'LDC") and its implement ing regulation.

The provisions of the LDC are enforced not only by the Spanish Antitrust Authority (the National Commission for Markets and Compet ition, or "CNMC"), but also by some regional antitrust authorities. Regional authorities are only competent for acts with effects limited to their own regions. In addition, EU and Spanish antitrust law can be applied in private litigation in Spanish courts.

1. Restrictive practices

The LDC prohibits collusive practices (anticompetitive agreements and concerted or parallel practices), abuse of dominant positions and significant acts of unfair competit ion that are contrary to the public interest.

Collusive practices

In general terms, Spanish law prohibits all agreements, collect ive decisions and recommendations. or concerted or parallel practices that have as their object or effect the prevention, restriction or distort ion of competition .

These practices include, inter alia, price fixing;limiting or controlling production, distribution, technical development or investment; sharing markets or sources of supply applying  dissimilar conditions to equivalent transact ions; and concluding contracts subject to the acceptance of supplementary obligations that have no connection with the object of these contracts.

26        Doing Business in Spain

Prohibited agreements and practices, subject to some exceptions, are null and void and may be punishable, depending on the severity of the restriction on competition, w ith fines of up to 10% of the total annual turnover of the infractor.

Abuse of dominance

The LDC prohibits abusive exploitation of dominance, whether by one or more undertak ings. Such abuse may, for instance, consist of applying unfair trading conditions, limiting production to the prejudice of consumers, or discriminating so as to place one or more parties at a competitive disadvantage.

Abuse of dominance is punishable with fines of up to 10% of the total

annual turnover of the infractor.

Unfair practices affecting the public interest

The Spanish antitrust authorit ies may also punish acts of unfair competition that have a significant effect on the market and, as a result, on the public interest (see section 4.3).

4.2 . Merger control

The LDC requires prior notification and author isation for mergers and other concentrat ions, including acquisitions and full-function join t ventures, which are not notifiable to the European Commissior'l under the EU Merger Regulation, but which satisfy the thresholds listed below.

Doing Business In Spain           27

A concentration should be notified to the CNMC when:

1. a market share equal or superior to 30% of the Spanish market (or of a geographical market w 1thrn Spain) for a partrcular product or  serv1ce is acquired or Increased as a result of the transaction (unless, under a de mlmmls exemption, the annual Spanish turnover of the acqUired undertak ing or assets is less than €10 million and the parties have no individual or combined market st1are of 50% or more in any affec ted market in Spain); or
2. the aggregate turnover in Spain of all the firms 1nvolved In the transact1on In the previous financialyear exceeded €240 million and the turnover In Spain of at least two participants exceeded €60 million.

The LDC provides for fines of up to 1% of the parties' turnover if a transaction is not notified, and of up to 5% of the parties' turnover if a transaction is completed w ithout authorisation.

4 .3.   Unfair competition

Spanish unfair competition law is based on the general principle that commercial conduct contrary to good faith is considered unfair. The relevant Spanish statute is the Unfair Competition Act.

The Spanish Unfair Competition Act specifically addresses unfair commercial conducts , including: acts of confusion, misleading advertising, some kinds of gifts and discounts, acts of denigration, acts of comparison, acts of imitation and sales at a loss.

28       Doing Business in Spain

5.     STATE AID

Under EU law, State aid is subject to control by the European Commission to ensure that government interventions at any level (national, regional or local) do not distort competition and trade inside the EU. State aid is defined as an advantage -in any form whatsoever- conferred from state resources on a selective basis that may result in a distortion of competition.

EU law establishes a general prohibition of State aid, while making allowances for a number of areas in which State aid can be considered compatible under certain conditions or after notification to and authorisation from the European Commission.

Doing Business In Spain            29

6.        INTELLECTUAL PROPERTY PROTECTION AND DATA PROTECTION

The English term "Intellectual Property" ("IP'') covers two main sub­ categories: (i) copyrights (referred to in Spanish law as "propiedad intelectual"), and (ii) industrial property rights, which include trademarks, industrial designs,  patents, utility models and geographical indications.

Spain has a modern IP legal system. It has adhered to the main international IP treaties, including the Paris Convention for the Protection of Industrial Property, the Berne Convent ion for the Protection of Literary and Artistic Works , the TRIPS Agreement, the Madrid Agreement Concerning the International Registration of Marks and the European Patent Convention.

Being part of the EU, Spanish IP legislation incorporates all EU Regulations

(e.g. , EU Regulations on European Trademarks and Designs) and it is harmonized with EU Directives (e.g., EU Directive 2004/ 48/EC , on the Enforcement of Intellectual Property Rights).

Since 2004, Spain has courts specializing in IP issues, known as ''juzgados de to Mercantil".

Next , we will summarize the main IP rights recognized by Spanish law. It is wo rth noting that several IP right s can exist over the same object, i.e., an icon can be protected by copyright, design rights and trademark rights, as long as the necessary requirements are met .

The following table identifies the main characteristics of IP rights under

Spanish law. Please note that the information it provides is not comprehensive:

30        Doing Business in Spain

TRADE TRADEMARKS                           COPYRIGHTS            DESIGNS               PATENTS              SECRETS

(KNOW-HOW)

Signs,

Appearance

of a product Its shape ,

Including:            Pure aesthetics     patterns              New products,       Any

information Subject         • Words         (books, movies,   and colours        processes          providing a matter             • Figurative       architecture,        (e.g.• design       or uses that          technical/

• Combined       software and        on furniture,        solve technical       comme rcial

• Sound            databases)           clothing,             problems               advantage

• 30                                             electronic

devices

and icons)

Main requirements

• Novelty

Originality             •  Novelty               (universal)

Distinctiveness   (independent        •  Individual         • Inventive step    Confident iality creation)                      character                            •   Industrial

applicability

Not registered (only EU): 3 Indefinite (must General: life years from Indefinite be renewed of author + 70 first public 20 years (until secret is every I 0 years) years disclosure revealed) Registered: up to 25 years

Term of

protection

Must

More

register?            Yes                    Not mandatory      protection           Yes                       No

if you do

•  

EUTM Spain (but principles (EUIPO): of "national Territoria l All EU treatment'' and scope Spanish TM (OEPM): "Independence" under Berne Spain only Convention apply)

1. (EPO):

• EU Design        EU Member

(EUIPO):             States where

AU EU                patent is

• Spamsh              vaJidated          Wor ldwide

Design            • Spanish

(OEPM):             patent

Spain only           (OEPM): Spain

Doing Business in Spain            31

1. Copynghts

In Spain, copyrights are regulated by the Intellectual Property Act, which complies wit h international treaties and the existing EU directives dealing with different copyright aspects .

The subject-matter of copyr ights are works of authorship. For a work of authorship to be protected, it  must  be an  original  creat ion, expressed In any way or form. Works protected by copyright include, but are not limited to, books, music, cinematographic works, sculptures and paintings, architectural works, photographs, databases, videogames and software. The Spanish Copyright Act also grants protection to the so-called "neighbouring rights", including the rights of produce rs of phonograms and videograms, performers  and broadcasting companies.

Unlike most industrial property rights, copyrights are automatically acquired on creation of the wor k, once it is perceptible by others. Thus , protection is not subject to registrat ion with the Intellectual Property Registry, although at times this may be advisable to prove existence and authorship of these rights at a certain point in time.

Under Spanish law, the author has two sets of rights:

1. Moral rights: Regardless of the author's economic rights. and even after the transfer of these rights, the author has "moral rights," wl1ich include but are not limited to the right to claim authorship of the work and the right to object to any distortion, mutilation or modification to the work which would be prejudicial to his honour or reputation. Moral ngl1ts cannot be assigned or waived under any circumstance.

(li) Economic rights: The exclusive right to authorise the reproduction, drstributron and transformation of the work, as well as its communrcatron to the public. These rights may be licensed and assigned to third parties. rndivrdually or as a whole.

32        Doing Business in Spain

Explo1tat1on rights last for the author's life and 70 years after the author's death. However, in the case of works created by a legal entity, the term of protection expires 70 years after the work has been lawfully made available to the public. When the term expires, the affected work enters the public domain and the public may use it as long as they respect the moral rights that may remain in force.

If any of these rights is infringed, the holder may take legal action, requesting that the infringer cease the unlawful activity, and claim reparation for any material and moral damages caused. In clear-cut cases, the holder can also apply for a preliminary Injunction to obtain immediate protection.

6.2.   Industrial property rights

Industrial property rights are territorial rights that can be protected at different levels (national , EU or international). In most cases they are subject to previous registration.

Trademarks

A trademark is any sign distinguishing different goods or services of one undertaking from others in the course of trade. In practice, these signs can be represented by words, images, shapes, letters, numbers , three­ dimensional shapes, sounds or any combination of the above.

National trademarks

In Spain , trademark rights are regulated in the Spanish Trademark Act. A Spanish trademark application must be filed before the Spanish Patent and Trademark Office. The application must specify the products and services for which protection is sought (using the Nice "International Classification of Goods and Services "). Trademark legislation forbids registration of signs which lack distinctive character; are contrary to law, public order or morality; or are identical or confusingly similar to an earlier trademark.

Doing Business In Spain           33

Trademark registration is granted for a ten -year period starting on the application date and can be indefinitely renewed for subsequent ten-year periods. A trademark can be revoked if its holder has not used it, without proper reason, for at least five straight years.

Registration gives right owners the right to use the trademark in the course of trade. If a third party uses an ident ical or confusingly similar trademark to designate identical or similar goods or services in the marketplace without authorisation, holders can request the cessation of the unlawful activity against the infringer and can claim reparation for any material and moral damages caused. They can also request a preliminary injunction to obtain immediate protection.

European Union trademarks

The Regulation on the European Union Trademark ("EUT") applies within the European Union. The EUT application must be filed before the European Union Intellectual Property Office ("EUIPO"). A EUT registration is effective in all Member States for a ten-year period and can be indefinitely renewed for additional ten-year periods. A community trademark can also be revoked if it is not used for an uninterrupted period of five years. If the EUT is revoked, it is revoked in all EU Member States.

International Protection: the Madrid System

The Madrid Arrangement and the Madrid Protocol (together known as the "Madrid System") establish a unified application procedure to obtain different national trademarks. The Madrid System, administered by the World Intellectual Property Organisation, allows an application to be filed directly with a national trademark office, which will convert it into different national trademarks. Trademark holders will have a national title in each country designated in their applicat ion.

34         Doing Business in Spain

Industrial designs

Industrial designs are defined as the appearance of the whole or part of a product resulting from the features of the lines, contours, colours. shape, texture or materials of the product itself or its ornamentation. Holders of an industrialdesign right are entitled to use the design and to prevent third parties from using it without consent.

Spanish industrial designs

Industrial designs are regulated under the Legal Protection of Designs A ct, which implements  EU regulations. The two  requirements  for registering a design are novelty and individual character, meaning that the overall impression it produces on informed users differs from the overall impression any previous design produced on these users.

The period of protection is five years from the date the application is filed. The rights holder can renew the period of protection for one or more five­ year periods, up to a maximum of 25 years from the filing date. Unlike EU regulation, Spanish regulation only protects registered designs.

Commun ity designs

EU Regulation on community designs is directly applicable in all Member States, including Spain. There are two types of protection for community designs: (i) the unregistered community design without any formalities, which is protected for three years from the date on which it was first made available to the public within the EU: and (ii) the registered community design, registered after a formal exam ination by the EUIPO, which is protected for a five-year period, renewable for subsequent five-ye ar periods up to a maximum of 25 years.

Doing Business In Spain       35

Patents

Spanish patents

Spain has recently approved a new Patent Act to adapt the Spanish patent system to the EU and international legislation.

Under the Spanish Patent Act, an invention (a new product , process or use) is patentable when it (i) is novel, i.e., it is not part of the state of the art before the date on which the patent application is filed; (ii) involves an inventive step , i.e., with regard to the state of the art, it is not obvious to a person skilled in the art; and (iii) is susceptible of industrial application,

i.e., it can be made or used in any kind of industry.

The new Patent Act, enacted in 2015 , will enter into force on April 2017. Under the new Patent Act, all Spanish patent applications will be examined ex officio by the Spanish Patent and Trademark Office, which will search the prior art and make sure all substantive requirements are met.

The Spanish Patent and Trade mark Office grants patent rights for a non­ renewable period of 20 years, beginning on the date the application was filed. This registration grants exclusive exploitation rights in Spanish territory. These rights can be licensed and/or assigned to third parties.

Patent claims will determine the extent of the protection conferred by a patent. The rights holder must exploit the invention or license an authorised third party to exploit it.

European Patent Conventio n system

The Munich Convention, of October 5, 1973, created a European patent issuance system whereby a single application is filed with the European Patent Office. After the European patent is granted by the European Patent Office, to be enforceable , it must be translated into the language/s of the

36         Doing Business in Spain

spectfic countnes where protectton is sought and it must be published in those countries. By doing this, the European Patent is converted into several national patents. Thus, the European Patent Convention system provides a ''single window'' to obtain several national patents, each of which is subject to the national rules of the countries listed on the application. Therefore, it is not valid throughout the entire EU territory.

EU unitary patents

On January I , 20 14, the single EU Patent System entered into force.

The unitary patent -or "European patent with unitary effect'' - is a European patent, granted by the European Patent Office under the rules and procedures of the European Patent Convention , to which, on the patent proprietor's request , unitary effect is given for the ter ritory of the Member States participating in the unitary patent scheme. To date, Spain has not joined the Unitary Patent System.

International patent system

The Patent Cooperat ion Treaty, signed on June 19, 1970, provides for a unified procedure to protect inventions by filing patent applications with the World Intellectual Property Organisation. Examination and granting procedures are handled by the corresponding national authorities and do not result in an international patent.

Utility models

Utility models are defined as "minor" inventions possessing novelty and industrial applicability. Utility models are subject to a less rigorous examination of inventive step. The period of protection is a non-extendable term of 10 years from the date of registration. The regulation for patents applies by default to utility models in all aspects that are not contrary to the specific nature of utility models.

Doing Business In Spain           37

Data protection

Privacy regarding personal data files is protected under the Spanish Data Protection Ac t , which implements EU regulation . This Act governs all processing of personal data if (i) processing is carried out as part of the activities of an establishment belonging to the data controller; (ii) the data controller is not established in Spain, but is subject to Spanish law pursuant to public international law; (iii) the data controller is not established in EU territory, but uses means in Spain for processing personal data (unless such means are only used for transit purposes).

The most important obligations concerning data protection relate to (i) registering personal data files in the General Registry of the Spanish Data Protection Agency; (ii) informing the subjects about processing; (iii) implementing appropriate security measures; (iv) transferring data to third parties to render the services to the data controller; (v) disclosing data to third parties; and (vi) transferring international data.

Before May 25th, 2018 the Spanish legislation on personal data will have to be adapted to comply with the new requirements set forth in the recently approved General Data Protection Regulation (Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC).

38       Doing Business in Spain

7.     TAX

1. Overview of the Spanish tax system

The Spanish tax system consists of different taxes that can be grouped according to assessment at state, regional or local level.

State level

1

Direct taxes on income are levied for companies (corporate income tax, ' C IT") and individuals (personal income tax, "PIT"). Tax on income earned by non-residents, whether individuals or corporations, is also levied through non-resident income tax ("NRIT").

Net wealth tax is levied for resident individuals , who are taxed on their worldwide wealth. Non-residents are also subjec t to wealth tax on the wealth that is located or will be exercised within Spain.

Individuals must also pay inheritance and gift tax on the free acquisition of assets and rights by way of Inter vivos or mortis causa transfers.

Indirect taxes at state level include value added tax ("VAT'') and transfer tax. The former is applied to the consumption  of goods  and  services; the latter is levied on specific property transfers , corporate events and legal documented acts. Excise duties are also levied on the production or importation of specific goods, such as hydrocarbons, gas, alcohol and alcoholic beverages, tobacco, carbon and some oil products, and on the registration of some motor vehicles.

Indirect taxes are harmonised at EU level and the Spanish legislation regulating these taxes complies with EU directives.

Doing Business In Spain       39

Regional level

Spain's autonomous regions receive a percentage of state- level tax revenue (including PIT, CIT, VAT, transfer tax, inheritance and gift tax and excise duties) . Two autonomous regions, the Basque Country and Navarre, have their own regulations on these taxes.

Autonomous regions are entitled to create specif ic regional taxes provided they are levied on taxab le events that are not subject to any other pre­ existing tax. All of the autonomous regions have introduced different taxes on authorised gambling, vacant agricultural lands and environmentally damaging activities.

Local level

Mandatory taxes are levied by municipalities on specific taxab le events related to the ir own territories, i.e., business activities tax, tax on real property and motor vehicle tax . In addition, municipalities may choose to levy other complementary taxes in their own territor ies, including tax on constructions, installations and works; tax on the increase in value of urban land and tax on luxury goods.

Social security  contributions

Social security contributions are similar to taxes and must be paid by employees, companies and individual entrepreneurs. These contributions finance social and welfare payments, such as unemployment benef its, work accident compensation, pensions, medical care and additional work­ related benefits.

40       Doing Business in Spain

Bel'ow is an overvfew of the most important taxes you should consider when

conducting business or business-related activities in Spain:

• Corporate income tax (section 7 .2).

• Personal income tax (section 7 .3).

• Non-resident income tax (section 7 .4).

• Value added tax (section 7 .5).

• Transfer tax (section 7.6).

1. Corporate income tax ("CIT")

Taxable events and taxpayers

CIT is levied on the worldwide income obtained by companies that reside ln Spain , regardless of the source or origin of that lncome. A company is considered to be resident in Spain in any of the following cases :

1. It was incorporated under Spanish laws.

1. Its registered head offices are located in Spain.

1. Its effective management headquatiers, understood as the place where its

business activities are managed and supervised, are located in Spain.

If there is a conflict of residence,the doub le taxation treaties between Spain and the conflicting country will apply.

Taxable base

The CIT taxable base is calculated from the declared accounting results (profit and loss account) and is subject to the adjustments required by CIT law.

Doing Business in Spain            41

In general, accounting expenses are considered tax deductible if they are duly registered in accountancy and documented in the corresponding invoice.

Specif ic tax deduction rules apply to the following accounting expenses :

(i) amortisat ion and depreciation of assets and rights; (ii) bad debts; (iii) financ ial leasing agreements; (iv) provisions for loss of value of editorial, phonographic or audiovisual inventories; and (v) the depreciation of financial goodwill of investments in non-resident companies.

Net financial expenses are tax deductible up to €1 million per year. Net financ ial expenses exceeding this amount are tax deductib le provided they do not exceed 30% of annual EBITDA.

Tax deduction of impairment losses of the value of fixed and intangible assets and participations in quoted and non-quoted entities is deferred to the tax year in which the asset or participation is transferred to third parties or due to the winding up of the company.

Some expenses are  considered  non-deductible  and  must  be adjusted to the CIT taxable base. Such expenses include (i) the remuneration on equity (dividends); (ii) CIT due paid; (iii) criminal or administrative fines and sanctions; (iv) gambl ing losses; (v) donations, gifts and contributions to internal provisions or funds equivalent to pension schemes; (vi) expenses deriving from unlawful activities; (vii) expenses for operations performed, directly or indirectly, with persons or entities residing in tax havens; (viii) financial expenses (interest) from debt-financing borrowed from a lender entity or entities that comprise a group of enterprises used to purchase shares in third entities or shares in other ent ities that belong to the same group of entities; (ix) remuneration exceeding €1 million per year paid to workers due to the extinction of the labour or commercial relationship with the enterprise; and (x) expenses incurred in transactions with related entities that , due to a different fiscal qualification of such entities, do not generate taxab le income or derive in tax exempt income or income subject to taxation below a 10% tax rate.

42        Doing Business in Spain

A negative tax base must be carried forward and offset against positive tax bases calculated in the following tax years without any temporary limitation.

Tax rates

The current CIT rate is fixed at 25%.

A 15% reduced tax rate is granted to newly created companies for the first tax period they have a positive taxab le base and for the following period.

Tax credits

Full tax exemption is granted for dividends, profit distr ibutions and capital gains deriving from the transfer of shares in other companies, whether resident or non-resident. Tax exemption is granted if the taxpayer (i) holds a stake of at least 5% in the company or the participation is higher than

€20 million, and (ii) partic ipates for at least one year before the date on which they are payable.

Special rules apply for this tax exempt ion when profit distribut ions or capital gains from the sale of participations derive from entities where income from dividends or capital gains from the sale of participations exceed 70% of their total return.

Foreign source dividends and capital gains from transfers in qualifying foreign companies may also apply for this tax exemption provided the prior requisites are met and also provided the profit distribution or the capital gain deriving from the transfer corresponds to a foreign entity subject to an income tax that is identical or analogous to Spanish CIT and where the tax rate is at least 10%.

Doing Business in Spain             43

A sim ilar tax exemption is provided for foreign income derived from a permanent establishment. Losses derived from fore ign permanent establishments are not tax deductible in the tax year when losses are incurred, but when the permanent establishment is transferred or liquidated .

A specific tax exemption is provided for income derived from certain intangible assets. This tax exemption amounts to 60% of the net income derived from the assignment of the right to use or exploit intellectual property, including patents, drawings or models, plans, equations or secret procedures, and rights over information related to industrial , trading or scient ific experience, and know-how.

Specif ic tax credits are granted for some corporate investments:

• R&D and technologica l innovation investments.

• Investment in film productions, audiovisua l series and live performances of scenic arts and music.
• Employment  creation.

• Creation of new jobs for disabled people.

Foreign tax credit may be claimed for any foreign tax paid on foreign-sou rce income up to the amount of the tax payable in Spain on such income.

Tax accrual

The CIT period coincides with the taxpayer's accounting year, which must not exceed 12 months and may coincide with the calendar year.

The CIT due accrues on the last day of the tax period. The taxpaye r must pay the due CIT within 25 calendar days following the sixth month after the tax accrual date.

44        Doing Business in Spain

Special CIT regimes

CIT regulations include the following special taxation regimes for some companies or activities :

• Corporate restructuring operations. As provided by EU regulations, a specific tax deferral regime Is provided for income generated in corporate restructuring operations , such as mergers , spin offs, non-monetary contributions of branches of activity or exchanges ot securities. See further details in sect1on 7 .8.
• Special tax regime and regimes for groups. A tax consolidation regime Is granted to groups of companies, and a special tax regime may apply, among ott1ers, to (i) compan ies 1nlended exclusively to provide rental housing , (ii) real estate tnvestment trusts, (iti) economtc tnterest groupings (AlE), (iv) collective investment undertakings, and (v) venture capital entities.
• Foreign securities holding regime. A special foreign securities holding regime (Entidades de Tenencia de Va/ores Extranjeros, ETVE) is granted to companies meeting specific requirements. These are the most noteworthy features of this taxation  method:

The qualifying holding company can claim exemption to avoid internationa l double taxation of dividends and income from foreign sources  resulting from the transfer of equ1ty shares in non-resident companies if the following conditions are met:

1. It holds a stake of at least 5% in the company or the participation is

higher than €20 million.

1. It participates for at least one year before the date when they are

payable.

1. The profit distribution or the capital gain deriving from the transfer corresponds to a foreign entity subject to an income tax that is identical or analogous to the Spanish CIT. and where the tax rate IS at least 10%.

Doing Business In Spain         45

The follow ing are not regarded as income obta1ned in Spa1n and are exempt from NRIT: (i) dividends paid out of income that are tax-exempt to non-resident members of the holding company: and (ii) income received by a non-resident member on the transfer of an equity interest in the holding company In an overseas transaction. ThiS does not apply to members who. for tax purposes, are residents in tax havens.

1. Personal Income tax ("PIT"}

Taxable events and taxpayers

Resident individuals in Spain are subject to PIT on their wor ldwide income. Individuals are considered as tax residents in Spain for PIT purposes if:

• they  spend  more than  183 days of a calendar year  in Spanish territory.

Temporary absences from Spain are not taken into account when calculating the period of residence, unless the taxpayer proves res1dence abroad for tax purposes; and

• the main centre or base of their business or professional activities or the centre of their economic interests is, directly or indirectly, located in Spain. The centre of economic interests is considered to be in Spain if the taxpayer 's spouse (husband or wife, not legally separated) and underage children have their habitual residence in Spain. This legal presumption is rebuttable and does not apply among others, to staff members ot diplomatic or consular offices.

The tax period is the calendar year and tax accrual takes place on December

31 each year.

Tax base

Income obtained by the taxpayer must be classified for PIT purposes in one of the following categories: (i) employment income, (ii) income from economic  activities,  (iii)  real  property  income,  (iv)  Investment  income,

(v) capital gains and losses, and (vi) income attributions/imputations as established by PIT law. Income subject to inheritance and gift tax Is not subject to PIT.

46         Doing Business in Spain

To calculate gross tax due, all income categones will be classified under one item of the tax base:

GENERAL                                                   SAV INGS  INCOME

Employment Income                                              Investment  Income:

Income from economic activities                            •

Real property income

•

Deemed Income (attributions/imputations)

established In PIT Law:                                           •

• Income from the ownership of real

estate different to the taxpayer's habitual residence and not rented.

• Controlled foreign company rules.

• Income from the assignment of nghts regarding the taxpayer 's image .
• Deemed tncome from collective investments undertakings in tax havens.

Income from equity in any kind of company (dividends and profit dist ributions)

Income from assigning own

capital to lhird parties (Interest)

Income from life/disability insurance policies, capitalisation instruments and life/temporary annuities.

Capital gains and losses not deriving from

transfers of assets or rights.

Capital gains and losses deriving from

translers of assets .

Positive and negative net income respectively allocated in eac f1 part of the tax base can be offset according to specific rules. Negative aggregate income not offset  in the tax year can be carr ied forward to the four subsequent years.

The general tax base can be reduced in the amounts paid when subscribin g specific private social welfare instruments, such as pension schemes (with limits) and equivalent financ ial instruments as established in PIT law.

Some allowances are made to align taxpayers ' liability to personal and family circumstances. Personal and family minimum allowances have resulted from applying general tax rates to the personal and family amounts established in PIT law.

Doing Business in Spain      47

Tax rates

Income allocated in the general tax base is subject to taxation at progressive tax rates ranging between 19% and 45%, on an aggregate basis (state and autonomous regions level). In some autonomous regions, higher margin tax rates may apply.

Income allocated in the savings tax base is subject to the following progressive tax rates:

SAVINGS TAX       TAX CHARGE

BASE (euros)              (euros)

REST OF SAVINGS

TAX BASE                 APPLICABLE RATE

(up to euros )

0                            0                              6,000                                 19%

6,000                      1'140                          44,000                                21%

55,000                    10,380                        onwards                              23%

Tax credits

Taxpayers can request specific tax credits at national and regional level.

To reduce gross tax payable, tax credits apply to the following:

• Investments in new companies or in recently incorporated companies (business angels) .
• Donations to non-profit companies and charitable institutions .

• Economic activities.

• Income obtained in Ceuta and Melilla.

• Renting a habitual residence.

Foreign tax credits and specific transitory  benefits may apply to reduce net tax payable and to fix the final tax due. In addition, the taxpayer may be refunded for PIT due.

48         Doing Business in Spain

1. Non-resident income tax ("NR IT")

NRIT is levied on Spanish source income obtained by non-residents,

whether individuals or companies.

Resident companies under CIT (see section 7.2 above) and non-residents permanently established in Spain (branches and other permanent establishments) are subject to NRIT on their worldwide income. They must appoint a tax representative residing in Spain to deal with the tax authorities for all issues concerning NRIT. Having a tax representative is also mandatory in some cases for non-residents t hat do not operate in Spain through a permanent establishment.

Non-residents that are not permanently established are subject to NRIT only on their Spanish source income and capital gains. Fixed tax rates apply to the gross amount of the following main sources of income:

• General tax rate: 24%.

• D1v1dends and other income denved from shares 1n the eqUity of a company: 19%.

• Interest and other earnings obtained from transferring own capital to third parties: 19%
• Capital gains derived from the transfer or redemption of shares or participations

representing the capital or assets of collective investment undertakings: 19%.

• Other capital ga1ns derived from the transfer of assets: 19%.

• Royalties between associate companies paid to a company res1dent 1n an EU Member State or to a permanent establishment of the company in another EU Member State: tax-exempt.

Optional taxation method for "impatriates"

Individuals moving to Spain to work under a Spanish labour contract may

choose to be taxed that same tax year and for five subsequent tax years under:

1. the rules of individual income tax (progressive tax rates with the deduction of spec1flc expenses and allowances); or
2. the rules of non-resident income tax subject to specific tax rates and with no deduction of expenses or allowances.

Doing Business In Spain           49

This taxation method applies to "impatriates" if ind1v1duals:

• have not resided in Spain at any time during the previous 10 years.

• move to Spain because of an employment contract or due to the acquisition of the status ot administrator of a company, subject to certain requisites; and
• are paid an 1ncome that is not exempt from NRIT.

Non-resident Individuals opting for PIT liability under this special taxation method may benefit from the following NRIT tax rates on employment income:

TAXABLE AMOUNT                                                                  TAX RATE

Up to €600,000                                                                            24%

€600,00 1 and above                                                                        45%

To apply for this option, taxpayers must notify the Spanish tax authorities. This taxation method applies in the tax period when the taxpayer becomes a tax resident in Spain and during the five subsequent tax periods, unless the taxpaye r decides to stop applying this tax benefit before the five-year period expires, or falls under any disqualifying circumstances established under PIT law.

1. Value added tax ("VAT"}

VAT is an excise tax on the consumption of goods and services.

Entrepreneurs, professionals and companies must levy this tax at every stage of the production or distribution process of goods and services. The final tax burden is borne by consumers .

Entrepreneurs and professionals charge VAT on supplies of goods and services provided to consumers and must pay this tax to the tax authorities (output tax). The VAT they are charged by suppliers for goods and services

50         Doing Business in Spain

(input tax) may be offset against output VAT. Therefore, VAT is neutral for entrepreneu rs and professionals operating wit hin the production and distribut ion chain.

VAT is a harmonised tax within the EU. VAT is applicable within the Spanish territory, except the Canary Islands, Ceuta and Melilla.

VAT applies to the following transactions carried out in Spain:

1. Supplies of goods and services made by entrepreneurs or professionals in the course of their business or professtonal activity (including the transfer of goods or services that are part of their entrep reneurial or professional net worth when they cease their activities).
2. lntra-EU acquisitions of goods . In general. these transactions are taxed when they are made by entrepreneurs or professionals but, In some cases, they are also taxed when made by Individuals
3. Imports of goods. regardless of who makes them (whether an entrepreneur or professional).

The general tax rate is 21%, but there are some reduced rates. A reduced rate of 10% is provided for a number of protected transactions, and an ult ra-low rate of 4% is applied to a number of goods and services of public interest .

1. Transfer tax

Transfer tax includes three different taxes: (i) property transfe r tax, levied on the non-business onerous transfer of property; (li) tax on corporate events, levied on transactions related to companies' equity; and (iii) stamp duty, levied on the issuance of specific notary, commercial and administrative documents.

Section 7.8 (M&A-related taxation) describes the most usual tax costs

incurred when starting a business in Spain.

Doing Business In Spain            51

1. Tax treaties and limited taxes on Spanish-source income

Spanislltax treaties follow the 1963 Organisation for Economic Cooperat ion and Development ("OECD")  Model Convention and, in the case of more recent treaties, the 1977 OECD Model. They apply to individuals and entities residing in one of the treaty partner states under the domestic and treaty residence rules. The concept of residence used in Spanish treaties closely follows the OECD Model Convention.

In Schedule I we include a practical table with the taxation limits on the main sources of income regulated in the Spanish tax treaties in force.

1. M&A-related taxation

The most usual tax costs incurred when starting up business in Spain relate to corporate operations, wl1ich vary depending on how the business is carried out :

• Incorporation of a subsidiary.Since December 3, 2010 ,  all operations aimed at incorporation or capital increase are tax-exempt under transfer tax provis1ons.
• Branch offices. If branch offices of a non-resident company are Incorporated

in Spain, they are taxed as follows:

Non-resident companies with a registered office and headquarters in an EU country are tax-exempt.

Non-resident companies with a registered office and actual headquarters in a non-EU country must pay 1% of the own funds allocated to the Spanish branch carrying out business in Spain.

• Investment in an existing company.As mentioned above, since December 3, 2010 , all operations aimed at capital increase are exempt from tax on corporate events. Consequently, no taxation should arise if investment is made in an existing company by way of subscription of new shares .
• Share acquisition.The transfer of shares, in general, IS not subject to indirect

taxation, whether VAT or transfer tax.

52         Doing Business in Spain

However, as provided for in Article 314 of the Securities Markets Act ("SMA"), a transfer of non-quoted shares in the second market that leads to the acquisition of or an increase in control over certain companies owning real property located in Spain may be subject to transfer tax or VAT -where applicable-if , by means of such transfer, taxation of the real estate transfer is evaded.

Tax evasion is considered to exist, unless the contrary is proved, if the following

requirements are met:

1. The purchaser obtains control of the share capital of an entity where more than 50% (at market value) of the total amount of the assets on its balance sheet consist of real property located in Spain.
2. The purchaser acquires shares of an entity whose assets include securities that enable the acquirer to exerc ise control over another entity, more than 50% (at market value) of whose assets consist of real property located in Spain.
3. The shares transferred were previously subscr ibed by the transferor in exchange for real estate transferred to the entity under incorporation or capital increase of the entity, and the time elapsed between the transfer and the previous acquisition is less than three years.

It taxation takes place under the scope of article 314 SMA, transfer tax may be levied at a rate of 7% (in some regions, this rate may vary) and VAT may be levied at the general tax rate of 21%. The taxable base will be the market value of the real property owned by the company whose assets are transferred, or the value of the real property owned by the subsidiaries in which a control position

is reached by the purchaser, pro rata to the percentage of ownersh ip therein.

• Ongoing business acquisition  (transfer of assets and liabilities) . The transfer of assets and liabilities of a company may be taxed under VAT or under transfer tax,  where  applicable.

However, tax exemption is granted under VAT provisions to the transfer of a group of tangible and intangible assets and liabilities that form part of an ongoing business (an undertaking or a part of an undertaking capab le of carrying on an independent econom ic activity). In this respect , it is irrelevant

Doing Business in Spain            53

whether the acquirer carries out the same activity as the one with which the assets and liabilities were connected. Acquirers must justify their intention to keep the elements connected with a business or a professional activity.

• Corporate reorganisations. The Corporate Income Tax Act provides for a special tax deferral regimen for mergers, spin-offs, contribution of assets, exchanges of securities and the change of address of a Sociedad  Europea or Sociedad Cooperativa Europea from one EU Member State to another EU Member State. This special tax regime is based on the tax deferral of the income obtained by all persons or entities intervening in the corporate restructuring. The tax deferral regime will not apply if the transaction concerned is fraudulent or carried out in the interest of evading tax. In particular, the tax regime will not apply if the transaction concerned is carried out not for valid economic reasons, but w ith the aim of obtaining a tax benefit.

54           Doing Business in Spain

8.     LABOUR  ISSUES

In this section we provide an overview of the main aspects of Spanish employment law to consider when carrying out an activity In Spain.

1. Employment law framework

The main mandatory employment and labour rules are provided in the Workers Statute Act ("Workers' Statute") and the applicable collective agreement for each company. Besides, there is a substantial body of legislation regarding employment , social security and health and safety, among others.

1. Employment agreements

Types of employment contract

Employment agreements are concluded on a permanent or f ixed-term basis, and can be full-time or part-time .

From a legal standpoint, the general rule is to conclude a permanent full­ time employment contract. Fixed-term employment contracts are valid if their tempo rary nature Is justified by one of the following business-related reasons:

• The company needs to carry out a specifiC task or serv1ce.

• There is an extraordinary  tncrease in the company's production levels.

• The company requires temporary  replacement of an employee on leave with

the right to return lo work (employees on sick leave or maternity leave).

There are also training and apprenticeship contracts for employees acquiring first -time work experience or completing their education .

For companies employing fewer than 50 employees, there is a spec ific employment contract , known as "contract for entrepreneurs. u It foresees a probation period of one year, until the unemployment rate in Spain drops to 15%, and provides for specific tax and social benefits.

Doing Business In Spain         55

Concluding an employment contract

An employment contract must be signed before or on the f irst day of employment. An addendum or modification of the employment contract can be signed at any time after the first day of employment. Employers are obliged to provide their employees with basic information in writing on the key terms and conditions of the employment relationship, including the Identification of the employer and employee, baste salary, working time, place of work , type of contract and probation period.

Probation period

The parties to an employment contract usually agree on an initial probation period. This must be agreed in writing. Collective agreements often establish fixed probation periods. If no such provision exists, the probationary period must not be longer than six months for qualified employees, and two months for the rest of employees.

No notice or severance payment is required if termination is made while on probation. During the probation period, the employee will have the same rights and obligat ions as a permanent member of staff, except with regard to termination.

1. Salaries

Salaries are defined either in tile collective agreement or in the ernployee's Individual employment contract. The annual salary Is usually paid in 12 monthly instalments plus two annual bonus payments on the dates provided In the applicable collective agreement. Thus, an employee's gross annual salary is normally paid in 14 instalments.

Salary is subject to general legal provisions on social security and income tax. The employer 1s responsible for making the corresponding withholdings on the employee 's salary for these taxes and contributions.

56        Doing Business in Spain

The official m1n1mum wage 1s established by law. For 2016, 1t has been set at

€655.20 per month or €2 1.84 per day. However, the minimum wage for each

professional group is usually negotiated in collective bargaining agreements.

1. Working time

The maximum number of working hours per week is 40. These may be computed on an annual average basis, subject to a maximum of nine hours per day. Each hour worked over this limit is considered overtime, unless provided otherwise In the applicable collective bargaining agreement or, in the absence of a collective bargaining agreement, in an agreement between the employer and the workers' representatives.

As a general rule, overtime must not exceed 80 hours per year and has to be compensated with money or an equivalent amount of time off. The amount paid per hour of overtime cannot be below the rate paid for ordinary working hours.

The ordinary minimum annual vacation period is 30 calendar days.

1. Changes in labour conditions

The Workers Statute admits several types of employee mobility to allow companies to adapt to market and economic circumstances.

Functional mobility

Employers may freely transfer employees between equivalent professional groups, as long as they respect the employees' dignity. Mobility between non-equivalent groups is permitted only when it is attributable to technical or organisational reasons , and must end as soon as the circumstances are resolved. If, as a consequence of functional mobility, an employee is performing higher functions for a period of more than six months in one year or eight months in two years, he or she may ask to be recognised as

Doing Business In Spain            57

belong1ng to the higher professional group, according to the upgrad1ng regulations applicable in the company.

Geographical mobility

A change in an employee's job location is allowed when it is attributable to economic, technical, organisat ional or production reasons. Employees may be permanently or temporarily transferred. In the first case. employees may choose between being t ransferred and having thei!·expenses reimbursed, or terminating their labour relat ionship with severance pay equal to 20 days' pay for each year of service up to a maximum of one year's pay. However, the employee may challenge the transfer before a labour court. If the court considers that the transfer is unjustified, it may deter mine that the employee is reinstated in the original place of work.

If the transfer affects a certain number of employees within a specific period of time, the workers ' representatives must be consulted.

In the case of temporary transfer, the employee must accept the employer 's orders but , if the duration of the temporary transfer exceeds 12 months in a three-year period, the transfer will be treated as a permanent transfer.

Substantial modifications of the employment conditions

The employment conditions can be substantially modified, affecting issues such as (I) working  hours, (ii) working time and distribution, (IIi) work shifts ,

(iv) remuneration system and salary, (v) wor king syste m and performance, and (vi) funct ions (if this exceeds the limits of functional mobility) .

The employer must state and be able to produce evidence of t he economic, productive, organisational or technical reasons justifying any modification. Reasons that j ustify a substant ial modificat ion must relate to competitiveness, productivity, work or technical organisation needs in the company.

58        Doing Business in Spain

Different procedures apply depending on t he impact caused by the substantia l modification, particularly if it involves one or severa l employment contracts or it affects the conditions set out in the statutory collective agreement, in which case the procedure is stricter.

Finally, employers can temporarily suspend employment contracts or reduce working time without having to pay compensat ion (unless otherwise agreed by the parties) when layoffs are due to temporary work problems (as a result of force majeure or for technical or economic reasons).

1. Term inat1on of employment

Termination of employment must be based on a cause. There are several grounds for individual termination of employment. Besides conduct-related termination (including terminat ion for gross misconduct), employment may be terminated as a result of individual or collective redundancies (due to economic difficulties or the closure of business operations).

Disciplinary termination

The Worker s' Statute establishes a list of misconducts by employees that, if sufficiently serious, may justify disc iplinary termination. Furthermore, collect ive agreements commo nly establish a list of infringements that are qualified as minor, serious or very serious, and their corresponding sanctions . Companies decide which sanction should be applied. Collective agreements usually set out specific procedures for this type of termination.

Individual redundanc ies

This type of termination may be carried out if there is economic, technical, organisational or productive proof that justif ies redundancy.

A 15-day prior written notice must be given to the employee and the grounds for the dismissal must be clearly and precisely stated in the termination letter.

Doing Business In Spain           59

With respect to redundancy payments, the employee must be paid statutory severance equal to 20 days' salary per year of service (capped at 12 months' pay). For this purpose, salary includes base salary plus commissions plus some benefits paid either in cash or in kind (including company car or stock options).

Collective redundancies

If redundancies affect a significant number of employees, this may be considered as collective dismissal under Spanish law. The thresholds for collective redundancies are as follows: (i) 10 employees when the company employs fewer than 100 employees; (ii) 10% of the employees when the company employs between 100 and 300 employees; and (iii) 30 employees when the company employs more than 300 employees.

If a collective dismissal is to be carried out, workers' representatives or ad hoc designated workers' representatives are entitled to negotiate the collective redundancy process. This process includes a negotiation period of 30 days­ or 15 days for companies employing fewer than 50 employees-and the implication of the labour authorities. During negotiations with the workers' representatives, employers must consider alternative measures to reduce the number of terminations and agree on the selection criteria.

The employer must formally notify its employees or their representatives of its intention to carry out a collective dismissal 7 or 15 days prior to the beginning of the negotiation period, depending on whether all the affected working centres have designated workers' representatives.

As in the case of individual redundancy, minimum severance payment is set at 20 days' salary per year of service (capped at 12 months' pay), although during the negotiation w ith the workers' representatives, severance per employee is often increased.

If the collective redundancy affects more than 50 employees, the company must offer a relocation plan of at least six months through an authorised relocation company.

60       Doing Business in Spain

Termination of employment without cause: unfair dismissal

Although termination in Spain requires cause, employers can dismiss employees without cause or with insufficient cause. This type of employment termination allows the company to terminate an  employment  relationship with immediate effect, although this dismissal is qualified as unfair, entitling the employee to a severance payment of (i) 33 days' salary per year of service (capped at 24 months' pay) for the  length of service accr ued after February 12 , 20 12; and (ii) 45 days' salary per year of service (capped at 42 months' pay), for the length of service accrued  before  February  12, 2012, up to a maximum  of 720 days'  salary.

Dismissal can be declared null and void when it is considered to be based on discriminatory grounds . In this case, the employee must be reinstated and receive back payment of the salaries accrued during the judicial process. A collective redundancy procedure may be declared null and void if formal requirements are not met , such as negotiating in good faith or providing the  required information.

Also , terminations without cause will be null and void if they affect certain employees, such as pregnant women,  employees on maternity or paternity leave, or enjoying working time reduction because of caregiving, or during nine months after t he birth or  adoption of a child.

1. Transfer of undertaking

Under the Acquired Rights Directive, employment relationships cannot terminate because of the transfer of the business. Instead, employees are automatically transferred to the transferee, preserving all their employment rights. Likewise, the transfer does not justify changes in the employees' working conditions. The new company assumes the position of employer, with the same obligations as the previous employer, becoming a party to the employment agreements.

Doing Business In Spain           61

A transfer of undertaking occurs when the transfer involves an autonomous economic entity, defined as an organised grouping of resources that has the objective of pursuing an economic activity, regardless of whether that activity is central or ancillary. The object of this kind of transfer may be an entire company, a work centre or an autonomous production unit.

The transferor and t ransferee are joi ntly and severally liable, for a three­ year period starting on the transfer date, for all employment obligations existing before the transfer and that have not yet been fulfilled. Employment obligations include social security obligations.

1. Subcontracto rs and temporary employment agencies

The Spanish legal system allows decentralising measures and considers that subcontracti ng is legal, including the use of alternative workforce, if the necessary requirements are met. These requirements aim to ensure employees ' rights.

Subcontractors

Companies frequently recur to alternative workforces through a contract with another company. The purpose of this contract is to provide a service, usually by one company (subcontractor) to another company (contracting company) . This service requires not only providing a labour force . but also organisation, equipment and initiative with a view to ensuring that the services are provided.

If the services provided  by  the  subcontracting  company  are  part  of the contractor's main activity, the contractor must comply with certain requirements to ensure the subcontractor complies with all its social security and employment obligations.

The subcontrac tor must exerc ise its management powers by giving orders to its employees on when, where and how the contracted service must be

62        Doing Business in Spain

carried out. In contrast, the contracting company cannot exercise these management powers over the subcontract ing company's employees.

If these conditions are not fulf illed, subcontracting may be considered an illegal transfer of employees, in which case the employees of t he subcontractor company are entitled to choose which of the two companies­ the subcontractor or the contracting company- is their real employer.

Penalties for the illegal transfer of  employees  include joint  liability for the subcontractors' labour and social security rights (salary and social security contributions), fines (an illegal transfer is considered to be a very serious infringement and fines range from €6,251 to €187,000) and , in very except ional cases , even criminal liability.

Temporary employment agencies

Temporary employment agencies are permitted, subject to some limitations. Besides providing all kinds of temporary employment, they also act as outplacement agencies.

1. Collective representat ion and organisational rights

Trade unions play an important role in Spain. Workers' representatives have

a significant presence in companies and are consulted on many decisions.

Workers' representat ives are elected by the employees . If the company has 50 or more employees, workers' representatives will be organised in works councils , with a minimum of five members and a maximum of 75 members in very large companies.

The representat ion of employees in businesses w ith more than 10 and fewer than 50 employees is undertaken by between one and tt1ree individual workers ' representatives , depending on the size of the company. The rights, functions and obligations of individual workers' representatives are the same as those of the members of a company's works council .

Doing Business In Spain           63

The works counc1l and individual workers ' representatives have rights regarding the information on the company they are entitled to receive and must be consulted on some issues.

Trade unions are represented in a company by union sections and union delegates. Union sections are groups of all the company's employees who are members of the same trade union. These sections can be created at work centre or company level. All union sections have the right to (i) hold meetings, having previous ly notified the employer; (li) collect membership fees and distribute union information; (iii) receive information sent by their unions; (iv) go on strike; and (v) participate in the negotiation of collective bargaining agreements at a certain level.

1. Registration and social security issues

Before employing local workers, foreign employers must be registered as employers with the Spanish tax authorities and the social security authorities. Although it is not necessary to set up a local company, employers wanting to register must file several documents, some of which need to be legalised and translated.

Social security contributions are compulsory for employers and employees. Employers must withhold their employees' contribut ions from their salaries and are liable for this withholding. The monthly social security contributio n Is determined by applying the rates provided by law to the adjusted income (the "social security basis") of the employee. The law establishes a minimum and a maximum social security basis for each professional group.

When hiring an employee in Spain , social security contributions must be

made on the following basis:

• Soc1al security contributions on the employer sicJe amount to approximately 32% of the monthly pay, depending on the activity carried out. Pay is def1ned as base pay plus any commissions earned dunng the month. These payments must be made on a mont hly bas1s.

64         Doing Business in Spain

• Soc1a1 secunty contributions on the employee side generally amount to a 6.35

%of the monthly salary, 1ncluding base salary plus any comm1ssions earned. The contributio ns on the side of the employee must be withheld from the monthly payroll and paid to the social seoun ty authorities.

Under Spanish law,there is a maximum contribution base for the calculation of social security contributions. This maximum monthly base is €3,6 42 in 2016. For salaries higher than €3,642 per month, no addit ional contributions have to be made for the portion of the salary that exceeds the maximum base.

These amounts are public or state social security contributions. The company can also contribute to a private pension scheme ; the amount depends on what the parties agree on and the content of the relevant documents.

1. Contracting employees who are non-residents of the EU

As a general rule, employees who are not from the European Economic A rea need an initial work authorisation to work in Spain, irrespective of the type and duration of the services rendered. There are some exceptions for work permits required for specific groups of employees , mainly those involved in foreign affairs and scientific issues . Even so, t hese employees require a visa to enter Spain.

Employers wishing to hire non-resident employees have to file a pet ition for an initial temporary work and residence author isation for t hose employees before the Government authorities.

A work authorisation is not required for the following activities, as they are not considered as "work" for the purposes of immigration law: (i) trips for commercial meetings with prospective clients, (ii) taking part in business fairs , and (iii) visit ing the country to set up a business.

In these cases. prospective employees will be allowed to enter and stay in Spain for up to 90 days within a period of 180 days if they are from a country that is on the list of countries whose nationals do not require a visa

Doing Business In Spain           65

to cross Schengen borders and if they hold a valid passport and documents

justifying the purpose of their visit.

No provision to date establishes a minimum period of service for whic h non-residents are required to obtain a work authorisation . In legal terms, work authorisations are required even when employees work for one day. In practice, companies do not apply for work authorisations w hen (i) the period foreign employees stay in Spain is shorter than the period granted by transits visas or visa waiver programmes, and (b) the services are rendered in an environmen t in which industrial accidents are uncommon.

Requirements to obtain an initial work authorisat ion1

Generally, the following requirements must be met to obtain an initial work

authorisation:

1. The national employment s1tuat1on must be favourable for the foretgn employee to work in Spain due to a lack of equivalent employees in the Spanish market. The Employment Service Administration publishes a list of occupations that need to be covered in Spam.
2. The employee must have an employment contract with the Spanish company

for at least the validity period of the work authorisation.

1. The Spanish company must not have pending debts with the social security

or tax administrations.

1. The Spanish company must have the necessary econom1c and material means

to hire the employee for the corresponding project.

1. The employee must have the qualifications legally required to fulfil the duties corresponding  to the employment  contract.
2. The employee must not be 1n Spa1n 1n an 1rregular Situation or have a criminal background.

The corresponding administrative fees must be paid.

This section only refers to authorisations for employees. Requirements for self-employed workers may differ.

66           Doing Business in Spain

Every official foreign document must be apostilled and all documents must be translated into Spanish by a sworn translator.

Requirements to obtain a residence and work visa

Once the initial residence and work authorisation has been granted, non-resident employees must apply for a visa at the Spanish diplomatic delegat ion or consular office in their home country.

After entering Spain, non-resident employees must apply for a foreigner identity card at the police station of their city of residence in Spain.

The work authorisation is effective once the company registers the employee with the Spanish Social Security Administration . However, its validity starts on the date the employee entered Spain.

The employee's work is limited to a specific activity or project and geographic area, and is valid until the services to be rendered in Spain have been completed, with a maximum limit of one year. However, an extension can be requested if the transfer activit ies have not been completed.

Investors and qualified  professionals

Act 14/20 13, of September 27, supporting entrepreneurs and their internat ionalizat ion, set out several new provisions affecting international mobility with the intention of attract ing investment (capital) and talent (qualified professionals) by eliminating administrative bureaucracy.

The Act regulates the follow ing foreigners' entry into and presence in Spain:

• Investors

• Entrepreneurs

• Highly qualified professionals

• Researchers

• Workers subject to intra-corporate transfers w ithin the same undertaking or

group of undertakings

Doing Business in Spain            67

Investors

This feature  is aimed at  non-resident foreigners  carrying out capital

investments in Spain.

The visitors' visa for investors is granted for one year and is suff icient authorisation to reside in Spain.

To obtain the visa , one of the following types of investment in Spain must be proven:

• €2 million in Spanish public debt, or €1 million in shares or equity interests

in Spanish companies, or in bank deposits in Spanish financial institutions.

• Acquisition of one or more properties w ith a joint value of at least €500,000 per applicant.
• Investment in a general interest business project, provided it helps create jobs, has a socio-econom ic impact on its geograph ic sphere of influence or makes a relevant contribution to scientific and/or techno logical innovation (upheld with a report from the consulate trade office) .

Entrepreneurs and business activity

For this purpose, business and entrepreneurial activities must be innovative, of particular economic interest to Spain , and must have been given a favourable report from the General State Administration's relevant body. The creation of jobs in Spain is particularly valued. The contract ing party's professional profile will also be considered, along with the business plan, its financing , added value for Spain's economy, innovation and investment opportunities.

A one-year visa can be applied for to carry out the preliminary procedures for start ing a business activity. When proof of the start-up of the business activity has been provided, applicants will qualify for a residence permit for entrepreneurs,  requiring no prior minimum stay.

68        Doing Business in Spain

Highly qualified professionals

Companies requiring foreign professionals for an employment or professional relationship may apply for a residence permit for highly qualified professionals.

This employment or professional relationship should fall within one of the

following  circumstances:

• Highly qualified professionals and managers should belong to a company or group of companies that complies with one of the following requirements:

It must have an average staff of more than 250 employees in Spain during the previous three months.

It must have an annual net turnover in Spain of over €50 mtllton, or net

equity or own funds in Spain of over €43 million.

It must have received an average gross annual investment from abroad of at least €1 million in the three years immediately preced1ng the date the apphcatton is submitted.

According to the latest investment registry information, it must have a stock investment value or position of over €3 million.

The company can be a SME in a sector deemed strategic.

• These companies may request tile collective processing of aut11orlsations to carry out intra-company transfers of groups of professionals.
• Highly qualified professionals and managers should form part of a business project considered of general tnterest.
• This also extends to undergraduates and graduates from renowned universities

and business schools

Doing Business In Spain           69

Intra-company transfer

A visa and residence permit is regulated for foreigne rs who move to Spain within the framework of an employment or professional relationship, or for professional training with a company or group of companies established In Spain or elsewhere.

The applicant must prove the following requirements must have been met:

• There is a business activity.

• The applicant has a degree or equivalent , or three years' professional experience .

• The applicant had a prior continuous refationsllip of at least three months with

one or more of the group companies.

• The applicant has documentation from the company prov1ng the transfer.

Consequences of infringement

If a non-resident employee renders serv ices in Spain w ithout t he correspond ing residence and work authorisation, the company and the employee will be fined and prohibited from obtaining further work permits and from entering Spain during a set period of time.

If a spec ific number of unauthorised foreign employees are hired by the

company, this may constitute a crime.

1. Health and safety at work

Employers must ensure health and safety at work by (i) notifying the labour authorities that they are opening a workplace, (ii) drawing up a risk assessment and prevention plan, (iii) training workers , and (iv) monitoring workers ' health.

The labour authorities rigorously enforce these obligations and carry out regular investigat ions regarding safety at work. Employers that fail to comply with these obligations may face severe sanctions.

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1. Labour f ines and penalties

Spanish law establishes penalties for infractions committed by employers and employees alike in the context of a wide range of labour laws, including those relating to social security obligations, health and safety, labour relations, subcontracting, and temporary employment.

Employers and employees are both subject to disciplinary measures. The labour and social security inspectors are in charge of monitor ing that companies and employees comply with their labour and social security obligations.

Fines for labour relations and employment, and social security infractions range between €60 for mtnor infractions and €187,515 for serious infractions. Fines for violating health and safety laws range between €40 and €81 9,780.

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1. SECURITIES REGULATION

1. Overview

Balsas y Mercados Espanoles ("BME") is the listed company that operates the Spanish stock markets  and financial systems. In Spain, the official secondary markets are (i) the Spanish Stock Exchanges in Barcelona, Bilbao, Madrid and Valencia; (ii) MEFF (the market for financial futures and equity derivatives) ; (iii) the AIAF Fixed-Income Market ; (iv) the book­ entry public debt market and (v) the futures market for olive oil. The main multilateral trading facilities in Spain are the Alternative Stock Exchange Market ("MAB") and the Alternative Fixed-Income market ("MARF"), which are run by BME.

Securities and financial instruments are mostly traded on secondary markets through an electronic trading platform (the Spanish Automated Quotation System or ..SIBE") that matches buy-and-sell orders when these are entered. Only compan ies listed on at least two stock  exchanges can trade their shares through SIBE. If a company is only listed on one stock exchange, trading is carried out using the open outcry system. On June 27, 2016,the Spanish market will move from T+3 to T+2 settlement cycle for equit ies.

The main act regulating the Spanish Securities Market is the Securities Markets Act (11 SMA'') and the most important market authorities are the following :

1. The Spanish Securities and Exchange Commission ("CNMV") .This agency is 1n charge of supervising and inspecting the Spanish securities markets and the activ1ties of all the participants 1n those markets.
2. The Bank of Spain. The national central bank and superv1sor of the Spanish

banking system.

1. The Stock Exchange Management Authorities .These compan1es are owned by BME and supervise and manage all of the Span1sh stock exchanges .

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1. BME Clearing.The company w1thm BME that prov1des cleanng serv1ces as a

central counterparty (CCP).

1. lberclear. The company in charge of manag1ng settlement and keep1ng tl1e accounting records of securities traded on t11e Spanish stock exchanges, the fixed-income market , the book entry public debt market and the MAB.

1. Listed compan ies: obligations and recommendations

This section outlines the main obligations of and recommenda tions for listed

companies regarding corporate governance, transparency and market abuse.

Corporate governance

Two types of provisions apply to corporate governance: provisions of law and recommendations for good governance (soft law). In Spain, recommendations for good governance are set out in the Good Governance Code for listed companies approved on February 18, 2015 (the "Good Governance Code").

The Good Governance Code is based on the principle of voluntary compliance, subject to the rule of "comply or explain," where a listed company can choose whether to apply a given recommendation, but is obliged to inform the market and explain the reasons for its decision. Every year, listed companies must publish an annual corporate governance report to inform the market of their degree of compliance with good governance recommendations.

We outline some of the most noteworthy provisions of law and good governance recommendations that apply to the general meeting and board of a listed company:

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Provisions of law

• Listed companies must approve a specific set of regulations for the general meeting and for the board of directors, report them to the CNMV and file them with the Corporate Registry.
• Signatories to a shareho lder agreement must disclose to the market any clause that restricts the exercise of voting rights or the transfer of shares. Otherwise, those restrictions will not be effective.
• Voting caps can be included in a listed company's by-laws, although they will not app ly when a takeover bid ("TOB") results in a bidder attaining 70% of the company's voting rights (subject to the reciprocity rule).
• The minimum percentage stake of 5% required to exercise specific shareholder rights is lowered to 3% in the case of listed companies. These minority rights include, most notably, petition for call of a general meeting, supplement to the agenda of a general meeting, petition for appointment of an independent expert for non-cash contributions, carrying out actions for liability against directors, challenge of board resolutions and appointment of auditors under spec ific circumstances.
• On demand, lberclear must disclose to the listed company the particulars of its shareho lders. Any shareholders associations formed within the company that represent at least 1% of share capital, and shareholders who possess, whether individually or jointly, a stake of at least 3% of share capital will have that same right exclusively for the purpose of facilitating their communication with other shareholders to exercise their rights and defend their common interests.
• Depending on their background, directors of listed companies are classified as:

1. executive or internal directors (those that perform senior management duties or are employees of the company or its group);
2. proprietary directors (shareholders or shareholders'  representatives); or

1. independent directors (those fulfilling the legal requirements that enable them to perform their duties without being restrained by relationships with the company, its shareholders or its executives).

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Those who do not fall into one of the above categories are considered as "other directors." Proprietary and independent directors are jointly referred to as "external directors."

• Unless the by-laws provide otherwise, an execut ive director can hold the office of chairman of the board. As a counterbalance, if one person holds both offices, the listed company should appoint a lead independent director.
• The powers that the board of a listed company cannot delegate are broader than those of an unlisted company.
• Listed companies must have an audit comm ittee and one or two separate committees for appointments and remuneration. For companies listed on IBEX 352 , the Good Governance Code recommends two separate committees . The audit and the appointments and/or remuneration committees must be made up of non-executive directors, two of which, including their chairman, must be independent. From June 17, 2016, the majority of the audit committee members must be independent.
• The role of the general meeting with regard to remuneration is much broader than in the case of unlisted companies. On the one hand, the general meeting must approve the remuneration policy for directors at least every three years or when any amendment is made. The law sets out the content of this remunerat ion policy. On the other, a yearly report on the directors' remuneration (including a breakdown of each director 's individual remuneration) must be submitted to the vote of the general meeting by way of consultation. If this report is rejected in the vote by the ordinary general meeting, the remunerat ion policy for the following year must be subm itted for approval by the general meeting before it can be applied.

2       The benchmark stock market index of the Madrid Stock Exchange.

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Good governance recommendations

• The Good Governance Code prov1des several recommendations targeted at strengthening the role of shareholders and preventing strategic and selective manoeuv res by the board in situations of shareholder  conflict and hostile TOSs . Among others, it recommends that companies establish and disclose a consistent overall policy on payment of attendance bonuses and on the requirements and procedures they will accept as proof of share ownership and entitlement to attendance, delegation and remote voting.

• In connection with the board of directors, the Good Governance Code includes several recommendatio ns aimed at ensuring Its better function1ng, including suggestions on the size of the board, divers1ty policies , majority presence of non-executive directors, director absenteeism, frequency of board meetings , and st ructure, make-up and form of directors' remuneration.As regards the latter, we highlight the Importance of the recommendation on the amount of termmatlon payments. which should noi exceed two years ' total annual remuneration.

Transparency

In this section we provide an overview of the continuing transparency obligations and disc losure rules applicable to listed companies. Please note that this description is not fully comprehensive and that listed companies are subject to other transparency obligations.

Financ ial information

Listed companies have to submit annual, bi-annual and quarterly financial reports to the market following the standard forms published by the CNMV.

Relevant informat ion

Listed companies have to immediately publish and disclose to the market any relevant fact, understood as any relevant information which, if disclosed, may reasonably  induce an investor to acquire or transfer securities or

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financial instruments, and may materially affect their quotation on a secondary market.

Exceptionally, the company can postpone publishing a relevant fact, under its own responsibility, if it considers that the information would damage its interests, as long as this postponement is not likely to confuse the public and the company can guarantee the confidentiality of the information.

Major holdings

The acquisit ion or loss of a major holding, or its existence in the case of an initial listing, must be reported when it meets, exceeds or falls below the following thresholds:  3%, 5%,  10%, 15%, 20% , 25% , 30%, 35%, 40%,

45%, 50%, 60%, 70%, 75%, 80% and 90% of the company's voting rights. This obligation arises when someone:

1. has the ability to exercise share voting rights representing a major holding, not only as shareholder, but also, for example, as a representative or under a shareholders agreement; or
2. holds a financial instrument with a financial effect similar to that of holding shares, regardless of whether settlement is made through shares or in cash.

To calculate whether the thresholds for notification of major holdings have been met, the voting rights corresponding to holding shares (physical position) and financial instruments (derivative position) will be added together.

In addition to the not ice that must be given under the regulations for prevention of market abuse, directors of listed companies must report their number of voting rights, whether directly or indirectly and regardless of the percentage of the stake, (i) on acquisit ion or transfer of shares, voting rights or financial instruments that confer the right to acquire or transfer shares with voting rights; (ii) on their appointment or removal; and (iii) when the company's shares are initially admitted to trading.

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Treasury stock

A listed company must disclose the direct or indirect acquisition of its own shares when this represents at least 1% of the company's voting rights. This disclosure obligation is triggered as soon as the company meets the threshold, even if the shares are totally or partially transferred on the same day.

Market abuse

The Spanish market abuse regulation, which implements EU regulations, distinguishes two categories of market abuse: insider trading and market manipulation .

Insider trading

Anyone holding inside information must not misuse this information and must take the necessary measures to prevent the information from being used abusively or unfairly. For this purpose, inside information is understood as information of a precise nature, which has not been made public, relating directly or indirectly to one or more issuers or financial instruments , and which, if it were made public , would be likely to have a significant effect on the prices of the securities or financial instruments.

It is worth noting that directors and executives of listed companies and persons closely linked to them are subject to relevant reporting obligat ions that enable the CNMV to monitor improper use of inside information.

Market manipulation

The term "market manipulation" is not defined under Spanish law. There is a non-comprehensive list of conducts that are contrary to free price formation and a list of accepted market practices. They also identify signs that the CNMV and market operators should consider when determining whether a specific conduct is a manipulative practice.

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Listed compames must approve an internal code of conduct on market abuse and submit it to the CNMV.

The EU Market Abuse Regulation ("MAR") and its implementing provisions will apply in Spain from July 3, 20i 6. The MAR replaces the existing market abuse regime with an updated and more uniform EU-wide legal framework for the prevention of insider dealings, unlawful disclosure of inside information and market manipulation.

1. Offering of securit ies and admission t o trading

A prospectus must be published when (i) an offer of securities is made to the public. and/or (ii) securities are admitted to trading on a regulated market. There is a single regime throughout the EU governing the content, format , approval and publication of the prospectuses. This prospectus regulation, which is cur rently being reviewed, is a major component of the EU's Financial Services Act ion Plan, aimed at creating a single market in financial services in the EU. The automatic European passport is a major step towards this goal, as it allows companies from the EU and third-party countries to offer their securities or apply for admission to listing on any EU regulated market , on the condition that the authority of the home Member State has approved the prospectus. The supervisory authorities of the host Member States cannot impose further requirements .

Public offerings

Anyone making a public offering of securities in Spain must obtain the approval from the CNMV and file and publish a prospectus to inform the public of the offering.

EU prospectus regulation introduced an EU-wide def inition of "public offering." The definition is very broad, encompassing any notification, regardless of its form and the means in which It is disclosed , as long as it

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provides sufficient information on the terms of the offer (price or cnteria to determine price) and the securities offered , enabling an investor to decide to purchase or subscribe for those securities.

Given the characteristics of potential investors and the structure of the offer, certain offers are considered to be private placements and are not required to obtain approval f rom the CNMV or to file and publish a prospectus. Private placements include, among  others, off ers addressed solely to qualified Investors or offers aimed at less than 150 persons (other than qualified investors) per Member State.

Moreover, a prospectus and the CNMV's approval are not required fo r offers of certain securities ("exempt public offerings"), such as shares issued as a result of a split and securities offered, allotted or to be allotted to directors or employees by their  employer or by a group company.  A document containing equivalent information must be made available in most cases as a condition for the exemption.

Adm1ssion to trading on a Spanish secondary market

There are also exemptions from the obligation to publish a prospectus in the event of admission to trading on a Spanish official seco ndary market . For example, no prospectus needs to be published for adn isslon to listing of (i) shares issued in an exempt public offering; (ii) shares representing, over a period of 12 months, less than 10% of the number of shares of the same class already admitted to trading on the same market; (iii) shares offered, allotted or to be allotted free of charge to existing shareholders or shares resulting from the conversion or exchange of other securities or from the exercise of the rights conferred by other securities.

1. Takeover bid regulation

The EU Takeover Directive, implemented in Spain in 2007, establishes a

set of minimum rules for carrying out TOBs on securities in the EU and the

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European Econom1c Area, allow1ng countries to adopt additional and more stringent requirements. The Takeover Directive is the result of 14 years of negotiations that resulted in the optional implementation of some of its rules and, in the long term, in a failure to achieve a European-w ide harmonisation on some essential rules (including the passivity rule and breakthrough rule). On July 16, 2012, the EU Commission published a review on the application of the TOB Directive and concluded that the regime is satisfactory on the whole, despite some areas that could be clarified. The European Securities and Markets Authority ("ESMA") has begun to clarify some of these aspects (e.g., ESMA statements on shareholder cooperation issues and acting in concert, published in 2013 and 2014).

Types of TOBs

In Spain, two types of TOB open up a range of possibilities when designing the strategy for acquiring cont rol of a listed company:

• Mandatory bids, a procedure tnggered by a change 111  control of a hsted

company to guarantee all shareholders access to the control premium.

• Voluntary bids, a procedure to acquire shares of a listed company by means of a public offering.

A company must also launch a bid when it resolves to delist its shares from trading on official Spanish secondary markets, unless an exemption applies (delisting bid) .

Def inition of control

For TOB purposes, control of a listed company is gained when a shareholder

acquires:

• 30% of the company's voting nghts, or

• a stake of less than 30%. if rt appoints within 24 months a number of board members that , added to those it had already appointed, make up more than half of the company's board members.

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There IS also a spec1al regime aimed to 1mpede shareholders holding between 30-50% of the voting rights of a listed company as of August 13, 2007 (when the existing TOB regulation came into force) from gaining control of the company without launching a takeover bid for 100% of the capital.

The CNMV can conditionally waive the obligation to launch a takeover b1d when these thresholds are reached if another shareholder acts as a counterbalance.

Contro l can be achieved not only by direct or indirect acquisition of securities conferring voting rights, but also by reaching agreements with other holders of securities that will lead to the acquisition of 30% of the voting rights by consensus.

Characteristics of mandatory bids

Mandatory bids are an important mechanism allowing shareholders to exit after a change in the control of a listed company. They must be addressed to all the holders of shares , subscription rights and convertible debentures, and must be launched at an equitable price, including the premium that the offeror has paid to the sellers of the controlling stake.

The equitable price is understood as the highest price that the offeror or the persons acting in concert with the offeror have paid for the same securities during the 12 months prior to the bid announcement. If no shares have been acquired, this price will be calculated according to the valuation methodologies applicable to delisting bids.

There are noteworthy exceptions to the mandatory bid regime. A mandatory bid will not be required, among others , when control is acquired as follows:

(i)      After a total voluntary bid, tf an eqwtable pnce was offered or the bid was

accepted by 50% of the vot1ng nghts to wh1ch 1t was addressed.

(ii) Wit11in a merger carried out for industrial or business purposes, provided that whoever acquires control of the listed company did not vote in favour of the merger at the general meeting of the target company

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(Ill} By conversion or capitalisat ion of creditS mto shares ot a listed company whose financial viability is at serious risk, even though it is not in bankruptcy. To benefit from thts except1on. the transactton must be aimed at ensunng the company 's long-term financial recovery.

Exemptions (ii) and (iii) do not apply automatica lly. The CNMV must evaluate the transaction to determine whether it falls under one of these exemptions. Exceptionally, when control is acquired by a conversion or capitalization of debts into shares directly attributable to a court-sanctioned refinancing agreement, the exemption applies automatically without the need for a CNMV evaluation.

Characteristics of voluntary bids

Vo luntary bids may be partial, freely priced and conditional, providing the CNMV considers that the condition complies with the law and that compliance of the conditio n may be verified prior to the expiry of the acceptance period. Voluntary bids are frequently subject to a minimum number of acceptances , removal of voting caps included in the target's by-laws, or approval of the bid by the bidder's general meeting.

TOSs launched in extraordinary circumstances

If two years before the announcement of a mandatory or voluntary bid, spec ific "extraordinary circumstances" occur, the bidder's freedom to determine the offer price is limited . The bid price must be the higher of either the price determined according to the rules for calculating the equitable price (see above) or the price resulting from applying the valuation methods in an independent expert's report to be submitted by the bidder. Furthermore, in the case of an exchange TOB. the bidder will have to offer a cash alternative.

These "extraordinary circumstances" occur when (i) the securities subject to the bid have been affected by 41reasonable evidence of manipulation";

1. market prices in general or the listed price of the target company in

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parttcular are affected by exceptional events (including natural disasters, war and calam ity, and circumsta nces resulting from force majeure);  or

1. the target company has been expropriated. confiscated or subject to equivalent circumstances that could materially alter the real value of its equity. This regulat ion has not been applied to date .

Squeeze-out/ sell-out

In Spain, squeeze-out and sell-out rights are only provided for listed companies when, following a total TOB, (i) the bidder holds at least 90% of the target's voting rights, and (ii) the TOB was accepted by holders represent ing at least 90% of the voting rights comprised in the bid.

The squeeze-out or sell-out right must be exercised within three months following the expiry of the acceptance period and the price will be the same as the price offered in the TOB.

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10.     REGULATED SECTORS

Investments in some sectors are subject to spec ial regulations that, depending on the particular circumstances of the transaction, may require previous authorisation or notification. Authorisations may be required by state, regional or local authorities.

The main regulated sectors in Spain are the following:

• Financial and investments

• Insurance

• Energy

• Technology, media and telecommunications

1. Financial entities and investment companies

The provision of banking activities has to be authorised by the Bank of Spain .

Investment services are developed by investment services companies: dealers, brokers, portfolio management companies and investment advisory firms . To incorporate any of these entities and develop their activities , prior authorisation from the CNMV is required.

Investment services can also be provided as ancillary activities by management companies of collective investment vehicles (UCITS and AIFs), w ith prior authorisation from the CNMV, and by credit institutions authorised by the Bank of Spain.

Credit institutions and investment services companies from other EU Member States are exempt from these authorisations if they operate through a branch in Spain or under the free rendering of services regime. The latter only requires a formal notification to the competent supervising authorities (the Bank of Spain or the CNMV, as applicable, and the corresponding national central bank of the State where the bank rendering the services has its corporate address).

All credit institutions and investment services companies must comply with specific rules regarding their assets, investments, accounting and reporting to the supervisory authority.

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1. Insurance

Prior author isation from the Ministry of Economy is required to carry out insurance activities. EU insurance companies benefit from simplified procedures when setting up a branch or providing their services on a free rendering of services basis. In this case, notifications are made to the Spanish General Directorate of Insurance and Pension Funds.

All entities participating in this sector must comply with specif ic rules regarding their assets, invest ments, accounting and reporting to the supervisory authority.

10.3.  Energy

Electricity market activities

The regulation of the electricity sector is established through the Electricity Sector Act ("LSE"). Act 24/2013. of December 26. Despite including key developments, the electricity system it regulates is similar to the previous one: production and marketing continue to be liberalized activities, which will be developed in a competitive environment, while transportation, distribution, and technical and economic management of the system are regulated activities. Companies performing regulated activities and their managers cannot participate in the shareholding of companies developing non-regulated activities. The electricity supply is deemed a service of general economic interest.

Spanish electricity market activities require a non-discretionary administrative authorisation, which means that the competent authorit ies only verify whether specific requirements are fulfilled (regarding legal, technical and economic capacity). If they are, authorisation  is granted.

As regards the economic regime for renewable plants , which has been recently modified, they receive a specific amount associated with the type and category of each plant depending on their technology, characterist ics and administrat ive status.

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Gas market activities

Natural gas transport, distribution and storage activit ies in Spain require prior administrative authorisation, while commercialisation activities require a communication to the Administration. Companies carrying out more than one act ivity in the gas sector must isolate each activity.

The supervisory authority of this sector is the CNMC.

Act 8/2015, which amended A ct 34/i 998, on the Hydrocarbon Sector, created the secondary gas market, which was previously carried out in a non­ regulated manner in bilateral relations between marketers. The new secondary market has an Iberian scope, intending to cover Spain and Portugal, although there is still no final agreement for its implementation. Moreover, the A ct regulates the market operator of the newly established secondary gas market.

10.4. Tec hnology, media and telecommunications ("TMT")

Any individual or entity resident in the UE,or in a state that has an international treaty binding Spain, may operate networks and provide electronic communications services provided that it appoints a resident in Spain for notification purposes. A previous notification to the CNMC is required.

Private televisio n broadcasting activity is regulated by two different regimes:

• A genera l regime, whlcl1 only requires previous notification to the competent

authorit ies (state or regional, depending on the scope of the activity).

• A special regime, applicable to Digital Video Broadcasting-Terres trial (or DVB-T, known 1n Spa1n as TOT) serv1ces, which requ re a licence granted through public contests. These licences are Issued by the state, regional or local authorities depending on the scope of broadcasting.
• Recent modifications to Spanish TMT legislation have established the possibility of providing public television broadcasting services through systems of public-private partnershiP (PPP) under the princ1ples of publicity, transparency, competition, equality and non-discrimination: or by indirect management of the service through the transfer ot the ownership of the entity in charge ot the services. also observ1ng the mentioned principles.

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1. INSOLVENCY

In this section, we describe some of the key aspects of Spanish insolvency law.

1. Definition of insolvency

Insolvency proceedings are only trigge red in the case of a debtor's insolvency. The debtor is considered insolvent when it is regular ly unable to meet its obligations as they become due. In this situation, insolvency law aims to protect creditors' interests and to reorganise and preserve the viab ility of sound companies that become insolvent.

1. The insolvency procedure

In Spain, there is only one insolvency procedure for all debtors, whether companies or individuals. Abbreviated procedures apply to cases involving relatively small amounts (with fewer than 50 creditors, when liabilities do not exceed €5 million, or when assets and rights are valued at less than

€5 million} or in cases where the debtor files an advanced composition proposal or a liquidation plan that complies with specific requirements.

Insolvency procedures have a common stage (to determine the assets and

liabilities), which may be followed by a:

• composition  stage, the aim of w hich is to reach an agreement  between borrowers and creditors on the payment of debts: and/or
• liquidation stage, during which the debtor's assets are realtsed and distributed

among creditors.

Voluntary insolvency

The debtor must file for insolvency within two months after it becomes aware , or should have become aware of its state of insolvency. If the debtor fails to fulfil this obligation, directors can become personally liable.

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However, if within th1s two-month period the debtor files a "S.b1s petition" an extra four-month period (3 months to negotiate + 1 month to file for insolvency) is granted from the date the debtor files the petition with the court to reach a refinancing agreement or seek the necessary support for an advanced composition proposal (or, in the case of out-of-court agreements for payment, from the date the registrar or notary informs the court). If negotiations with creditors are not successfu l, the debtor will have to file for insolvency within one month from the unsuccessful conc lusion of the three-month  negotiation  period.

Mandatory insolvency

Creditors can file for mandatory insolvency against a debtor if they can prove the debtor's insolvency. If you become a creditor through an inter vivos transaction, you can only file mandatory insolvency against the debtor six months after the acquisition date of the credit. This time limit does not apply when credits are acquired by universal succession (due to a merger or spin off, for example).

11.3. Effects on debtors

The effects of the declaration of insolvency on the debtor mainly depend on whether insolvency is voluntary or mandatory. In the first case, the debtor usually retains its powers to manage and operate its business, supervised by the insolvency administrator the insolvency judge has appointed. If insolvency is mandatory, debtors lose all rights over their assets , which are managed by the insolvency administrator.

When the debtor is a company, the judge may grant injunctive relief over the assets and liabilities of the directors , liquidators and attorneys with general powers (including those who held these positions in the preceding two years) when there are sufficient grounds to consider that , in the insolvency proceedings, they will be requested to cover the deficit.

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1. Effects on creditors

One of the keystones of the Spanish Insolvency Act is that creditors must receive equal treatment. There are few exceptions to this rule and those permitted by law abide by the rule that "ordinary credits" are considered equal.

On this basis, a distinction is made between privileged, ordinary and subo rdinated credits. Privileged credits are given preferential treatment over ordinary credits , which in turn have preference over subordinated credit s. In addit ion , there is another special and priorltised category, known as "credits against the insolvency estate," which generally arise after the declar ation of Insolvency. These credits are not subject to ranking or acknow ledgement and, in principle , must be paid by the insolvency administrator when they fall due.

Privileged credits may have a special or general privilege, depending on whether the security is created over a specif ic asset (special privilege) or over all of the debtor's assets (general privilege).

Credits with special privilege generally include those in which collateral consists of specific property or rights (mortgage or pledge) or equivalent rights (financial lease agreement for the leased property) . The privilege will only cover the part of the claim not exceeding the value of the respective guarantee. The value of the in rem guarantee will be t hat resulting from deducting any outstanding debts enjoying a preferential guarantee over the asset or right over which the guarantee lies from nine-tenths of its fair value as determined by an independe nt expert.

Credits with general privilege are, for instance, (i) credits relating to salaries and indemnity for termination of agreements , occupational health and safety claims, provided they are incurred before insolvency; (ii) tax and social security withholdi ngs; and (iii) 50% of the credits held by the creditor at whose request insolvency has been declared.

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Ordinary creditors are those who do not fulfil the requirements to become

a privileged or a subordinated creditor.

Subordinated creditors are those that the Spanish Insolvency Act considers subordinated to all other creditors. Subordinated claims include those not filed in due time or that are contractually subordinated , interests and penalties and claims held by a party considered to be "closely related to the debtor," including significant shareholders of the debtor.

1. Clawback period

Clawback applies to any act or transact ion, performed within the two years before the debtor's declaration of insolvency, which is deemed to damage the debtor's estate, even in the absence of fraudu lent intent. Actions carried out in the debtor's ordinary course of business and under market conditions cannot be challenged.

The following actions are deemed to damage the debtor's estate:

• Without  proof to the  contrary: (i) acts performed without  consideration, and

(ii) payments or other acts cancelling obligations due after the declaration of insolvency (except those with an in rem guarantee).

• Unless proved otherw ise: (i) acts of d1sposal tor valuable considerat ion performed in favour of a party closely related to the Insolvent party; (il) granting security interests covering pre-existing debts or new debts incurred to cancel pre-existing debts; and (iii) payments or other actions cancelling obligat ions secured by an in rem security interest due after the declaration of msolvency.

A special regime for refinancing agreements protects debtors from being

challenged if they fulfil specific requirements (see section 1'1.6).

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1. Key pre-Insolvency refinancing instruments

Spanish insolvency law regulates flexible out-of-court refinancing tools and powerful restructuring mechanisms that enhance the deleveraging of viab le Spanish companies, and facilitate pre-petition restructuring deals while preventing debtors from entering into insolvency proceedings (which generally result in low recovery rates for creditors).

In brief, these are the key pre-insolvency refinancing Instruments under Spanish law :

Protected refinancing agreements against clawbac k actions

Some refinancing agreements (and the acts performed through them) are protected against the clawback risk. Only the insolvency administrator is entitled to challenge ref inancing agreements, and clawback actions can only be based on a breach of the requirements described below.

There are two types of protected refinancing agreements: (i) collective refinancing agreements and (ii) individual refinancing agreements .

Collective refinancing agreements are defined as agreements the debtor enters into wit h creditors whose credits represent at least three- fifths of the debtor's liabilities on the date of the agreements (as evidenced by an auditor's certificate), w hich must (i) be based on a viability plan that allows the company to keep operating lh the short ahd medium term; (ii) significantly extend the credit available or modify the debtor's obligations (for example, by extending the ter m or including new obligations to substitute former ones); and (iii) be executed in a public instrument.

Individual refinancing agreements include refinanc ing agreements that, despite not being supported by the majority of creditors needed for collective agreements , may still be protected if they comply wit h several strict requirements (among others, that they improve the ratio of assets over liabilities and that the resulting amount of current assets is equal to or greater t han current liabilities).

92         Doing Business in Spain

New money privilege

Until October 1. 2016, fresh money granted under a refinancing agreement will tully quality as claims against the bankrupt estate, regardless of who the creditor is. This rule is aimed to encourage lenders and debt funds to grant new funds to companies in distressed situations. A s from October 1, 2016, 50% of the new money will qualify as claims against the bankrupt estate and the other 50% as general privilege (provided the creditor is not a closely related person).

Court-sanctioned refinancing agreements  or "Spanish scheme of

arrangement"

The main requirements affecting refinancing agreements to be sanctioned by the court are similar to those applicable to collective refinancing agreements, despite being subject to a different majority regime (51% of the financial claims). If a refinancing agreement is sanctioned by the court, some of its covenants could be extended to dissenting or non-participat ing financial creditors (including secured creditors) provided that the agreement is entered into by specific majo rities of creditors. Thus , the cram down will be subject to achieving certain majorities, which may vary depending on the effects to be crammed down for dissenting creditors and the type of dissenting creditors.

The regime for the homologat ion of unsec ured creditors requires (i) the approval by creditors holding 60% of finan cial liabilities of payment deferrals up to five years and conversion of the debt into participating loan agreements up to five years: and (ii) the approval by creditors holding 75% of financial liabilities of payment deferrals between five to 10 years , debt write-offs (with no limitation), debt-for-equity swaps, conversions of senior debt into financial instruments with rank, term and character istics that differ from the original debt and debt for assets swaps. As regards debt -for-equity swaps, when a debt-for-equity swap has been agreed in the refinancing, dissident creditors must state that they wish to be affected by the capitalisation. Otherwise, they will suffer a release of an amount equal to the share capital amount and the share premium that would have corresponded to them in the capitalisation.

Doing Business In Spain            93

For dissenting secured creditors the following rules apply: (i) for debt up to the value of the security, the same effects as described for unsecured credits apply, but only if accepted by 65% or 80% (calculated according to the proportion between the creditors with in rem guarantees adhering to the agreement and the total debt with in rem guarantees), depending on the claims to be crammed down; and (ii) for the secured debt amount not covered by the security value, the same effects as described for unsecured credits and same majority thresholds apply.

Finally, the Spanish Insolvency Act allows also court approval of refinancing agreements signed by creditors representing at least 51% of the financial debt. Although court approval will have no effect on dissent ing creditors unless the above majorities are reached, it will protect the agreement against clawback  actions.

94         Doing Business in Spain

12.     DISPUTE SETTLEMENT

1. Litigation: jurisdictio n and civil procedure

Jurisdiction

Jurisdiction is determined by different criteria, namely (i) subject matter of the case (mainly civil and commercial, criminal, administ rative, labourL (ii) instance (first instance, second instance, Supreme Court), and (iii) territory.

In the civil jurisdict ion, courts of first instance are competent to hear, in first instance, all civil cases not expressly attributed to other courts by legal provision. Some courts of first instance specialise in specific commercial issues, such as insolvency. Appeals are usually heard by provincial courts.

The general territorial rule is that the claimant must initiate the litigation in the

place where the defendant resides, even though other special rules may apply.

Civil and commercial procedures

The two main types of civil and commercial declaratory procedures are ordinary procedures and oral trials. The amount of money under discussion Is what usually determines whether a case is decided through an ordinary procedure or an oral trial. In addition, the subject matter of the procedure may have a bearing on the type of declaration procedure used.

Ordinary procedures consist essentially of (i) a statement of claim accompanied by documentary evidence and expert reports; (ii) an answer to the statement of claim made by the respondent, togethe r with the documents and expert reports that support this plead; (iii) a preliminary hearing, which is primarily direc ted to solve procedural issues and propose additional taking of evidence; and (iv) a trial, in which witnesses and experts are heard.

An oral trial is developed in a single hearing that takes place after a written statement of claim and a written answer to the statement of the claim.

Doing Business In Spain        95

Appeals

Most first instance decisions can be appealed before a second instance court, frequently with a three-judge panel. In these courts there is usually no hearing, although one can be held if necessary.

In some cases, the second instance decision can be challenged before the Supreme Court, which is not a third instance. Two types of appeals can be filed before the Supreme Court: (i) extraordinary appeals for breach of procedure, and (ii) appeals in cassation. An appeal in cassation can be filed, essentially, when the econom ic amount involved exceeds €600,000 or when there is a general reverse interest that justifies a decision of the Supreme Court in that particular case.

Enforcement  procedures

The Civil Procedure Act also encompasses enforcement procedures. It is wort h noting that in Spain public instruments (documents issued before a notary public) are directly enforceable, which means that a prior declaration proceeding will not be necessary to enforce them.

Most decisions issued in fi rst and second instance are provisionally enforceable while being subject to appeal. Besides , the Civil Procedure Act includes an order for payment procedure that simplifies collection of debts that can be proven either by:

• documents signed by the debtor or that contain the debtor's seal, stamp or mark; or
• invoices, delivery notes, certifications or other documents commonly used to prove credits and debts in the particular relationship that exists between the creditor and the debtor.

In addition , the European order for payment simplifies collection for some cases of European crossborder debts. It is recognised and enforced in almost all EU countries without requiring a declaration of enforceab ility.

96         Doing Business in Spain

1. Commercial arbitration and mediation

Spain has a long-standing culture of arbitration. Its Arbitration Act is based on the UNCITRAL Model Law of June 21, 1985, and encompasses domestic and international commercial arbitration.

Spanish judicial case law respects the attribution of competences to arbitrators, and only reverses arbitral awards for the reasons listed in the Arbitration Act, most of which suggest a lack of arbitration agreement, procedural defects and the principle of "public policy.'' This increases Spain's role as a seat of international arbitrations . Spain is often chosen as the seat of arbitration proceedings to solve International commercial disputes , particularly when these involve Latin American businesses.

There are a number of consolidated arbitration institutions in the country. Some examples are the Madrid Court of Arbitration, the Barcelona Arbitration Court and the Civil and Commercial Court of Arbitration. Spain is also a key seat of international arbitration proceedings held under the  International Chamber of Commerce Rules of Arbitration. The Spanish Committee of the International Chamber of Commerce was constituted in i922.

In addition , it is also possible to hold ad hoc proceedings, which are not

administrated by any arbitration institution, but by the arbitrators themselves.

Spain has been a party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), without reservations or declarations, since 1977. Therefore. the grounds on which a court may deny enforcement are limited to serious procedural defects and the principle of "public policy." Spain is also a party to the 1965 Washington Convention on the Settlement of Investment Disputes between States and Nationals of other States, which established the International Centre for Settlement of Investment Disputes.

Mediation in civil and commercial issues has been promoted by the Mediation Act, which , among others, entitles the judge to encourage the parties to delay civil judicial proceedings and initiate a mediation process.

Doing Business In Spain      97

SCHEDULE  I

Tax limits on Spanish tax treaties

Source: Spanish Tax Administration Agency

DIVIDENDS

PARENT-SUBSID IARY

	COUNTRY	GENERAL	MINIMUM		INTERESTS	ROYALTIES
			PARTICIPATION	TAX RATE{%)
			REQUIRED
	Albania	10	10/75	0/5	0/6	0
	Algeria	15	10	5	0/5	7/14
	Andorra	15	10	5	5	5
	Argentina	15	25	10	0/12	3/5/10/15
	Armenia	10	25	0	5	5/10
	Australia	15		15	10	10
	Austria	15		15	5	5
	Barbados	5	25	0	0	0
	Belg1um	15	25	0	0/10	5
	Bolivia	15	25	10	0/15	15/0
	Bosnia and Herzegovina	10	20	5	017	7
	Brazil	15	25	10	0/10/15	10/15
	Bulgaria	15	25	5	0	0
	Canada	15	10	5/0	0/10	0/10
	Chile	10	20	5	5/10	5/10
	China	10		10	10	6/10
	Colombia	5	20	0	0/5/10	10
	Costa Rica	12	20	5	0/5/10	10
	Croatia	15	25	0	0	0
	Cuba	15	25	5	0/10	0/5
	Czech Republi	c           15	25	5	0	0/5
	Cyprus	5	10	0	0	0

98          Doing Business in Spain

DIVIDENDS

COUNTRY

GENERAL

PARENT-SUBSIDIARY MINIMUM

PARTICIPATION       TAX  RATE(%) REQUIRED

INTERESTS        ROYALTIES

Denmark!5J	15		0(1)	10	6
Dominican Republic	10	75	0	0/10	10
East Timor	15	25	10	0/10	10
Ecuador	15		15	0/5/10	5/10
Egypt	12	25	g	0/10	12
Estonia	15	25	5	0/10	5/10
Finland	15	25	10	10	5
Former USSR<6l	18		18	0	0/5
France	15	10	0	0/10	0/5
Georgia	10	10	0	0	0
Germany	15	10	5	0	0
Greece	10	25	5	0/8	6
Hong Kong	10	25	0	0/5	5
Hungry	15	25	5	0	0
Iceland	15	25	5	0/5	5
India	15		15	0/15	10
Indonesia	15	25	10	0/10	10
Iran	10	20	5	0/7.5	5
Ireland	15	25	0	0	5/8/10
Israel	10		10	0/5/10	5/7
Italy	15		15	0/12	4/8
Jamaica	10	25	5	0/10	10
Japan	15	25	10	10	10
Kazakhstan	15	10	5	0/10	10
Korea	15	25	10	8/10	10
Kuwait	5	10	0	0	5
Latvia	10	25	5	0/10	5/10

Doing Business in Spain              99

Lithuania	15	25	5	0/10	5/10
Luxembourg	15	25	10	10	10
Macedonia	15	10	5	0/5	5
Malaysia	5	5	0	0/10	5/7
Malta	5	25	0	0	0
Mexico	15	25	5	0/5/10/15	0/10
Moldavia	10	25/50	5/0	0/5	8
Morocco	15	25	10	10	5/10
Netherlands	15	25+25/50	5(Hol)/1O(Sp)	10	6
New Zealand	15		15	10	10
Nigeria	10	10	7.5	0/7.5	3.75/7.5
Norway	15	25	10	0/10	5
Oman	10	20	0	0/5	8
Pakistan	10	25/50	7.5/5	0/10	7.5
Panama	10	40/80(7)	5/0	0/5	5
Philippines	15	10	10	0/10/15	10/15/20
Poland	15	25	5	0	0/10
Portugal	15	25	10	15	5
Rumania	15	25	10	10	10
Russian Federation	15(2)	Upon investment	10/5	0/5	5
Salvador {EI)	12	50	0	0/10	10
Saudi Arabia	5	25	0	0/5	8
Senegal	10	0	10	0/10	10
Serbia	10	25	5	0/10	5/10
Singapore	5(8)	10	0	0/5	5
Slovakia	15	25	5	0	0/5
Slovenia	15	25	5	0/5	5

100        Doing Business in Spain

DIVIDENDS

PARENT-SUBSIDIARY

COUNTRY GENERAL                 MINIMUM			INTERESTS           ROYALTlES TAX RATE(%)
		PARTICIPATION REQUIRED
South Africa	15	25	5		0/5	5
Sweden	15	50	10		15	10
Switzerla nd	15	10	0		0	0/5lAi
Thailand	10		10		0/10/15	5/8/15
frlnidad and Tobago	10	25/50	5/0		0/8	5
Tunisia	15	50	5		5/10	10
Turkey	15	25	5		10/15	10
Untted Arab Emirates	15	10	5		0	Or.J
United Kingdom	10	10	0		0	0
United States	15	25	10		0/10	5/8/10
Uruguay	5	75	0		0/10	5/10
Uzbekistan	10	25	5/0		0/5	5
Venezuela	10	25	0		0	5
Vietnam	15	25/50/70	10/7/5		0/ 10	5/ 10

( 1)   See double taxation treaty, section 10.

(2)   See double taxation treaty, section 10.

1. See double taxation treaty, section 12.

1. Tax exemption for royalties paid between associated corporations has been applicable since

July 2, 2011 .

1. The Spain-Denmar k Double Taxation Treaty and its annex protocol were terminated and have not been in force since January 1. 2009.
2. Annex protocol, see sections 11 and 12. Five years after the annex protocol entered into

force , tax rates will be 0%.

1. See double taxation treaty, section 10.

1. See double taxation treaty, section 10.

Doing Business In Spain         101

SPAIN AND PORTUGAL

ALICANTE

Plaza de Gabriel Mir6, 2 03001Alicante,  Spain Tel. 34 965 230 510

[email protected]

Contact Partner: Carlos Alarcia

LISBON

Prar;a Marques do Pombal, 2

1250-160 Llsboa, Portugal

Tel. 351 2 1 355 38 00

llsboa@cuatrecasasgoncalves pereira.com

Contact Partners: Maria Joiio Ricou;

PALMA DE MALLORCA

Colon,9

07001 Palma de Mallorca, Spain Tel .34 971 425 700

[email protected] Contact Partner:

Pedro San Jose

VALENCIA

Avda. Aragon, 30

4602 1 Valencia. Spain

Tel. 34 963 390 440

[email protected] Contact Partner:

Juan Grima

ANGOLA

LUANDA"

Largo 17 de Setembro, 3 Edificio Presidente, 4 andar Sala 448, Caixa Poslal1914 Luanda ,Angola

Tel. 244 939 378 652

[email protected] Contact:

Elsa Sousa Rodrigues

LATIN AMERICA

MEXICO CITY

[email protected] Contact Partners:

Agustin Cerda Mariano Ocar

UNITED STATES

BARCELONA

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Tel. 34 932 90S 500

barcelona@cuatrecasas .com

Contact Partner:

Miguel Trias

LLEIDA

Plar;a St.Joan, 10

25007 Lleida, Spain

Tel.34 973 727 200

[email protected] Contact  Partner:

Felix Gonzalez

PORTO

Av. da Boavista, 3265 4100- 137  Porto, Portugal

Tel. 351 22 616 69 20

porto@cuatrecasasgo ncalves pereiracom

Contact Partner:

Paulo Castro Rangel

VIGO

Colon, 10

36201 Vigo, Spain

Tel. 34 986 449 300

[email protected] Contact  Partner:

Juan M'Varela

BELGIUM

BRUSSELS

23,rue Montoyer

1000  Brussels,Belgium

Tel. 32 2 743 39 00

bruselas@cuatrecasas .com Contact Partner:

Canl Fernandez

MOROCCO

CASABLANCA'"

1, Boulevard SldlMohammed Ben

Abdallah

Tour Crystal 7eme etage 20030 Casablanca, Morocco

Tel. 212 522 274 628

casablanca@c uatrecasas.com Contact:

Sanaa Dlimi

BILBAO

A lameda Mazarredo, 5 48001   Bilbao.Spain

Tel. 34 944 359 200

bilbao@cuatrecasas .com Contact   Partner:

Ant6n Perez-lriondo

MADRID

A lmagro,9

28010 Madrid,Spain

Tel. 34 915 247 100

madrid@cuatrecasas .com Contact Partner: Francisco Parez-Crespo

SAN SEBASTIAN

Av. Llbertad, 17

20004 San Sebastian , Spain Tel. 34 943 440 900

[email protected] Contact Partner:

Joanes Labayen

VITORIA

Area, 2

01005 VIloria, Spain

Tel. 34 945 157 150

[email protected] Contac t  Partner:

Jose M'Acedo

BRAZIL

SAO PAULO

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04551-010, Sao Paulo, SP, Brazil

Tel. 55 11 5184 4650

saopaulo@cua trecasas.com Contact Partners:

Andonl Hern ndez;

Mana da Paz Tierno Lopes

MOZAMBIQUE

MAPUTO''..

Av.Kim II Sung 961 Maputo, Mozambique Tel, 258 214 864 38

[email protected]

Contac t Partner:

Pedro Couto

GIRONA

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Tel. 34 972 417 619

girona@cuatrecasas .com Contact Partner:

Silvia Alberti

MALAGA•

Martinez, 11

29005 Malaga, Spain

Tel. 34 952 062 733

mal[email protected] Contact Partner: Franotsco Romero

SEVILLE'

Fernandez y Gonzalez , 2 41001  Seville,Spain

Tal.34 954 501 414

[email protected] Contact Partner:

Joaquin Cuesta

ZARAGOZA

Joaquin Costa, 4

50001 Zaragoza , Spain Tel. 34 976 468 130

[email protected] Contact  Partner:

Javier Garanto

CHINA

SHANGHAI

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Central Plaza

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Tel. 86 21 2327 7000

shanghal@c ualrecasas.com Contact Partner:

Omar Puertas

UNITED KINGDOM

LONDON

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Tel. 44 20 7382 0400

london@cuat recasas.com Contact Partner.

Antonio Baena

NEW YORK

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New York, NY 10022, USA

Tel. 1212 784 8800

[email protected] m

Contact Partner: Miguel Angel Melero

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