Madrid is one of the seventeen Spanish autonomous communities, but it is also the seat of the state capital. If the latter is in itself an incentive for foreign direct investment in Madrid (FDI), an extremely favorable legal framework is even more so, since it contributes to turning Madrid into the main Spanish pole of attraction for FDI. This legal framework, easier (facilitating investment and establishment of companies), freer (adapting rules to business reality) and closer (approaching the administration to individuals), has been materialized in new Laws, Measures and Bills, with the aim of eliminating the excess of rules, regulations, forms and regulatory proceedings.
Laws, Measures and Bills that promote the Foreign Direct Investment in Madrid
Firstly, as far as Laws are concerned, Law 06/2022, of June 29, on the Open Market, which allows any businessman, established anywhere in Spain, to carry out his activity in the Community of Madrid without further paperwork, procedures or licenses; and Law 11/2022, of December 21, on Urgent Measures to Boost the Economic Activity and Modernize the Administration, also called “Omnibus Law”, which pursues, through the modification or deletion of fifty regulations, the reduction of unnecessary burdens for individuals and companies, the elimination of regulatory obstacles that slow down entrepreneurship and the simplification of current regulatory framework in certain areas, such as taxes, public rates and prices, the environment, digital administration or territorial and urban planning.
In addition to these Laws, we must also highlight, secondly, the adoption of certain Measures equally conducive to a friendly climate for foreign direct investment in Madrid, such as the inception of the Open Line Against Hyperregulation, consisting of a communication channel with companies and individuals that seeks to reduce excess regulation and eliminate bureaucracy that causes frustration, costs and inefficiency. And the creation of the Investment Accelerator, aimed at expediting those investment projects that, due to their economic significance, the generation of jobs or other factors may be considered of special interest, and which, for these reasons, may involved the adoption of a preferential and urgent agreement on those procedures that may affect them.
Another example of this friendly climate for foreign direct investment in Madrid are, thirdly, some Bills recently approved by the Government Council of the Community of Madrid, such as the one giving the green light to a deduction of 20% of the regional Personal Income Tax quota, in order to attract investments and generate projects. This new tax incentive, which will enter retroactively into force from January 1, is aimed at foreigners or Spaniards who have been living out of Spain for more than 5 years. It will be applicable to different types of assets, such as investments in Government Bonds; purchases of shares of listed or unlisted companies; or participations in companies and businesses, but not to investments in real estate, whether purchases of homes, garages or any other kind of estate assets.
Madrid, second to none in FDI in Spain according to current statistics
Based on those Laws, Measures and Bills, as well on its political and institutional stability, its economic model built on the promotion of business freedom and its moderate and decreasing taxation, the Community of Madrid has come to rank first in the preferences of foreign investors (4.150 billion euros), quadrupling FDI in Barcelona (1.085 billion euros), if we stick, for example, to the statistics for the first quarter of the current year. In this period, foreign direct investment in Madrid accounted for 62% of the total, with investors concentrating on the sectors of energy supplies (28.6%), civil engineering (26%), technical services of architecture and civil engineering (7.5%) and whosale trade (7.5%).
Why not take advantage of Madrid’s friendly business climate to invest?
If this is the current situation, can we expect that the future situation, given this background, will be like it or even better?. If we focus, for example, on the multimillion dollar projects that big American technology companies plan to undertake in Spain in general, and in the Community of Madrid in particular, to expand their infrastructures in the face of the explosion of artificial intelligence and cloud computing, everything seems to indicate that’s how it’s going to be. Amazon (AWS), Microsoft, Google and Meta will undertake investments of more than 21 billion euros in the coming years, in addition to the investments already made by specialized data center operators, such as Nabiax, Digital Reality, Equinix Data4 or NTT among others. If they and others like them, both in this and other sectors, are already here, why not you?.
Antonio Viñal
Lawyer
AVCO Legal
madrid@avco.legal
