Establishing a Latin American Business Abroad

“Doing Business in Latin America – From A to Z” UIA/AIJA Seminar

Panama City, 27 February 2015 Héctor Sbert

Lawants – Barcelona, Spain

Overall increase in FDI coming from LATAM

0

100000

200000

300000

400000

500000

600000

700000

1980 1990 2000 2010 2013

In millions of USD at current exchange rates (2014) Source: UNCTAD

Destination of LATAM’s FDI in Europe (2013)

Spain and Portugal

Poland

UK

France

Germany

Italy

Others

Source:CEPAL/ECLAC

Trade and Tax Considerations

•  Access to EU, EMEA markets

•  Moderate Taxation

•  Corporate Tax Reduction for 2015 and 2016

•  Double Taxation Conventions and “Participation Exemptions”

•  Patent Box

•  R&D Taxation

•  Expats Regimen (Ley BECKHAM)

•  ETVE’s

•  Other Investment Forms: SICAV and SOCIMI

Moderate Taxation

•  Tax pressure below EU-27 Average

•  Ratio between tax revenues, including Social Security and GDP: •  Spain 33,6%

•  EU Average 40,6% •  Denmark 49,1% •  Belgium 48%

•  France 47% •  Sweden44,6% •  Italy 44,3%

•  Germany 40,4% •  UK 37,3%

Corporate Tax Reductions

Until 2015

•  General CT Rate: 30%

•  25% for SMEs

•  20% for microbusinesses (max 300k € turnover)

•  15% for newly created entities (max 300k € turnover)

2015 and 2016

•  28% in 2015

•  25% in 2016

•  T h a n k s t o o v e r a l l d e d u c t i o n s , ave r a g e corporate tax rate is at 19,3%.

Double Taxation Conventions

Spain has the largest network of Double Taxation Conventions with LATAM & the Americas (including USA & Canada) than any other European nation:

•  : : 19

•  13 : 13

•  : 12

•  8 : 8

•  5 : 5

:

13

5

8

Spanish DTC are also in general terms more favorable for the investor

Participation Exemption Regime

•  It allows Spanish companies a tax exemption on dividends from its foreign subsidiaries and also on any capital gains on the disposal of those shares.

Research & Development

•  According to the OECD, Spain is the country with the more advantageous tax regime on R&D after France.

•  “Patent Box” Tax Incentive •  It allows a 60% tax reduction

on gains deriving from the sale of patents, drawings and other intangible assets created by the company.

•  Most favorable system in the EU

•  It extends to the income from the sale of models, designs, formulas, plans or even know how.

Tax Regime for Expats

“Beckham Law” 

•  For expats coming to Spain, a tax flat rate of 24.75% for a maximum income of € 600,000 per year for five years.

Life quality for expats…

•  According to FT, 7 out of

the 10 most attractive cities to invest in Southern Europe are Spanish (2014-2015)

•  Spain is 9th in life quality for expats according to Expat Explorer Survey 2013 of HSBC. Ses Illetes Beach, Formentera

“ETVEs”

 “Entidades de Tenencia de Valores Extranjeros” =

Holding Entities of Foreign Securities

•  It is a holding regime that favors particularly Latin American companies.

“ETVEs”

 

•  ETVEs are holding companies whose purpose is the management and administration of securities representing the equity of entities not domiciled in Spain

“ETVEs”

 

•  Foreign dividends and capital gains from abroad are tax exempt. This facilitates the repatriation of dividends paid by subsidiaries.

•  Dividend payments to non-resident parent companies are free of withholding tax in Spain unless the parent company is domiciled in a country that does not pay income tax or resident in a tax haven.

•  Access to Spanish network of Double Taxation Treaties

“ETVEs”

 

•  Brazil and Mexico are the second and fourth country to have invested the most in Spanish ETVEs

•  Petrobras and Gruma already use this advantageous tax regime for its European operations.

Other low taxation investment forms

•  SICAV: For financial investments

•  SOCIMI: For real estate investments

Golden Visa

Since September 2013, new immigration rules to promote foreign investment in Spain

 

Golden Visa

Applicable to:

•  Investors

•  Entrepreneurs

•  P e r s o n s w i t h h i g h academic qualifications

•  Researchers

•  Expats

Golden Visa

•  For investors: Foreigners who have made a significant capital investment in Spain: •  Real estate assets (over €

500,000)

•  Shares in Spanish companies or f inancial deposits in Spanish banks (over 1 million €)

•  Business projects they are to b e d eve l o p e d i n S p a i n considered of general interest,

•  Spanish public debt (over € 2 million).

Golden Visa

•  Entrepreneurs: foreigners who are to develop an entrepreneurial and business activity with particular economic interest to Spain.

•  Highly qualified personnel: employees or people in possession of a graduate or postgraduate degree from a prestigious University or Business School.

•  Researchers: Scientific and technical staff and professors from Universities and Business Schools.

•  Expats: Staff in international transfer in the context of an employment, professional or training relationship with a company or group of companies established in Spain or another country.

Golden Visa

•  Visa and/or Permission to live and work and Spain.

•  Free movement across the Schengen area.

•  Expedited processing: Visa petition resolved within 10 business days. Residence permits resolved within 20 business days.

•  In the case of the investor, no obligation to effectively reside in Spain (it is only required to visit Spain once during the period of residence).

Easier access to Spanish residence and nationality for LATAM citizens

Apart form Golden Visa…

•  Some LATAM citizens may apply for a Spanish residence permit without having an actual job or job offer (Peru, Chile)

•  All citizens from LATAM and other Spanish-speaking countries may apply for Spanish nationality after only 2 years of legal residence (instead of 10, generally) without having to waive to their nationality of origin

Thank you!

Héctor Sbert

LAWANTS – Barcelona, Spain

hector.sbert@lawants.com

+34 93 255 31 35

Source: ICEX: España, Plataforma para las inversiones y sedes de empresas multilatinas en Europa, África y Oriente Medio, September 2014)

Note: The information contained in this presentation should not in itself be regarded as specific advice on the mentioned subject, but only as a preliminary approach. It is therefore recommended that recipients of this information seek professional advice about their particular case before adopting measures or actions of any kind.