Taxation, bureaucracy, and regulatory complexities are the main challenges for multinationals, according to the Barómetro del Clima de Negocios en España 2023. Iberian Lawyer discussed the issue with Cuatrecasas, Uría Menéndez, and Baker McKenzie
Experts: David López Velázquez, counsel at Uría Menéndez; Joan Hortalà, transfer pricing partner at Cuatrecasas; Heidi López Castro, partner at Uría Menéndez; Antonio Morales, head of the public law practice at Baker McKenzie; and Ester Navas, compliance partner at Baker McKenzie.
by ilaria iaquinta
Spain continues to be one of the top destinations for foreign direct investment, thanks to its infrastructure, market size, and human capital. This is according to the Barómetro del Clima de Negocios en España 2023, published in September by ICEX-Invest in Spain, alongside the Spanish Chamber of Commerce and the Foro de Marcas Renombradas Españolas. However, despite these strengths, the report highlights significant challenges: taxation, bureaucracy, the slow judicial system, and energy costs are major concerns for multinational companies already operating in, or considering entering, the country.
TAXATION: A HEAVY BURDEN FOR BUSINESSES
Multinationals consider Spain’s tax burden to be high. More than 30% of foreign companies surveyed see it as a serious obstacle, with 50% saying it hampers investment, directly impacting profitability. The key concerns revolve around corporate tax, social security contributions, and VAT.
Joan Hortalà, a transfer pricing partner at Cuatrecasas, notes that although taxation across Europe is broadly similar due to EU and OECD initiatives, Spain’s tax burden remains high but comparable to other European nations, including in tax audits. “The real challenge lies in practical application. Bureaucracy is extensive, complex, and slow, and the cooperation from the tax authorities is often lacking, especially in terms of speed. Multinational companies need quicker and more empathetic responses to their queries. Another significant challenge is the time it takes to resolve tax disputes, which can take years”, he emphasises.
To mitigate the tax impact, Hortalà stresses the importance of “proper planning in advance, as once certain investments or decisions are made, it is difficult to adjust their tax implications. Spain’s tax system offers attractive advantages for certain activities, such as the Patent Box or the expat regime, but it’s vital to prepare the investment carefully and ensure supporting documentation is in place to avoid issues in practice. It’s also becoming increasingly common for taxpayers to take out tax insurance policies to minimise their exposure to identified risks”.
BUREAUCRACY AND THE JUDICIAL SYSTEM: A NEVER-ENDING MAZE
