Royal Decree 571/2023 on Foreign Investment

BOE No. 159 of 5 July 2023 published Royal Decree 571/2023 of 4 July on Foreign Investments, which will enter into force on 1 September, with the aim of implementing Law 19/2003 of 4 July on the legal regime governing capital movements and economic transactions with foreign countries with regard to investments from or to foreign countries.

On the one hand, Article 63 of the Treaty on the Functioning of the European Union (TFEU) prohibits restrictions on capital movements between Member States and between Member States and third countries. However, Articles 65(1)(b) and 346(1)(b) TFEU modify this prohibition, as they allow Member States, respectively, to establish information procedures for administrative and statistical purposes; as well as to adopt protection measures necessary for security in the defence sector.

The Royal Decree has the following structure:

Chapter I (Articles 1 and 2) sets out the subject matter and scope.

Chapter II (Articles 3 to 5) is devoted to the declaration of foreign investments in Spain, and to the declaration of investments to the Investment Register, which is obligatory, for administrative or statistical purposes, after they have been made.

Chapter III (Articles 6 to 8) deals with these same aspects, referring to the regime for Spanish investments abroad.

Chapter IV (Articles 9 to 20) develops the regime applicable in the event of suspension of the foreign investment liberalisation regime in accordance with the provisions of Regulation (EU) 2019/452 of the European Parliament and of the Council, of 19 March 2019, and Law 19/2003, of 4 July, through four sections.

Section 1 (articles 9 to 12) develops the rules applicable in the event that the general investment liberalisation regime provided for by default in the applicable legal framework is suspended. A voluntary consultation procedure is regulated ex novo to clarify whether or not a given operation is subject to authorisation. The common regime applicable to the suspension of the liberalisation regime is also developed, as well as the subjects a priori subject to authorisation, in application of the aforementioned legal framework, and the obligation of notaries to inform interested parties of the regime applicable to foreign investments.

Section 2 (Article 13) and Section 3 (Articles 14 to 17) establish the prior authorisation regime for foreign investments in Spain and Spanish investments abroad by agreement of the Council of Ministers, in application of Articles 7 and 7 bis of Law 19/2003, of 4 July. In this regard, the authorisation system for certain foreign investments from countries that are not members of the European Union or the European Free Trade Association is regulated.

Section 4 (Articles 18 to 20) specifies the prior authorisation regime for foreign investments in Spain in activities directly related to national defence and directly related to arms, cartridges, pyrotechnic articles and explosives for civilian use or other material for use by the State Security Forces and Corps. Finally, Article 20 specifies the prior authorisation regime to which acquisitions of real estate for diplomatic purposes from non-EU Member States are subject, on the basis that it is the foreign State, and not the foreign individual who may be residing in Spain when carrying out the transaction, who ultimately proceeds with the acquisition of the real estate.

Chapter V (Articles 21 to 26) specifies the bodies and obligations that complete the regulations on foreign investment; for example, Article 21 introduces the Foreign Investment Board as a collegiate inter-ministerial body with reporting functions in matters of foreign investment.

The Royal Decree is approved by virtue of the powers recognised to the State by Article 149.1 of the Constitution, in sections 10 and 13, which reserve to the State exclusive competence in matters of foreign trade and the bases and coordination of the general planning of economic activity, as well as under the powers of regulatory development recognised to the Government and included in section one of the sole final provision of Law 19/2003, of 4 July.

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