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7. Internationalization incentives

Although it is not the aim of this publication to address incentives for Spanish investment abroad, this section is included in view of the obvious interest that Spanish investment abroad has sparked in foreign investors as a platform for international expansion.

In this context, please note that the official financial instruments approved by the Spanish government to provide official support for the internationalization of business are, inter alia:

  • FIEM (enterprise internationalization fund, managed by the Ministry of Industry, Trade and Tourism through the Office of the Secretary of State for Trade).
  • FIEX (fund for investments abroad, managed by COFIDES).
  • FONPYME (operating fund for SME investments abroad, managed by COFIDES).
  • CRECE + INTERNACIONAL (line of financing managed by COFIDES through COFIDES, FONPYME or FIEX funds).
  • Pyme Invierte (managed by COFIDES).
  • Programs for the Conversion of Debt into Investment managed by the Ministry of Economy and Enterprise.
  • The ICO Internationalization and Support for Exports Lines.

Of all the foregoing financial instruments, particular regard must be had to the FIEM, the FIEX and the FONPYME, as well as the lines promoted by ICO in connection with internationalization, such as Línea ICO-Internacional 2020, Línea ICO-Exportadores 2020 and Línea ICO-Canal Internacional.

Certain lines for the financing of specific sectors of economic activity (such as, inter alia, the FINTEC or FINCONCES lines targeted at new technologies industries or infrastructure concession), which had been offered by COFIDES and to which we referred in previous versions of the Guide, are no longer operative. This is because COFIDES has considered it more suitable (in the interest of greater simplification) to offer financing to all enterprises, regardless of the sector in which they operate, through the same lines of financing:

A. FIEM:

The FIEM is an instrument intended for the direct financing of international contracts for the supply of goods and services or the execution of projects undertaken by Spanish companies in order to support direct investment by Spanish companies abroad. Its aim is to promote export operations by Spanish companies and direct Spanish investment abroad.

The FIEM finances (i) transactions and projects of special interest to the strategy to internationalize the Spanish economy; (ii) the technical assistance required by such transactions and projects and (iii) technical assistance and consultancy services of special interest to the internationalization strategy, the objective of which is the preparation of viability, feasibility and pre-feasibility studies, studies related to the modernization of economic sectors or regions, and consulting services aimed at institutional modernization of an economic or regional nature.

In this connection, a transaction or project, technical assistance or consultancy service is deemed to be of special interest to the internationalization strategy where (i) it promotes the internationalization of Spanish SMEs; (ii) it entails the direct investment or exportation of goods and services of Spanish source and manufacture in a sufficiently significant percentage of the financing or (iii) otherwise, where there are circumstances justifying the interest.

In this respect, operations or projects which entail the creation of, or participation in, a productive or concessionaire company or entity (i.e. conduit or special purpose entities, provided that there are Spanish companies investing in them), are eligible for financial support to supplement other sources of public financing.

In any case, the following will not be financed (i) exports of defense, paramilitary and police materials to be used by the armed forces, police forces and security forces or the anti-terrorist services or (ii) projects related to certain basic social services such as education, health and nutrition, unless they have a major ripple effect on internationalization and have a high technology content.

Potential recipients of financing from this Fund are foreign central governments and foreign Public, Regional, Provincial and Local authorities, as well as enterprises, groupings and consortiums of foreign publicly-owned and private enterprises, not only from developed countries but also from developing countries.1

In exceptional cases, FIEM aid may be granted to international organizations, provided that there is a clear commercial interest, from the point of view of internationalization of the Spanish economy, in the corresponding contribution. In this connection, please note the list of 23 countries which are to be given priority according to the 2020 Guidelines.2

The three types of financing offered through the FIEM are: financing for trade, financing of concessions and financing of investment projects, of which full details can be found in the information published by the Secretary of State for Trade on its website https://comercio.gob.es/Financiacion_para_internacionalizacion/FIEM/Paginas/fiem.aspx.

B. FIEX:

The purpose of the FIEX is to foster the internationalization and business activities of Spanish companies and, in general, the Spanish economy, through direct investments in minority and short-term interests in the equity of companies located, in juridical terms, outside Spain, specifically through holdings in the capital (equity) or quasi-equity instruments (coinvestment loans, etc.).

The maximum amount of the financing is 30 million euros subject to a minimum amount of €250,000.

C. FONPYME:

The FONPYME is intended to finance direct short-term and minority holdings in the capital stock or equity of Spanish companies located in Spain, for their internationalization, or of Spanish companies located outside Spain, through participative financial instruments. Additionally, according to the provisions of Royal Decree 321/2015, of April 24, 2015, direct short-term and minority holdings may also be acquired in “capital expansion funds” or vehicles with official support, whether already existing or to be established, and in private investment funds, provided that they foster the internationalization of the Spanish enterprise or economy. The maximum amount of the financing is 5 million euros, with a minimum of €75,000 per transaction.

If the project being funded is located in a country in which COFIDES can operate, the Fund’s participation may be instrumented, if so approved by the Company’s Board of Directors and the Fund’s Executive Committee, through joint financing with COFIDES, using identical or differing financial instruments. Under the joint financing arrangement, different remuneration schemes can be established for each of the support instruments. The percentage of the COFIDES funding in transactions funded with FONPYME will be decided on a case by case basis by its Board of Directors.

D. CRECE + INTERNACIONAL:

This programme, through capital or quasi-capital instruments, finances the establishment in new markets of SMEs and small and mid-capitalization companies, and the growth of such companies in markets in which they already have a presence.

To be eligible, Spanish companies are required to have: (i) an international growth plan; (ii) a controlling interest in the subsidiary; (iii) audited financial statements reflecting revenues of between 10 and 150 million euros and sufficient EBITDA; (iv) a workforce of between 10 and 500 employees; (v) a sustainable financial position, and (vi) sound and verifiable financial projections.

The programme can take various forms, depending on the objective to be fulfilled through the internationalization of the business, namely: CRECE + INTERNACIONAL (linked to the company’s growth plan), CRECE + INTERNACIONAL + DIGITA (involving the digitalization of the subsidiary), CRECE + INTERNACIONAL + EDUCA (training of personnel in the target country) and CRECE + INTERNACIONAL + SOSTIENE (to promote good practices in the areas of Corporate Social Responsibility and sustainability).

The financing may be between 1 million and 30 million euros, the maximum being up to 90% of the need for investment in assets.

E. PYME INVIERTE (SME INVEST):

This line offers financing to Spanish SMEs that wish to undertake either a productive investment project outside Spain, with a term of more than 3 years, or a start-up of commercial activities outside Spain. Maximum financing will vary according to the SME’s objectives:

  • In productive investments, the amounts will vary between 75,000 and 10 million euros and comprise financing of up to 80% of the project’s medium and long-term needs. The period of financing will be between 5 and 10 years.
  • In start-ups of commercial activities, the investment will range from 75,000 though 1 million euros and will comprise financing of up to 80% of the expenses associated with the enterprise’s commercial implementation (expenses incurred on structure, salaries, wages and associated promotional expenses incurred by the subsidiary or branch).

F. Línea ICO-Internacional 2020 Tramo I "Inversión y Liquidez": (2020 ICO International Line Tranche I “Investment and Liquidity”

Línea ICO-Internacional2020” is aimed at Spanish independent professionals and publicly-owned and private entities (i.e., enterprises, foundations, NGO’s, public authorities), not only with registered office in Spain but also those in which, despite having their registered office abroad, at least 30% of capital stock is Spanish-owned) which carry out investment projects abroad. It will remain in force for the whole of the year 2020.

The financing can be used for investment projects and/or the general needs of the activity, including:

  1. New or second-hand productive fixed assets.
  2. Vehicles and industrial vehicles.
  3. Acquisition of companies.
  4. Creation of enterprises abroad.
  5. Technological needs.
  6. Upgrade and reform of installations.
  7. Liquidity: operating expenses, payroll, payments to supplies, purchases of merchandise, etc.

The maximum financing is 12.5 million euros or its equivalent in US dollars (USD) per customer per year, in one or more transactions and may be executed in the form of a loan, leasing arrangement or line of credit.

The repayment period and grace periods are: (i) from 1 to 6 years, with the possibility of a grace period of up to one year for the repayment of principle; (ii) from 7 to 9 years, with the possibility of a grace period of up to 2 years, (iii) or of 10, 12, 15 or 20 years, with the possibility of a grace period of up to 3 years for the repayment of principal.

The APR on the operation may not exceed the following thresholds:

  • For operations with a term equal to 1 year: A fixed or variable rate (euros or US dollars), plus up to 2.30%.
  • ­For operations with a term of 2, 3 or 4 years: A fixed or variable rate (euros or US dollars), plus up to 4%.
  • For operations with a term of 5 years or more: A fixed or variable rate (euros or US dollars), plus up to 4.30%.

This type of financing may be combined with other aid granted by the Autonomous Communities and other public institutions.

The customer can choose between a fixed or variable interest rate in the currency in which the transaction was executed.

Lastly, with regard to fees, it is to be noted that the financial institutions can charge a fee at the start of the operation, although the cost of such fee plus the interest rate may not exceed the maximum APR which the institution is able to apply to the operation based on its term.

Similarly, credit institutions can apply a voluntary early repayment fee which is generally 1% of the amount cancelled if the transaction was executed at a fixed rate. Where it was executed at a variable rate, a minimum fee of 0.05% and a maximum fee of 0.8% will be applied, depending on the residual life of the transaction on the date on which the repayment is made. In the event of mandatory early repayment, a penalty equal to 2% of the amount cancelled accrues.

G. Línea ICO Internacional 2020Tramo II “Exportadores Medio y Largo Plazo” (2020 ICO International Tranche II “Medium- and Long-Term Exporters Line”)

This financing may be requested by: (i) enterprises with registered office in Spain or with registered office abroad but with “Spanish interest”3 for the sale of goods or services, with deferred payment, to enterprises with registered office outside Spain; and (ii) enterprises with registered office outside Spain which make purchases of goods or services, with deferred payment, from enterprises with registered office in Spain or with registered office abroad but with “Spanish interest”.

In particular, the following items are eligible for financing:

  1. Supplier Facility: Financing targeted not only at enterprises with registered office in Spain, but also at those with registered office abroad but with “Spanish interest”, for the sale, with deferred payment, of new or second-hand goods or services to enterprises with registered office outside Spain.
  2. Purchaser Facility: Financing targeted at enterprises with registered office outside Spain, for the acquisition, with deferred payment, of new or second hand goods or services exported by enterprises with registered office in Spain or with registered office abroad but with “Spanish interest”.
  3. Supplementary Financing: Financing required by enterprises with registered office outside Spain which acquire goods or services exported by an enterprise with registered office in Spain, the full amount of which was not entirely covered by a Purchaser facility.

The financing may take the form of a loan, with the possibility of disbursement in multiple drawdowns, for a maximum amount of 25 million euros, or its equivalent in US dollars (USD), per customer, in one or more transactions.

The customer may choose between a fixed or variable interest rate in the currency in which the transaction is executed (euros or USD). The maximum annual cost of the operation may not, however, exceed the following thresholds:

  • ­For operations with a term of 2, 3 or 4 years: a fixed or variable rate plus up to 4%.
  • ­For operations with a term of 5 years or more: a fixed or variable rate plus up to 4.30%.

The repayment deadline and grace period may take any of the following forms:

  1. Between 2 and 6 years, with the possibility of a grace period of up to 1 year for the repayment of principal.
  2. Between 7 and 9 years, with the possibility of a grace period of up to 2 years.
  3. 10 and 12 years, with the possibility of a grace period of up to 3 years for the repayment of principal.

Lastly, it is to be noted that the credit institution may charge a fee at the start of the operation. It may also apply application costs or arrangement fees of up to 1% for transactions with a term of less than 5 years and up to 1.50% for transactions with a term of 5 years or more. Fees may also be charged for early repayment, whether voluntary (either 1% of the amount cancelled, if the transaction was executed at a fixed rate, or between a minimum 0.05% and a maximum of 0.80% if it was executed at a variable rate, having regard to the residual life of the transaction on the date on which the repayment is made) or mandatory (in which case it would incur a penalty of 2% of the amount cancelled).

Transactions may be formalized throughout the whole of 2020.

H. Línea ICO Exportadores 2020: (ICO Short Term Exporter Line):

This line of financing may be requested by independent professionals and enterprises with registered office in Spain who wish to obtain liquidity through an advance on the invoices from their export activity.

In particular, the financing is related to invoices issued within the framework of a transaction consisting of the final sale of goods and services supplied to a customer located outside Spain or to those with a document agreed with an enterprise that has its registered office outside Spain, evidencing that the purchaser undertakes to acquire goods from the enterprise that has its registered office in Spain, independent of the name and form given to such document. Invoices must be payable not more than 180 days after the transaction’s execution date.

Financing is also available in the form of pre-financing of the company’s liquidity needs to cover the production and manufacturing costs of the goods or services to be exported. This transaction is required to be cancelled prior to the formalization of the transaction consisting of an advance on invoices relating to the goods which were pre-financed.

In both cases, up to 100% of the amount of the invoice or up to 100% of the amount from the sale of the goods can be financed, provided that the outstanding balance does not exceed a maximum of 12.5 million euros per customer and year, in one or more drawdowns.

The APR on the operation will be composed of the cost of the initial fee established by the credit institution plus the interest rate. In no case can the APR exceed the maximum limit established by the ICO, currently set at 2.346%.

The interest rate applied to the customer will be variable and, as with the dates and method of payment, will be agreed between the credit institution and the customer within the framework of the agreement formalized.

Lastly, it should be mentioned that the credit institution can charge a fee at the start of the operation, although such fee added to the interest rate set may not exceed the maximum APR applicable to the operation. Also, the client may be charged a fee in the event of mandatory early repayment, equal to 1% of the amount cancelled.

Transactions may be formalized throughout the whole of 2020, this instrument being compatible with other aid received from the autonomous communities or from other institutions.

1In line with the other measures adopted by the Central Government to help enterprises confront the economic impact of the COVID-19 public health crisis, it provides for the approval of various changes in the FIEM SME Line (created in April 2019 to support the small and medium-sized exporter and to date providing support for more than 21 projects, for an amount of 21.37 million euros). The projected changes, according to the information furnished, are aimed at extending the eligible amount per transaction (from 3 to 10 million euros) as well as increasing the flexibility of repayment deadlines from 8 years up to the maximum set by the OECD Consensus in each case.

2Priority countries according to the 2020 Guidelines:

  • America: Brazil, Canada, Chile, Colombia, the US, Mexico and Peru.
  • Asia: Philippines, Indonesia, Uzbekistan, Vietnam, Japan and India.
  • Oceania: Australia.
  • Africa, Mediterranean and Middle East: South Africa, Kenia, Morocco, Egypt, Turkey, Saudi Arabia, Qatar, the United Arab Emirates and Israel.
  • HIPC countries: Ivory Coast, Senegal, Ruanda, Uganda and Tanzania.

3The ICO deems there to be “Spanish interest” for such purposes where the following exists:

  • ­Pursuit of business activities or investments in Spain, regardless of the nationality of the shareholder or holder of the financing..
  • ­Pursuit of business activities or investments outside Spain: (i) if the share of the Spanish enterprise in the capital is at least 30% of its capital or (ii) if the supplies, works or services provided by Spanish enterprises entail at least 30% of the total investment in the project.
  • ­Business activities and acquisition of Spanish goods and services by nonresident enterprises.
  • Direct or indirect holding of a Spanish company in the capital stock of the foreign company holding the financing.
  • Other cases, to be assessed in each transaction having regard to the specific circumstances of the project or of the enterprise.

In any case, the ICO must authorize the existence of “Spanish interest” having regard to the circumstances of the transaction.