The 1999 Royal Decree on foreign investments establishes the possibility to review and, if necessary, prohibit acquisitions of any asset by non-residents when these threaten Spain’s essential security interests.
On 18 March 2020, the Royal Decree-Law No. 8/2020 on extraordinary urgent measures to face the economic and social impact of COVID-19 entered into force. It provides a legal basis for the economic recovery package prepared by the Spanish Government. The Decree-Law states that the pandemic "poses a certain threat to listed Spanish companies, but also to unlisted Spanish companies that are seeing their equity value decline, many of them in strategic sectors of our economy" and that such companies have become an easy target of foreign acquisitions. Consequently, the Decree-Law suspends the liberalization regime for foreign direct investment in Spain regulated in Law 19/2003. Under the enactment, all foreign investors from outside the European Union now require prior governmental authorization to acquire 10% or more of the share capital or an effective management or control of a Spanish company. This applies to Spanish companies engaged in sectors or activities that "affect public order, public safety and public health". This list includes: a) critical infrastructures (energy, transport, water, health, communications, media, data treatment or storage, aerospace, defense, electoral or financial infrastructures, and sensitive facilities), as well as land and real estate that are key to the use of said infrastructures; b) critical technologies and dual-use products, including artificial intelligence, robotics, semiconductors, cyber security, aerospace technologies , defense, energy storage, quantum and nuclear, as well as nanotechnologies and bio-technologies; c) supply of fundamental inputs, in particular energy or those related to raw materials, as well as food security; d) sectors with access to sensitive information, particularly personal data, or with the ability to control such information; e) media.
Furthermore, an authorization is obligatory in relation to foreign investors: a) directly or indirectly controlled by the government, including public bodies or the armed forces; b) that have already made investments or participated in activities in sectors that affect safety, public order and public health in another EU Member State; c) against who an administrative or judicial proceeding has been opened in another EU Member State or in the State of origin or in a third State for carrying out criminal or illegal activities.
On 31 March 2020, Royal Decree-Law 11/2020 was adopted, enlisting additional measures that the Spanish Government undertakes to battle the consequences of the COVID-19 pandemic, including special provisions on the foreign investment regime. The new Decree-Law clarifies, among others, the definition of a foreign investor, whose investment is subject to prior authorization. The earlier Decree-Law applied only to non-EU and non-EFTA investors, but the new Decree-Law extends the scope of FDI screening to cover also EU and EFTA residents, whose real ownership corresponds to residents of countries outside the EU and EFTA. The amendment specifies that a real ownership exists, when a non-EU/EFTA resident controls - directly or indirectly - more than 25% of the investor's capital or voting rights or otherwise exercises control over an investor. On 2 April 2020, Royal Decree-Law 11/2020 entered into force. 
On 19 November 2020, the Royal Decree-Law 34/2020 relating to urgent measures against the COVID-19 pandemic entered into force. Inter alia, it prolongs the regime of suspension of liberalization of certain foreign direct investments in Spain until 30 June 2021. Under that regime, all foreign direct investment in listed companies as well as unlisted companies requires prior clerance, if the investment value exceeds 500 million euros. This applies to an acquisition of 10% or more of stock. Furthermore, the Royal Decree-Law specifies sectors, in which foreign investment is subject to advance screening. New additions include: 1) critical and dual-use technologies, key technologies for industrial leadership and training (telecommunications, artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies, nanotechnologies, biotechnologies, advanced materials and advanced manufacturing systems); 2) supply of fundamental inputs, in particular energy, or those related to strategic connectivity services or raw materials, as well as food security, and 3) media.
On 23 November 2021, Royal Decree-Law 27/2021 entered into force. Among others, this text extends the application of the temporary regime by which certain investments made by EU/EFTA residents, or by residents in Spain the ultimate ownership of which corresponds to residents of other EU/EFTA countries are subject to authorization. This regime applies only for investments in Spain listed companies and in unlisted companies if the value of the investment exceeds EUR 500 million. Initially to be applied until 31 December 2021, the temporary regime was extended until the 31 December 2022.
On 28 December 2022, Royal Decree-Law 20/2022 entered into force. Among others, this text broadens the definition of the term “foreign direct investment” of Article 7bis of the Law 19/2003 and extends the application of the temporary regime once more until 31 December 2023.
"Article 2. Subjects of foreign investment.
1. They can be holders of foreign investments in Spain:
a) Individuals not resident in Spain, understood as Spaniards or foreigners, domiciled abroad or who have their main residence there.
b) Legal persons domiciled abroad, as well as public entities of foreign sovereignty.
2. Natural persons of Spanish nationality and legal persons domiciled in Spain shall be presumed to be resident in Spain unless proven otherwise.
[...]
Article 4. Declaration.
1. Foreign investments in Spain, and their liquidation, will be declared to the Investment Registry of the Ministry of Economy and Finance, for administrative, statistical or economic purposes.
2. The obligation to declare referred to in the previous section shall comply with the following rules:
a) If the purpose of the declaration is an investment that comes from tax havens, understood as the territories or countries provided for in Royal Decree 1080/1991, of July 5, the holder of the same must make it prior to the realization from the investment. This declaration will be understood without prejudice to the one to be made after the investment is made, in accordance with the following letter.
However, the following cases will be exempted from the prior declaration:
1. Investments in negotiable securities, whether issued or offered publicly, whether they are traded on an official secondary market or not, as well as participations in investment funds registered in the Registers of the National Securities Market Commission.
2. When the foreign participation does not exceed 50% of the capital of the Spanish company receiving the investment.
[...]
Article 10. Suspension of the liberalization regime.
1. The Council of Ministers, at the proposal of the Minister of Economy and Finance and, where appropriate, of the head of the competent Department by reason of the matter, and following a report from the Board of Foreign Investments, may agree, in a reasoned manner, with general or particular nature, the suspension of the liberalization regime established in this Royal Decree and provided that investments by their nature, form or conditions of realization, affect or may affect activities related, even if only occasionally, with the exercise of public power, or to activities that affect or may affect public order, public health and safety.
2. Once the liberalization regime is suspended, the affected investor must request prior administrative authorization regarding the investment operations that, from the moment of notification of the suspension, it intends to carry out.[...]" (Royal Decree on foreign investments (664/1999, of April 23), in force from 25 May 1999, Articles 2, 4 and 10 [google translation])
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"Article 7 bis. Suspension of the liberalization regime for certain foreign direct investments in Spain.
1. For the purposes of the provisions of this article, direct foreign investments in Spain are considered to be all those as a result of which the investor holds a stake equal to or greater than 10% of the share capital of a Spanish company, and all other that as a consequence of the corporate operation, act or legal business carried out, control of all or part of it is acquired, by application of the criteria established in article 7 of Law 15/2007, of July 3 , of Defense of Competition, whenever one of these circumstances occurs:
a) That are carried out by residents of countries outside the European Union and the European Free Trade Association.
b) That are carried out by residents of countries of the European Union or the European Free Trade Association whose beneficial ownership corresponds to residents of countries outside the European Union and the European Free Trade Association. It will be understood that this beneficial ownership exists when the latter ultimately own or control, directly or indirectly, a percentage greater than 25% of the capital or voting rights of the investor, or when they exercise control, directly or indirectly, by other means, from the investor.
2. The liberalization regime for foreign direct investments in Spain, carried out in the sectors mentioned below and that affect public order, public security and public health, is suspended:
a) Critical infrastructures, whether physical or virtual (including energy, transportation, water, health, communications, media, data processing or storage, aerospace, defense, electoral or financial infrastructure, and sensitive facilities), as well as land and real estate that are key for the use of said infrastructures, understood as those contemplated in Law 8/2011, of April 28, which establishes measures for the protection of critical infrastructures.
b) Critical and dual-use technologies, key technologies for industrial leadership and training, and technologies developed under programs and projects of particular interest to Spain, including telecommunications, artificial intelligence, robotics, semiconductors, cybersecurity , aerospace, defense, energy storage, quantum and nuclear technologies, nanotechnologies, biotechnologies, advanced materials and advanced manufacturing systems.
c) Supply of fundamental inputs, in particular energy, understood as those that are subject to regulation in Law 24/2013, of December 26, of the Electrical Sector, and in Law 34/1998, of October 7, of the Hydrocarbon Sector or those referring to strategic connectivity services or raw materials, as well as food security.
d) Sectors with access to sensitive information, in particular personal data, or with the capacity to control said information, in accordance with Organic Law 3/2018, of December 5, on the Protection of Personal Data and guarantee of digital rights .
e) Media, without prejudice to the fact that audiovisual communication services in the terms defined in Law 7/2010, of March 31, General Audiovisual Communication, will be governed by the provisions of said Law. [...]
3. Likewise, the liberalization regime for foreign direct investments in Spain is suspended in the following cases:
a) if the foreign investor is controlled directly or indirectly by the government, including public organizations or the armed forces, of a third country, applying the criteria established in article 7.2 of the Defense Law for the purposes of determining the existence of said control. of the Competition.
b) if the foreign investor has made investments or participated in activities in sectors that affect security, public order and public health in another Member State, and especially those listed in section 2 of this article.
c) if there is a serious risk that the foreign investor carries out criminal or illegal activities that affect public safety, public order or public health in Spain.
4. The Government may suspend the liberalization regime for foreign direct investments in Spain in those other sectors not contemplated in section 2 of this article, when they may affect public safety, public order and public health, in accordance with the procedure established in article 7 of this Law.
5. The suspension of the liberalization regime established in accordance with sections 2, 3 and 4 of this article will determine the submission of the aforementioned investment operations to obtaining authorization, in accordance with the provisions of article 6 of this Law. Investment operations carried out without the required prior authorization will lack validity and legal effects until they are legalized in accordance with the provisions of Article 6 of the Law." (Law on the legal regime of capital movements and economic transactions abroad and on certain measures to prevent money laundering (19/2003, of July 4); as amended by Royal Decree-Law on extraordinary urgent measures to face the economic and social impact of COVID-19 (8/2020, of March 17), Royal Decree-Law by which urgent complementary measures are adopted in the social and economic sphere to deal with COVID-19 (11/2020, of March 31), Royal Decree-Law on urgent measures to support business solvency and the energy sector, and in tax matters (34/2020, of November 17), Royal Decree-Law by which certain economic measures are extended to support recovery (27/2021 of November 23 2021); and Royal Decree-Law on measures to respond to the economic and social consequences of the War in Ukraine and to support the reconstruction of the island of La Palma and other situations of vulnerability (20/2022, of December 27), Article 7 bis [google translation])
Royal Decree on foreign investments (664/1999, of April 23), in force from 25 May 1999, Articles 2, 4 and 10
Law on the legal regime of capital movements and economic transactions abroad and on certain measures to prevent money laundering (19/2003, of July 4); as amended by Royal Decree-Law on extraordinary urgent measures to face the economic and social impact of COVID-19 (8/2020, of March 17), Royal Decree-Law by which urgent complementary measures are adopted in the social and economic sphere to deal with COVID-19 (11/2020, of March 31), Royal Decree-Law on urgent measures to support business solvency and the energy sector, and in tax matters (34/2020, of November 17), Royal Decree-Law by which certain economic measures are extended to support recovery (27/2021 of November 23 2021); and Royal Decree-Law on measures to respond to the economic and social consequences of the War in Ukraine and to support the reconstruction of the island of La Palma and other situations of vulnerability (20/2022, of December 27), Article 7 bis
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