65473 Economy Profile: Spain © 2012 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org All rights reserved. 1 2 3 4 08 07 06 05 A copublication of The World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. 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ISBN: 978-0-8213-8833-4 E-ISBN: 978-0-8213-8834-1 DOI: 10.1596/978-0-8213-8833-4 ISSN: 1729-2638 Printed in the United States Doing Business 2012 Spain 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 25 Getting electricity ....................................................................................................................... 36 Registering property .................................................................................................................. 43 Getting credit .............................................................................................................................. 53 Protecting investors ................................................................................................................... 60 Paying taxes ................................................................................................................................ 70 Trading across borders .............................................................................................................. 78 Enforcing contracts .................................................................................................................... 87 Resolving insolvency .................................................................................................................. 94 Data notes ................................................................................................................................. 100 Resources on the Doing Business website ............................................................................ 105 Doing Business 2012 Spain 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is the paying taxes indicators, which cover the period for a local entrepreneur to open and run a small to January–December 2010). medium-size business when complying with relevant The Doing Business methodology has limitations. Other regulations. It measures and tracks changes in areas important to business—such as an economy’s regulations affecting 10 areas in the life cycle of a proximity to large markets, the quality of its business: starting a business, dealing with construction infrastructure services (other than those related to permits, getting electricity, registering property, trading across borders and getting electricity), the getting credit, protecting investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts and transparency of government procurement, resolving insolvency. macroeconomic conditions or the underlying strength In a series of annual reports Doing Business presents of institutions—are not directly studied by Doing quantitative indicators on business regulations and the Business. The indicators refer to a specific type of protection of property rights that can be compared business, generally a local limited liability company across 183 economies, from Afghanistan to Zimbabwe, operating in the largest business city. Because over time. The data set covers 46 economies in Sub- standard assumptions are used in the data collection, Saharan Africa, 32 in Latin America and the Caribbean, comparisons and benchmarks are valid across 24 in East Asia and the Pacific, 24 in Eastern Europe economies. The data not only highlight the extent of and Central Asia, 18 in the Middle East and North obstacles to doing business; they also help identify the Africa and 8 in South Asia, as well as 31 OECD high- source of those obstacles, supporting policy makers in income economies. The indicators are used to analyze designing regulatory reform. economic outcomes and identify what reforms have More information is available in the full report. Doing worked, where and why. Business 2012 presents the indicators, analyzes their This economy profile presents the Doing Business relationship with economic outcomes and indicators for Spain. To allow useful comparison, it also recommends regulatory reforms. The data, along with provides data for other selected economies information on ordering Doing Business 2012, are (comparator economies) for each indicator. The data in available on the Doing Business website at this report are current as of June 1, 2011 (except for http://www.doingbusiness.org. Doing Business 2012 Spain 5 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to ECONOMY OVERVIEW start is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing Region: OECD high income business based on indicator sets that measure and benchmark regulations applying to domestic small to Income category: High income medium-size businesses through their life cycle. Economies are ranked from 1 to 183 by the ease of Population: 46,217,400 doing business index. For each economy the index is calculated as the ranking on the simple average of its GNI per capita (US$): 31,650.00 percentile rankings on each of the 10 topics included in the index in Doing Business 2012: starting a business, DB2012 rank: 44 dealing with construction permits, getting electricity, registering property, getting credit, protecting DB2011 rank: 45 investors, paying taxes, trading across borders, Change in rank: 1 enforcing contracts and resolving insolvency. The ranking on each topic is the simple average of the percentile rankings on its component indicators (see Note: See the data notes for sources and the data notes for more details). 1 definitions. The aggregate ranking on the ease of doing business benchmarks each economy’s performance on the indicators against that of all other economies in the Doing Business sample (figure 1.1). While this ranking tells much about the business environment in an economy, it does not tell the whole story. The ranking on the ease of doing business, and the underlying indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. 1 Except for the ease of getting credit, for which the percentile rankings on its component indicators are weighted, the depth of credit information index at 37.5% and the strength of legal rights index at 62.5%. Doing Business 2012 Spain 6 THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2012 Spain 7 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy the regional average (figure 1.2). The economy’s stands in the aggregate ranking on the ease of doing rankings on the topics included in the ease of doing business is useful. Also useful is to know how it ranks business index provide another perspective (figure compared with other economies and compared with 1.3). Figure 1.2 How Spain and comparator economies rank on the ease of doing business Source: Doing Business database. Doing Business 2012 Spain 8 THE BUSINESS ENVIRONMENT Figure 1.3 How Spain ranks on Doing Business topics Source: Doing Business database. Doing Business 2012 Spain 9 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing This measure shows the distance of each economy to business tells only part of the story, so do changes in the ―frontier,‖ a synthetic measure based on the most that ranking. Yearly movements in rankings can efficient practice or highest score observed for each provide some indication of changes in an economy’s Doing Business indicator across all economies and regulatory environment for firms, but they are always years included in the Doing Business sample since relative. An economy’s ranking might change because 2005. Nine areas of business regulation are covered. of developments in other economies. An economy that Comparing the measure for an economy at 2 points in implemented business regulation reforms may fail to time allows users to assess how much the economy’s rise in the rankings (or may even drop) if it is passed regulatory environment as measured by Doing by others whose business regulation reforms had a Business has changed over time—how far it has moved more significant impact as measured by Doing toward (or away from) the most efficient practices and Business. strongest regulations in areas covered by Doing Moreover, year-to-year changes in the overall rankings Business (figure 1.4). The results may show that the do not reflect how the business regulatory pace of change varies widely across the areas environment in an economy has changed over time— measured. They also may show that an economy is or how it has changed in different areas. To aid in relatively close to the frontier in some areas and assessing such changes, Doing Business 2012 relatively far from it in others. introduces the distance to frontier measure. Figure 1.4 How far has Spain come in the areas measured by Doing Business? Distance to frontier, 2005 and 2011 Note: For economies added to the Doing Business sample after 2005, the starting point is the year in which they were added: 2006 for Montenegro; 2007 for Brunei Darussalam, Liberia and Luxembourg; 2008 for The Bahamas, Bahrain and Qatar; and 2009 for Cyprus and Kosovo. See the data notes for more details on the distance to frontier measure. Source: Doing Business database. Doing Business 2012 Spain 10 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part business regulation—such as a regulatory process that of the story (table 1.1). The indicators, on their own or can be completed with a small number of procedures in comparison with the indicators of a good practice in a few days and at a low cost. Comparison of the economy or those of comparator economies in the economy’s indicators today with those in the previous region, may reveal bottlenecks reflected in large year may show where substantial bottlenecks persist— numbers of procedures, long delays or high costs. Or and where they are diminishing. they may reveal unexpected strengths in an area of Table 1.1 Summary of Doing Business indicators for Spain United Kingdom DB2012 Best performer globally United States DB2012 Switzerland DB2012 Germany DB2012 Indicator Portugal DB2012 Spain DB2012 Spain DB2011 Italy DB2012 DB2012 Starting a Business 133 148 98 77 26 85 19 13 New Zealand (1) (rank) Procedures (number) 10 10 9 6 5 6 6 6 Canada (1)* Time (days) 28 47 15 6 5 18 13 6 New Zealand (1) Cost (% of income per 4.7 15.1 4.6 18.2 2.3 2.1 0.7 1.4 Denmark (0.0)* capita) Paid-in Min. Capital (% 13.2 13.5 0.0 9.9 0.0 26.9 0.0 0.0 82 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 38 39 15 96 97 46 22 17 China (1) (rank) Procedures (number) 8 8 9 11 14 13 9 15 Denmark (5) Time (days) 182 182 97 258 255 154 99 26 Singapore (26)* Cost (% of income per 51.8 47.3 49.7 138.1 47.2 40.1 63.8 12.8 Qatar (1.1) capita) Doing Business 2012 Spain 11 United Kingdom DB2012 Best performer globally United States DB2012 Switzerland DB2012 Germany DB2012 Portugal DB2012 Indicator Spain DB2012 Spain DB2011 Italy DB2012 DB2012 Getting Electricity (rank) 69 70 2 109 34 6 60 17 Iceland (1) Procedures (number) 5 5 3 5 5 3 5 4 Germany (3)* Time (days) 101 101 17 192 64 39 109 68 Germany (17) Cost (% of income per 231.9 236.9 49.9 327.2 54.6 62.7 72.3 16.8 Japan (0.0) capita) Registering Property 56 45 77 84 31 14 68 16 New Zealand (3) (rank) Procedures (number) 5 4 5 7 1 4 6 4 Portugal (1)* Time (days) 13 13 40 27 1 16 29 12 Portugal (1) Cost (% of property 7.1 7.1 5.2 4.5 7.3 0.4 4.7 0.8 Slovak Republic (0.0) value) Getting Credit (rank) 48 45 24 98 126 24 1 4 United Kingdom (1)* Strength of legal rights 6 6 7 3 3 8 10 9 New Zealand (10)* index (0-10) Depth of credit 5 5 6 5 4 5 6 6 Japan (6)* information index (0-6) Public registry coverage 54.7 54.6 1.3 23.0 86.2 0.0 0.0 0.0 Portugal (86.2) (% of adults) Private bureau coverage 11.4 10.7 100.0 100.0 21.5 27.3 100.0 100.0 New Zealand (100.0)* (% of adults) Protecting Investors 97 93 97 65 46 166 10 5 New Zealand (1) (rank) Extent of disclosure 5 5 5 7 6 0 10 7 France (10)* index (0-10) Doing Business 2012 Spain 12 United Kingdom DB2012 Best performer globally United States DB2012 Switzerland DB2012 Germany DB2012 Portugal DB2012 Indicator Spain DB2012 Spain DB2011 Italy DB2012 DB2012 Extent of director 6 6 5 4 5 5 7 9 Singapore (9)* liability index (0-10) Ease of shareholder suits 4 4 5 6 7 4 7 9 New Zealand (10)* index (0-10) Strength of investor 5.0 5.0 5.0 5.7 6.0 3.0 8.0 8.3 New Zealand (9.7) protection index (0-10) Paying Taxes (rank) 48 76 89 134 78 12 24 72 Canada (8) Payments (number per 8 8 12 15 8 19 8 11 Norway (4) year) Time (hours per year) 187 197 221 285 275 63 110 187 Luxembourg (59) Trading Across Borders 55 57 12 63 26 41 13 20 Singapore (1) (rank) Documents to export 6 6 4 4 4 4 4 4 France (2) (number) Hong Kong SAR, Time to export (days) 9 9 7 20 16 8 7 6 China (5)* Cost to export (US$ per 1221 1221 872 1245 685 1537 950 1050 Malaysia (450) container) Documents to import 7 7 5 4 5 5 4 5 France (2) (number) Time to import (days) 10 10 7 18 15 9 6 5 Singapore (4) Cost to import (US$ per 1221 1221 937 1245 899 1540 1045 1315 Malaysia (435) container) Enforcing Contracts 54 53 8 158 22 23 21 7 Luxembourg (1) (rank) Doing Business 2012 Spain 13 United Kingdom DB2012 Best performer globally United States DB2012 Switzerland DB2012 Germany DB2012 Portugal DB2012 Indicator Spain DB2012 Spain DB2011 Italy DB2012 DB2012 Time (days) 515 515 394 1210 547 390 399 300 Singapore (150) Cost (% of claim) 17.2 17.2 14.4 29.9 13.0 24.0 24.8 14.4 Bhutan (0.1) Procedures (number) 39 39 30 41 31 32 28 32 Ireland (21)* Resolving Insolvency 20 21 36 30 22 43 6 15 Japan (1) (rank) Time (years) 1.5 1.5 1.2 1.8 2.0 3.0 1.0 1.5 Ireland (0.4) Cost (% of estate) 11 11 8 22 9 4 6 7 Singapore (1)* Recovery rate (cents on 75.6 70.5 53.8 61.1 70.9 47.5 88.6 81.5 Japan (92.7) the dollar) Note: The methodology for the paying taxes indicators changed in Doing Business 2012; see the data notes for details. For these indicators, the best performer globally is the economy that has implemented the most efficient practices in its tax system and is not necessarily the one with the highest ranking. For more information on “no practice� marks, see the data notes for details. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2012 Spain 14 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as Preregistration (for example, name well as to new markets. And their employees can verification or reservation, notarization) benefit from protections provided by the law. An additional benefit comes with limited liability Registration in the economy’s largest companies. These limit the financial liability of business city company owners to their investments, so personal Postregistration (for example, social security assets of the owners are not put at risk. Where registration, company seal) governments make registration easy, more entrepreneurs start businesses in the formal sector, Time required to complete each procedure creating more good jobs and generating more (calendar days) revenue for the government. Does not include time spent gathering What do the indicators cover? information Doing Business measures the ease of starting a Each procedure starts on a separate day business in an economy by recording all Procedure completed once final document is procedures that are officially required or commonly received done in practice by an entrepreneur to start up and formally operate an industrial or commercial No prior contact with officials business—as well as the time and cost required to Cost required to complete each procedure complete these procedures. It also records the (% of income per capita) paid-in minimum capital that companies must deposit before registration (or within 3 months). Official costs only, no bribes The ranking on the ease of starting a business is No professional fees unless services required the simple average of the percentile rankings on by law the 4 component indicators: procedures, time, cost and paid-in minimum capital requirement. Paid-in minimum capital (% of income per capita) To make the data comparable across economies, Doing Business uses several assumptions about the Deposited in a bank or with a notary before business and the procedures. It assumes that all registration (or within 3 months) information is readily available to the entrepreneur  Has a start-up capital of 10 times income per and that there has been no prior contact with capita. officials. It also assumes that all government and nongovernment entities involved in the process  Has a turnover of at least 100 times income per capita. function without corruption. And it assumes that the business:  Does not qualify for any special benefits.  Is a limited liability company, located in the  Does not own real estate. largest business city.  Is 100% domestically owned.  Conducts general commercial or industrial activities. Doing Business 2012 Spain 15 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Spain? costs 4.7% of income per capita and requires paid-in According to data collected by Doing Business, starting minimum capital of 13.2% of income per capita (figure a business there requires 10 procedures, takes 28 days, 2.1). Figure 2.1 What it takes to start a business in Spain Paid-in minimum capital (% of income per capita): 13.2 Note: For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2012 Spain 16 STARTING A BUSINESS Globally, Spain stands at 133 in the ranking of 183 regional average ranking provide other useful economies on the ease of starting a business (figure information for assessing how easy it is for an 2.2). The rankings for comparator economies and the entrepreneur in Spain to start a business. Figure 2.2 How Spain and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2012 Spain 17 STARTING A BUSINESS What are the changes over time? While the most recent Doing Business data reflect how changed—and which have not (table 2.1). That can easy (or difficult) it is to start a business in Spain today, help identify where the potential for improvement is data over time show which aspects of the process have greatest. Table 2.1 The ease of starting a business in Spain over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. .. 148 133 Procedures (number) 10 10 10 10 10 10 10 10 10 Time (days) 114 114 47 47 47 47 47 47 28 Cost (% of income per 16.8 17.0 16.5 16.2 15.1 14.9 15.0 15.1 4.7 capita) Paid-in Min. Capital (% 17.9 16.9 15.7 14.6 13.7 13.1 12.8 13.5 13.2 of income per capita) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Doing Business 2012 Spain 18 STARTING A BUSINESS Equally helpful may be the benchmarks provided by Spain on ways to improve the ease of starting a the economies that today have the best performance business. And changes in regional averages can show regionally or globally on the procedures, time, cost or where Spain is keeping up—and where it is falling paid-in minimum capital required to start a business behind. (figure 2.3). These economies may provide a model for Figure 2.3 Has starting a business become easier over time? Procedures (number) Time (days) Doing Business 2012 Spain 19 STARTING A BUSINESS Cost (% of income per capita) Paid-in minimum capital (% of income per capita) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. In the case of paid-in minimum capital, 82 economies globally and 7 economies in OECD high income have no paid-in minimum capital. Source: Doing Business database. Doing Business 2012 Spain 20 STARTING A BUSINESS Economies around the world have taken steps making greater firm satisfaction and savings and more it easier to start a business—streamlining procedures registered businesses, financial resources and job by setting up a one-stop shop, making procedures opportunities. simpler or faster by introducing technology and What business registration reforms has Doing Business reducing or eliminating minimum capital requirements. recorded in Spain (table 2.2)? Many have undertaken business registration reforms in stages—and they often are part of a larger regulatory reform program. Among the benefits have been Table 2.2 How has Spain made starting a business easier—or not? By Doing Business report year DB Year Reform Spain eased the process of starting a business by reducing DB2012 the cost to start a business and decreasing the minimum capital requirement. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Spain 21 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Spain is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new City: Madrid firm. These are identified by Doing Business through collaboration with relevant local Legal Form: Sociedad de Responsabilidad Limitada (SRL) - professionals and the study of laws, regulations and Limited Liability Company publicly available information on business entry in Start-up capital: 10 times GNI per capita that economy. Following is a detailed summary of those procedures, along with the associated time Paid-in minimum capital (% of income per and cost. These procedures are those that apply to capita): 13.2 a company matching the standard assumptions (the ―standardized company‖) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Summary of procedures for starting a business in Spain—and the time and cost Time to No. Procedure Cost to complete complete Obtain a certification of uniqueness of proposed company name (certificación negativa de la denominación social) from the Mercantile Register The certification of uniqueness of the corporate name can be obtained directly from the Central Mercantile Registry by filing the corresponding form. Alternatively, it can be requested by mail or via the Internet. The Central Mercantile Registry must mail the certification C.O.D. to the address indicated in the request. EUR 15.95 (certificate) 1 3 days Once the Registry issues the certification, the requested corporate + EUR 3 (stamps) name will be reserved for a maximum of 6 months from the certification’s date of issuance. Each certification of uniqueness of the corporate name is valid for 3 months from its date of issuance. Should the company not be incorporated within this term, a certificate renewal must be requested. The certification must be attached to the public deed of incorporation. The cost of the certificate is EUR 15.95 + EUR 3 Open a bank account for the company; deposit capital in the bank and obtain a deposit certificate Pursuant to Spanish Royal Decree 1,784/1996 (Article 189, second 2 paragraph), the contributions can also be directly given to the notary 1 day no charge public before whom the deed of incorporation is going to be granted, at the time of the granting, so that the notary can deposit them in the Company's bank account, provided that (i) the contributions are paid in with cash, and (ii) the request to deposit the capital is included in the Doing Business 2012 Spain 22 Time to No. Procedure Cost to complete complete public deed. Grant a public deed of incorporation before a public notary approximately EUR The public deed of incorporation must include (a) the identity of the 500, depends on the company shareholders; (b) their will to incorporate the company; (c) the amount of the share 3 disbursement made by each of shareholder and the number of shares 1 day capital and subscribed to by each; (d) the company bylaws; (e) the type of complexity of the administrative body that will manage the company; and (f) the identity operation. of its administrators or directors. Submit Declaración Censal de Inicio de Actividad and obtain the Tax Identification Number (Numero de Identificacion Fiscal, NIF) from the Delegación Provincial de la Agencia Estatal de la Administración Tributaria As a general rule, the statement on commencement of business activities (Declaración Censal de Inicio de Actividad) must be filed and the tax identification number must be obtained before the company starts business activities. A copy of the public deed of incorporation must be filed with the Delegación Provincial de la Agencia Estatal de la 4 Administración Tributaria with the corresponding form. Through the 1 day no charge same procedure, the company must also register for VAT. The tax identification number is a prerequisite for registering the public deed of incorporation with the Mercantile Registry . Form 036 may be filed in person with the Delegación Provincial de la Agencia Estatal de la Administración Tributaria or by registered mail, along with the following documents: (a) the original and a copy of the public deed of incorporation; (b) original or copy of identity documents (such as DNI or NIE for a foreign individual or legal entity) of the shareholders; and (c) original of an identity document (such as DNI or NIE. for a foreign individual or legal entity) of the representative of the company. Obtain a tax declaration of exemption from the Dirección General de Tributos - Consejería Hacienda Comunidad Madrid On December 3, 2010, Spain adopted Royal Decree 13/2010 whose aim is to support businesses, primarily small and medium enterprises, and remove obstacles to growth, competitiveness and job creation. According to article 3 of Royal Decree 13/2010, all operations regarding the incorporation, capitalization and maintenance of companies are 1 day no charge 5 exempt from the Asset Transfer and Legal Documented Acts Tax. This implies that limited liabilities companies are exempted from the payment of this tax to the Dirección Gral de Tributos - Consejería Hacienda Comunidad Madrid (1% of the capital of the company). A tax declaration must be obtained from the Dirección Gral de Tributos - Consejería Hacienda Comunidad Madrid. Otherwise, the incorporation may be denied at the Company's registry. File the public deed of incorporation of the company for its 6 registration with the Mercantile Registry. 6 days EUR 155 Doing Business 2012 Spain 23 Time to No. Procedure Cost to complete complete The registration costs are based on variables such as the amount of the company share capital, the number of shareholders, and the type of administrative body. For example, for a company with share capital EUR 219,760 with five shareholders and five members of the board of directors, the registration fee would be about EUR 159. Fee schedule for registration: - If company share capital does not exceed EUR 3,005.06: fee is EUR6.01. - EUR 3,005.06 to EUR 30,050.61: 0.10%. - EUR 30,050.61 to EUR 90,151.82: 0.08%. - EUR 90,151.82 to EUR 240,404.84: 0.06%. - EUR 240,404.84 to EUR 601,012.10: 0.038%. - EUR 601,012.10 to EUR 1,202,024.21: 0.02%. - EUR 1,202,024.21 to EUR 6,010,121.04: 0.009%. - Over EUR 6,010,121.04: 0.005%. In any case, the regulated applicable global tariff will not exceed EUR 2,181.67. According to Royal Decree 8/2010 of 20 May to fight crisis fees for public registrar have been reduced by 5%. The company public deed of incorporation must be filed with the Mercantile Registry of the place where the company has its corporate address within 2 months of the date it was granted. For the public deed to be registered, it is necessary that the Asset Transfer and the Legal Documented Acts Tax has been paid and the tax identification number obtained. Once the public deed of incorporation has been registered, the company incorporation will be published in the Official Journal of the Mercantile Registry. Upon registration, the company acquires the status of a legal entity. Legalize company books approximately EUR 25 7 The process of legalizing the company books consists of the filling of 15 days per book (2 books) + the corresponding application form and the payment of the relevant EUR 21.14 to legalize fees to the Mercantile Registry. * Submit a notification of start of operations (declaracién responsable) to the municipality. Law 2/2011 of March 04, 2011 of Sustainable Economy substituted the 7 days (simultaneous requirement of obtaining a municipal license with a simple notification, with previous EUR 350 8 for general companies that do not have a hazardous impact on the procedure) environment, public health, security, or the preservation of national and artistic heritage. A general company is now able to start operations with a simple notification. The municipality will conduct an ex-post inspection to ensure compliance. * File for social security and affiliate all workers with the local general treasury of social security (Tesoreria General de la 1 day (simultaneous 9 no charge Seguridad Social) with procedure 7) Doing Business 2012 Spain 24 Time to No. Procedure Cost to complete complete Upon registration of the company with Social Security, a state supervisory number is issued and assigned to the company. The required documents are (a) the corresponding form; (b) a copy of the public deed of incorporation; (c) a photocopy of the applicant’s national identity document or power of attorney; and (d) the company tax identification number. Registration of the company and affiliation of all the workers must be made before starting any business activities. In addition to the registration of the company, registration of each employee with the Spanish Social Security System is required by submitting the following documentation upon hire: (a) corresponding form (signed by both the company and the employee); (b) powers of attorney of the company representative; (c) a copy of the employee's national identity document (such as DNI, NIE, or passport); and (c) a copy of the company representative's national identity card. The Decree 68/2010 of March 26th, 2010 has led to the use of electronic means to start up any type of company. Consequently, the documents that are required in order to register employees with the Spanish Social Security System may be submitted using new electronic procedures. Alternatively, the documents that are required in order to register employees with the Spanish Social Security System may be submitted using these new electronic procedures (Real Decreto 368/2010, de 26 de marzo por el que se regulan las especificaciones y condiciones para el empleo del Documento Único Electrónico (DUE)). Notify the Delegación Provincial de la Consejería de Trabajo e Industria The company must keep a visits book (libro de visitas) at all times. Information that must be noted includes the details of the company and the work place and a description of its business activity. The corresponding autonomous community must be notified within the 1 day no charge 10 first 30 days of the start of activities and the opening of the workplace. Every autonomous community has its own form. Some require that work injury and safety documentation (corresponding to the specific business or workplace in question) be filed along with the forms. Other forms and documents might be needed depending on the workplace activities. Pursuant to Spanish Labour Inspection's resolution of 25 November 2008, the company can now register through the Labour Inspection's visits book's electronic system. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2012 Spain 25 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid PERMITS INDICATORS MEASURE excessive constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in Procedures to legally build a warehouse time and money, many builders opt out. They may (number) pay bribes to pass inspections or simply build Submitting all relevant documents and illegally, leading to hazardous construction that obtaining all necessary clearances, licenses, puts public safety at risk. Where compliance is permits and certificates simple, straightforward and inexpensive, everyone Completing all required notifications and is better off. receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water, Doing Business records the procedures, time and sewerage and a fixed telephone line cost for a business to obtain all the necessary Registering the warehouse after its approvals to build a simple commercial warehouse completion (if required for use as collateral or in the economy’s largest business city, connect it to for transfer of the warehouse) basic utilities and register the property so that it Time required to complete each procedure can be used as collateral or transferred to another (calendar days) entity. Does not include time spent gathering The ranking on the ease of dealing with information construction permits is the simple average of the Each procedure starts on a separate day percentile rankings on its component indicators: procedures, time and cost. Procedure completed once final document is received To make the data comparable across economies, Doing Business uses several assumptions about the No prior contact with officials business and the warehouse, including the utility Cost required to complete each procedure (% connections. of income per capita) The business: Official costs only, no bribes  Is a limited liability company operating in  Will be connected to water, sewerage the construction business and located in (sewage system, septic tank or their the largest business city. equivalent) and a fixed telephone line. The  Is domestically owned and operated. connection to each utility network will be 10 meters (32 feet, 10 inches) long.  Has 60 builders and other employees.  Will be used for general storage, such as of The warehouse: books or stationery (not for goods requiring  Is a new construction (there was no special conditions). previous construction on the land).  Will take 30 weeks to construct (excluding all  Has complete architectural and technical delays due to administrative and regulatory plans prepared by a licensed architect. requirements). Doing Business 2012 Spain 26 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to permits there requires 8 procedures, takes 182 days build a warehouse in Spain? According to data and costs 51.8% of income per capita (figure 3.1). collected by Doing Business, dealing with construction Figure 3.1 What it takes to comply with formalities to build a warehouse in Spain Note: For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2012 Spain 27 DEALING WITH CONSTRUCTION PERMITS Globally, Spain stands at 38 in the ranking of 183 economies and the regional average ranking provide economies on the ease of dealing with construction other useful information for assessing how easy it is for permits (figure 3.2). The rankings for comparator an entrepreneur in Spain to legally build a warehouse. Figure 3.2 How Spain and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2012 Spain 28 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? While the most recent Doing Business data reflect how the process have changed—and which have not (table easy (or difficult) it is to deal with construction permits 3.1). That can help identify where the potential for in Spain today, data over time show which aspects of improvement is greatest. Table 3.1 The ease of dealing with construction permits in Spain over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. 39 38 Procedures (number) 8 8 8 8 8 8 8 Time (days) 182 182 182 182 182 182 182 Cost (% of income per 55.0 51.1 47.9 46.0 45.0 47.3 51.8 capita) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. For more information on “no practice� marks, see the data notes for details. Source: Doing Business database. Doing Business 2012 Spain 29 DEALING WITH CONSTRUCTION PERMITS Equally helpful may be the benchmarks provided by ways to improve the ease of dealing with construction the economies that today have the best performance permits. And changes in regional averages can show regionally or globally on the procedures, time or cost where Spain is keeping up—and where it is falling required to deal with construction permits (figure 3.3). behind. These economies may provide a model for Spain on Figure 3.3 Has dealing with construction permits become easier over time? Procedures (number) Time (days) Doing Business 2012 Spain 30 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. In cases where no data are displayed above for the economy, this indicates that the economy has received a “no practice� mark; see the data notes for details. Source: Doing Business database. Doing Business 2012 Spain 31 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while building safety while keeping compliance costs making compliance easy and accessible to all. reasonable, governments around the world have Coherent and transparent rules, efficient processes and worked on consolidating permitting requirements. adequate allocation of resources are especially What construction permitting reforms has Doing important in sectors where safety is at stake. Business recorded in Spain (table 3.2)? Construction is one of them. In an effort to ensure Table 3.2 How has Spain made dealing with construction permits easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Spain 32 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Spain are based BUILDING A WAREHOUSE on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through City : Madrid information collected from experts in construction licensing, including architects, construction Estimated lawyers, construction firms, utility service providers EUR 700,000 Warehouse Value : and public officials who deal with building regulations. These procedures are those that apply The procedures, along with the associated time and to a company and structure matching the standard cost, are summarized below. assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Summary of procedures for dealing with construction permits in Spain —and the time and cost Time to No. Procedure Cost to complete complete Request and Obtain a building license The relevant authority is the Municipality of Madrid. The documents required to obtain the license are the following: - A standardized application form and sheet containing the characteristics of the construction, properly completed. - Proof of payment of tax. - Declaration by one or more technical authors (architect and project design specialists) that the project conforms to the appropriate town planning regulations, and certificate of the structural feasibility, if necessary. - Declaration of the promoter that a signboard has been posted at the site to inform the public that a building license has been applied for and to provide information about the proposed operations and activities 90 days EUR 7,000 1 - Three copies of the technical project designs, signed by qualified technician(s) and countersigned by the appropriate official institute (or in this case, by the project’s administrative supervision office, accompanied by the application sheets of the appropriate professional association). - Confirmation of the deposit of a guarantee. - Authorization program for independent parts of the construction or approval of partial projects, if requested by the promoter. - In cases of renovation/expansion of buildings included in the general catalog of protected elements in historic city centers or historic centers of peripheral districts and historic colonies, a color photographic description of the existing building that permits, during enlargement operations, confirmation of the correct alignment of the enlargement plans with the historic city zoning restrictions. - License of parceling, if the new construction needs previous parceling. Doing Business 2012 Spain 33 Time to No. Procedure Cost to complete complete - Official alignment, if required. - Project design of installation of telecommunications infrastructure Real Decreto 346/2011. - Project design of the use of solar energy for heating (either as an independent project design or as part of the general project design), signed by a qualified technician and countersigned by the appropriate official institute, if required by the Regulation Concerning the Harnessing of Solar Energy for Thermal Use - Reglamento de seguridad contra incendios en los establecimientos industriales RD 2267/2004, de 3 de diciembre, modificado en parte por el RD 560/2010 de 7 de mayo - security and health certification or a basic certification regarding RD 1627/1997 de 24 de octubre - Certify the destination of all the construction waste and demolition (RCD) according to the Law 5/2003 and amendments by Law 9/2010 (regarding abandoned and discharged wastes) According to private sector contributors, the cost of the license can be up to 1% of the warehouse value. Receive inspection - I By law, two on-site inspections must be carried out during construction, one at the beginning and one at the end of the process. In the case considered here, a warehouse that takes 30 weeks to complete, there would be two inspections over the construction period. According to the building license, the construction works must be checked at least twice: once at the beginning of construction and once at the end. However, in reality it is rare that more than one inspection takes place during the process. 2 1 day no charge If, during the inspections, the committee detects any possible infringements of the building regulations or criminal law, a proposal on sanctions must be made, and a copy of the written record is given to the public prosecutor. At the least, administrative proceedings are initiated. In each inspection report, a record is included that provides information on every person involved and their roles, as well as on the facts, circumstances, dates, and results of the inspection. The record is regarded as a public administrative deed. The record has to be signed by the inspector(s) and by the person to whom the construction works have been attributed at the time of the inspection. Receive inspection - II By law, two on-site inspections must be carried out during construction, 1 day no charge 3 one at the beginning and one at the end of the process. In the case considered here, a warehouse that takes 30 weeks to complete, there would be two inspections over the construction period. Request and receive final inspection in connection with occupancy permit 30 days no charge 4 Due to the Ordenanza No. 158 of 26.06.2009, the Municipality of Doing Business 2012 Spain 34 Time to No. Procedure Cost to complete complete Madrid is not responsible for the processing of the working licence "licencia de actividad". This new law has created the "Entidades Colaboradoras en la Gestion de Licencias Urbanisticas-ECLU" (private professionals), which are in charge of preparing the issuance of the occupancy permit and which are authorized by the Municipality of Madrid. There is a list of these agencies, and the Municipality of Madrid website has the list of them as well as the maximum fees that can be charged by them. It is the ECLU who carries out the inspection and issuing of the declaraction of conformity at the end of the construction works. It is also necessary to pay a fee to the collaborating entities. This information is given by the official website of the Municipality of Madrid, www.munimadrid.es. The amount is 1.260 Euros for the surfaces between 100 and 500 square meters and additionally 70 Euros for every 100 square meters until 20.000 square meters. Request and obtain operating license ("Licencia de primera ocupacion") from the Mayor of Madrid (Ayunatamiento de Madrid) The purpose of the license of first occupation and working to verify that the construction and activities have been executed according to the project and the conditions under which the license had been granted, and that the construction has been completed and is adequate for urban determinations, the atmosphere and the security of its specific destination . As soon as construction is finished, to receive the first occupancy license (licencia de primera ocupación), the builder must submit to the ECLU the following documents: - Final certificate of terminated construction (declaration of conformity), which must be signed by the technical director of the work. This certificate must declare that the constructed building is in accordance 30 days EUR 1,820 5 with the issued license. For modifications that do not need approval of the City Council (23.2 of the Ordenanza Municipal de Tramitación de Licencias Urbanísticas de 23 de diciembre de 2004), the builder has to detail these modifications. - If urbanization works have been carried out simultaneously with construction, and this urbanization was completed by the builder, the builder must present the final certification of these works. - certificado final de obra visado por el Colegio Profesional y Plan de Autoprotección (Ordenanza Municipal de Tramitación de Licencias Urbanísticas de 23 de diciembre de 2004 - BOCM de 7 de enero de 2005). The costs depend on the area occupied by the future building (in square meters) and the maximum fees that can be charged are given by the Municipality of Madrid (www.munimadrid.es): The amount is 1.260 Euros for the surfaces between 100 and 500 square meters and additionally 70 Euros for every 100 square meters until 20.000 square meters. Register the new building 6 18 days EUR 2,831 Registration fees cannot exceed 2,181€ according to Real Decreto Doing Business 2012 Spain 35 Time to No. Procedure Cost to complete complete 1427/1989, de 17 de noviembre, por el que se aprueba el arancel de los registradores de la Propiedad. In addition to the registration fee provided by the regulation, notary fees (EUR 644.10) and a presentation and entry fee (EUR 6.01) are included in the total cost of this procedure. The cost has been adjusted from EUR 6,325 to EUR 2,831.11. Request and obtain water connection If the flow of water is less than 6 liters per second or if fewer than 25 counters are needed in one hall, only the following documents must be submitted: - Technical report (Memoria técnica), not required if the flow of water is less than 3 liters per second. - Form 2.1.4. 7 - Confirmation of fee payment (EUR 11.80 must be paid at the counter). 1 day EUR 12 - Two copies of Form 2.1.3 (Impreso de Final de Obra). If the required flow of water is more than 6 liters per second or if more than 25 counters are needed in one hall, the following additional documents must be filed: - Project design from an engineer specialized in planning water facilities. - Fee (in this case, a certain percentage of the budget). * Request and obtain telecommunication connection According to TELEFÓNICA, the biggest telecommunication company in Spain, there are two possible processes for obtaining a telecommunication connection. First, the warehouse may be constructed in an area without telecommunication resources, such as in the suburbs of a big city. In this case, the builder must apply to Telefónica for telephone lines. Telefónica then examines the area and carries out the necessary outside 8 works to supply the area. The necessary works inside the building have 11 days EUR 84 to be carried out by BuildCo itself. The only remaining step is then to connect the inside and outside installations. The waiting time depends on many factors: the location of the warehouse, distance to the provider center, permits of the City Council for the necessary works, and others. Second, the warehouse may be constructed in an area that already has telecommunication resources. In this case, it is necessary to apply only for the number of telephone lines required. The connections can normally be completed in 1–2 weeks. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2012 Spain 36 GETTING ELECTRICITY Access to reliable and affordable electricity is vital WHAT THE GETTING ELECTRICITY for businesses. To counter weak electricity supply, many firms in developing economies have to rely INDICATORS MEASURE on self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity first step for a customer is always to gain access by connection (number) obtaining a connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for Completing all required notifications and a local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to Obtaining external installation works and complete them. These procedures include possibly purchasing material for these works applications and contracts with electricity utilities, Concluding any necessary supply contract and clearances from other agencies and the external obtaining final supply and final connection works. The ranking on the ease of getting electricity is the simple average of Time required to complete each procedure the percentile rankings on its component (calendar days) indicators: procedures, time and cost. To make the Is at least 1 calendar day data comparable across economies, several assumptions are used. Each procedure starts on a separate day The warehouse: Does not include time spent gathering information  Is located in the economy’s largest business city, in an area where other Reflects the time spent in practice, with little warehouses are located. follow-up and no prior contact with officials  Is not in a special economic zone where Cost required to complete each procedure the connection would be eligible for (% of income per capita) subsidization or faster service. Official costs only, no bribes  Has road access. The connection works Excludes value added tax involve the crossing of a road or roads but are carried out on public land.  Is 150 meters long.  Is a new construction being connected to  Is to either the low-voltage or the medium- electricity for the first time. voltage distribution network and either overhead  Has 2 stories, both above ground, with a or underground, whichever is more common in total surface of about 1,300.6 square the economy and in the area where the meters (14,000 square feet), and is built on warehouse is located. The length of any a plot of 929 square meters (10,000 square connection in the customer’s private domain is feet). negligible. The electricity connection:  Involves installing one electricity meter. The monthly electricity consumption will be 0.07  Is a 3-phase, 4-wire Y, 140-kilovolt-ampere gigawatt-hour (GWh). The internal electrical (kVA) (subscribed capacity) connection. wiring has been completed. Doing Business 2012 Spain 37 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity procedures, takes 101 days and costs 231.9% of connection in Spain? According to data collected by income per capita (figure 4.1). Doing Business, getting electricity there requires 5 Figure 4.1 What it takes to obtain an electricity connection in Spain Note: For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2012 Spain 38 GETTING ELECTRICITY Globally, Spain stands at 69 in the ranking of 183 regional average ranking provide another perspective economies on the ease of getting electricity (figure in assessing how easy it is for an entrepreneur in Spain 4.2). The rankings for comparator economies and the to connect a warehouse to electricity. Figure 4.2 How Spain and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2012 Spain 39 GETTING ELECTRICITY Even more helpful than rankings for other economies economies, the practices of their utilities may provide a may be the indicators underlying those rankings (table model for Spain on ways to improve the ease of getting 4.1). If obtaining a new electricity connection requires electricity. Regional and global averages on these fewer procedures, less time or less cost in other indicators may provide useful benchmarks. Table 4.1 The ease of getting electricity in Spain and comparator economies United Kingdom income average Global average United States Switzerland OECD high Germany Portugal Spain Italy Indicator Rank 69 2 109 34 6 60 17 53 .. Procedures (number) 5 3 5 5 3 5 4 5 5 Time (days) 101 17 192 64 39 109 68 103 111 Cost (% of income per capita) 231.9 49.9 327.2 54.6 62.7 72.3 16.8 92.8 1,942.3 Source: Doing Business database. Doing Business 2012 Spain 40 GETTING ELECTRICITY What are the details? The indicators reported here for Spain are based on a OBTAINING AN ELECTRICITY CONNECTION set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution City: Madrid utility—identified by Doing Business. Data are collected from the distribution utility, then completed and Name of Utility: Iberdrola verified by electricity regulatory agencies and independent professionals such as electrical engineers, The procedures are those that apply to a warehouse electrical contractors and construction companies. The and electricity connection matching the standard electricity distribution utility surveyed is the one assumptions used by Doing Business in collecting the serving the area (or areas) in which warehouses are data (see the section in this chapter on what the located. If there is a choice of distribution utilities, the indicators cover). The procedures, along with the one serving the largest number of customers is associated time and cost, are summarized below. selected. Summary of procedures for getting electricity in Spain—and the time and cost Time to No. Procedure Cost to complete complete The customer obtains an administrative approval for the connection project from the DIRECCIÓN GENERAL DE INDUSTRIA, ENERG�A Y MINAS For any kind of electrical project an administrative authorization has to be obtained from the DIRECCIÓN GENERAL DE INDUSTRIA, ENERG�A Y MINAS. The engineer in charge of preparing the electrical plans submits a project plan to the Dirección General for approval. The Dirección General will review the documents to establish if the project complies with the relevant standards. The project is not inspected for the purpose of the approval (Iberdrola will later on do an inspection to ensure that the project has been realized according to the plans approved by the Dirección General). 38 calendar days EUR 1,100.0 1 For an installation project in low or medium voltage different types of approvals exist. An installation project that involves a medium voltage connection has to be registered directly with the Dirección General and the cost for the procedure is approximately EUR 1,100. For an installation involving a low voltage connection, customers usually contract a private firm that deals with the administrative procedure for them. This private firm will also inspect the installation before submitting the project for approval. This leads to a higher cost of approximately EUR 1,600. This procedure can be done simultaneously with the following or in advance. * The customer submits his service application with Iberdrola and 20 calendar days EUR 3,604.0 2 awaits the preparation of an estimate Doing Business 2012 Spain 41 Time to No. Procedure Cost to complete complete Most customers submit their service application to Iberdrola at the same time that they apply for the administrative approval with the Dirección General. Iberdrola will prepare an estimate and inform the customer with a letter about the estimated costs of the project. The payment is made at the bank. A receipt of this payment has to be submitted to Iberdrola at the time when the customer signs the supply contract. After signing the supply contract the connection should be finalized within 5 working days according to the relevant regulation. * The customer obtains a licence for the external works from the City Council 3 25 calendar days EUR 1,840.0 Customers need to obtain a licence for the external works from the municipality. The taxes on this licence are 4% of the cost of the works. Iberdrola or a private firm does the connection works Customers have two choices: The external connection works can be done by Iberdrola or the customer can hire a private licenced electrical constructor. Two cases are considered equally likely for a customer with a load of 140kVA: Iberdrola's distribution network allows for connections of up to 160kVA at the low-voltage level. If the area where the new connection is 4 done has enough spare capacity the connection can be done to the low 63 calendar days EUR 46,000.0 voltage lines. In some cases two connections are done for one customer to avoid that a new transformer station has to be installed. If no spare capacity exists, Iberdrola will connect the new customer to the medium voltage grid which will increase the connection costs for the customer. A transformer station will have to be installed in these cases and the station remains in the possession of the customer given that he pays for it in its entirety. Iberdrola considers the transformer part of the internal wiring installations of the client. * The customer signs a supply contract with Iberdrola and awaits the installation of the meter and energization of the project The customer elects a supplier for the supply contract and asks for the installation of the meter. Irrespective of who executes the actual works of the connection 5 (installation of the transformer, excavation for cables etc.), Iberdrola is 5 calendar days EUR 71.4 always in charge of installing the meter and the final energization of the project. The meter can be rented or bought by the customer. Most clients prefer to rent it at an approximate cost of EUR12 per month. According to Article 79 of the Real Decreto 1955/2000, the utility can levy a security deposit in the amount of one month of future consumption (corresponding to 50 hours supply of the contracted load). * Takes place simultaneously with another procedure. Doing Business 2012 Spain 42 Source: Doing Business database. Doing Business 2012 Spain 43 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being immovable property (number) accepted as collateral for loans—limiting access to Preregistration (for example, checking for liens, finance. notarizing sales agreement, paying property transfer taxes) What do the indicators cover? Registration in the economy’s largest business Doing Business records the full sequence of city procedures necessary for a business to purchase property from another business and transfer the Postregistration (for example, filing title with the municipality) property title to the buyer’s name. The transaction is considered complete when it is opposable to Time required to complete each procedure third parties and when the buyer can use the (calendar days) property, use it as collateral for a bank loan or Does not include time spent gathering resell it. The ranking on the ease of registering information property is the simple average of the percentile rankings on its component indicators: procedures, Each procedure starts on a separate day time and cost. Procedure completed once final document is received To make the data comparable across economies, several assumptions about the parties to the No prior contact with officials transaction, the property and the procedures are Cost required to complete each procedure used. (% of property value) The parties (buyer and seller): Official costs only, no bribes  Are limited liability companies, 100% No value added or capital gains taxes included domestically and privately owned.  Are located in the periurban area of the economy’s largest business city.  Has no mortgages attached and has been under the same ownership for the past 10  Have 50 employees each, all of whom are years. nationals.  Consists of 557.4 square meters (6,000 square  Perform general commercial activities. feet) of land and a 10-year-old, 2-story The property (fully owned by the seller): warehouse of 929 square meters (10,000  Has a value of 50 times income per capita. square feet). The warehouse is in good The sale price equals the value. condition and complies with all safety standards, building codes and legal  Is registered in the land registry or requirements. The property will be transferred cadastre, or both, and is free of title in its entirety. disputes.  Is located in a periurban commercial zone, and no rezoning is required. Doing Business 2012 Spain 44 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in 13 days and costs 7.1% of the property value (figure Spain? According to data collected by Doing Business, 5.1). registering property there requires 5 procedures, takes Figure 5.1 What it takes to register property in Spain Note: For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2012 Spain 45 REGISTERING PROPERTY Globally, Spain stands at 56 in the ranking of 183 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in Spain to transfer property. Figure 5.2 How Spain and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2012 Spain 46 REGISTERING PROPERTY What are the changes over time? While the most recent Doing Business data reflect how process have changed—and which have not (table 5.1). easy (or difficult) it is to register property in Spain That can help identify where the potential for today, data over time show which aspects of the improvement is greatest. Table 5.1 The ease of registering property in Spain over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. 45 56 Procedures (number) 4 4 4 4 4 4 4 5 Time (days) 25 20 14 13 13 13 13 13 Cost (% of property value) 7.1 7.2 7.1 7.1 7.2 7.2 7.1 7.1 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. For more information on “no practice� marks, see the data notes for details. Source: Doing Business database. Doing Business 2012 Spain 47 REGISTERING PROPERTY Equally helpful may be the benchmarks provided by These economies may provide a model for Spain on the economies that today have the best performance ways to improve the ease of registering property. And regionally or globally on the procedures, time or cost changes in regional averages can show where Spain is required to complete a property transfer (figure 5.3). keeping up—and where it is falling behind. Figure 5.3 Has registering property become easier over time? Procedures (number) Time (days) Doing Business 2012 Spain 48 REGISTERING PROPERTY Cost (% of property value) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. In cases where no data are displayed above for the economy, this indicates that the economy has received a “no practice� mark; see the data notes for details. Source: Doing Business database. Doing Business 2012 Spain 49 REGISTERING PROPERTY Economies worldwide have been making it easier for have cut the time required substantially—enabling entrepreneurs to register and transfer property—such buyers to use or mortgage their property earlier. What as by computerizing land registries, introducing time property registration reforms has Doing Business limits for procedures and setting low fixed fees. Many recorded in Spain (table 5.2)? Table 5.2 How has Spain made registering property easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Spain 50 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business City: Madrid through information collected from local property Property Value: 1,134,315.2 lawyers, notaries and property registries. These procedures are those that apply to a transaction The procedures, along with the associated time and matching the standard assumptions used by Doing cost, are summarized below. Business in collecting the data (see the section in this chapter on what the indicators cover). Summary of procedures for registering property in Spain—and the time and cost Time to No. Procedure Cost to complete complete * Obtain non-encumbrance certificate According to the law (Art. 175 of the Decree dated on June 2, 1944), the notary is obliged to duly inform the parties, be aware of the ownership 1 and encumbrances on the property, and consult the Property Registry 2 days EUR 9 books before executing the deed. Since the early 2000, the consultations can be done on-line at www.registradores.org (it takes 1-2 hours on average to obtain the information) and the printout from the internet is valid. * Obtain cadastral description no cost if obtained 2 1 day electronically Notarization of sale deed Notary’s fees Notary fees are on a cumulative scale, as follows: (decreasing scale): EUR 730 for a When the property value does not exceed EUR 6,010.12: EUR 90.151816 property of this For the excess amount between EUR 6,010.13 and EUR 30,050.61: 4.5 per value (minus 5% 1,000 discount) For the excess amount between EUR 30,050.62 and EUR 60,101.21: 1,50 For property values per 1,000 not exceeding EUR For the excess amount between EUR 60,101.22 and EUR 150,253.03: 1 2 days 6.010,12: 90, EUR 3 per 1,000 151816. For the excess amount between EUR 150,253.04 and EUR 601,012.10: 0.5 for the excess per 1,000 amount between For the excess amount between EUR 601,012.11 and EUR 6,010,121.04: 0.3 per 1,000 EUR 6.010,13 and For the excess amount above EUR 6,010,121.04 the fees are determined 30.050,61: 0,45%. by agreement between the notary and client. for the excess amount between The Real Decreto Ley 8/2010, of May 20 2010, modifies the Real Decreto EUR 3 1426/1989, of November 17th 1989, establishing notary fees. The 2010 Doing Business 2012 Spain 51 Time to No. Procedure Cost to complete complete decree establishes a 5% discount for notary fees. According to Royal Decree 45/2007, the notary must issue an authorized copy of the deed on the same or next day and send it to the Registry electronically, unless otherwise requested by the interested party. The documentation shall include: Power of attorney granted by the seller and ID of the person in favor of whom the power was granted. Power of attorney granted by the buyer and ID of the person in favor of whom the power was granted. The original property title of the Seller (public deed), which shall indicate the following information: Company tax identification and registration numbers Means of payment used in the transaction Cadastral reference Pay taxes First transfers of property or transfers made between entrepreneurs are subject to 8% VAT and Stamp Duty (0.5-1.0% of the property value, depending on the autonomous region -- it is 1.5% in Madrid). The transfer of property will only be subject to Stamp Duty when it is subject to VAT because the Stamp Duty is incompatible with the Transfer Tax. Second and subsequent property transfers are not subject to VAT, but to the Transfer Tax ("Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados", ITP). The rate of the transfer tax is 6% or 7% depending on the autonomous region of Spain (in Madrid, it is 7% of the property value). For the Doing Business case study, as it is assumed that the buyer is a company and the property is in Madrid and has been transferred at least once in the past, the applicable tax should be the Transfer Tax (ITP). The ITP is paid at the relevant tax office within 30 working days after the date 7% of purchase price 4 1 day of granting of the notarial deed of transfer (a copy of the transfer deed is (ITP) to be attached to the transfer tax liquidation form). In many cities without a specific tax office, the payment can be done at the Registry at the moment of registration, so that those steps could merge into one. In some autonomias, like Madrid, Catalunya, and Andalucia, the tax may be paid online. However, it has to be noted that under certain circumstances (e.g., that the acquisition of the property is within the scope of the usual activities of the acquiring company), the acquiring company can choose to make the transaction subject to transfer tax or VAT. In the case the company chose to have VAT apply, it would be charged an 8% VAT rate on the sale price, plus a stamp duty of 1.5% . The VAT paid would become a credit that the company would deduct fromsubsequent transactions, such as those related to the normal business of the company. Note: VAT rates were increased by Law 26/2009 of 23rd December, on Doing Business 2012 Spain 52 Time to No. Procedure Cost to complete complete Estate General Budgets for 2010. By this law, as from the 1st of July 2010, the general rate increased from 16% to 18% and the reduced rate increased from 7% to 8%. Registration of new title The public deed is presented for registration at the Land and Property Registry to make it opposable vis-à-vis third parties. The presentation entry’s date gives priority. The public deed carries the presentation entry's date and it is registered within the legal time limit of 15 business days from that date. If the procedure takes more than 15 business days, the fees will be reduced by 30%, unless there is an objective reason for the delay. However, with the introduction of technology and online procedures due to Ley 24/2005 de 18 noviembre, and the section II on electronic registration, the time to register is in the process of being reduced. The average registration time is currently at 8 calendar days. Registration of the transfer is necessary in order for it to have effect vis- à-vis third parties but the transfer of the property does not need to be registered in order to be valid. Transfer takes place and is valid as of the EUR 457 (minus 5% 5 execution of the sale in a public deed (granted before a Notary public ), 8 days discount) together with the delivery of the property, (unless otherwise specified in the deed, the granting of it implies delivery). Registration fees cannot exceed €2,181.87. Lower registration and notarial fees apply for the first registration of low-income housing (max 90 m2 per home): around €33 for registration fees and €100 per notarial deed. The documentation shall include: Public deed Proof of VAT or ITP payment (attached to the sale purchase agreement) Proof of stamp duty payment (in the case that VAT applied and not ITP) The Real Decreto Ley 8/2010, of May 20 2010, modifies the Real Decreto 1427/1989, of November 17th 1989, establishing notary fees. The 2010 decree establishes a 5% discount for registration fees. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2012 Spain 53 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and the legal rights of borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders to view a Strength of legal rights index (0–10) potential borrower’s financial history (positive or Protection of rights of borrowers and lenders negative)—valuable information to consider when through collateral laws assessing risk. And they permit borrowers to Protection of secured creditors’ rights through establish a good credit history that will allow easier bankruptcy laws access to credit. Sound collateral laws enable businesses to use their assets, especially movable Depth of credit information index (0–6) property, as security to generate capital—while Scope and accessibility of credit information strong creditors’ rights have been associated with distributed by public credit registries and higher ratios of private sector credit to GDP. private credit bureaus What do the indicators cover? Public credit registry coverage (% of adults) Doing Business assesses the sharing of credit Number of individuals and firms listed in information and the legal rights of borrowers and public credit registry as percentage of adult lenders with respect to secured transactions population through 2 sets of indicators. The depth of credit Private credit bureau coverage (% of adults) information index measures rules and practices Number of individuals and firms listed in affecting the coverage, scope and accessibility of largest private credit bureau as percentage of credit information available through a public credit adult population registry or a private credit bureau. The strength of legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. Doing Business uses case scenarios to determine  Has 100 employees. the scope of the secured transactions system,  Is 100% domestically owned, as is the lender. involving a secured borrower and a secured lender and examining legal restrictions on the use of The ranking on the ease of getting credit is based on movable collateral. These scenarios assume that the the percentile rankings on its component indicators: borrower: the depth of credit information index (weighted at 37.5%) and the strength of legal rights index  Is a private, limited liability company. (weighted at 62.5%).  Has its headquarters and only base of operations in the largest business city. Doing Business 2012 Spain 54 GETTING CREDIT Where does the economy stand today? How well do the credit information system and Globally, Spain stands at 48 in the ranking of 183 collateral and bankruptcy laws in Spain facilitate access economies on the ease of getting credit (figure 6.1). to credit? The economy has a score of 5 on the depth The rankings for comparator economies and the of credit information index and a score of 6 on the regional average ranking provide other useful strength of legal rights index (see the summary of information for assessing how well regulations and scoring at the end of this chapter for details). Higher institutions in Spain support lending and borrowing. scores indicate more credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How Spain and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2012 Spain 55 GETTING CREDIT What are the changes over time? While the most recent Doing Business data reflect how institutions and regulations have been strengthened— well the credit information system and collateral and and where they have not (table 6.1). That can help bankruptcy laws in Spain support lending and identify where the potential for improvement is borrowing today, data over time can help show where greatest. Table 6.1 The ease of getting credit in Spain over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. 45 48 Strength of legal rights 6 6 6 6 6 6 6 6 index (0-10) Depth of credit 5 5 5 5 5 5 5 5 information index (0-6) Public registry coverage 39.4 42.1 44.9 44.9 45.8 45.3 54.6 54.7 (% of adults) Private bureau 6.5 6.5 7.4 8.3 8.1 7.6 10.7 11.4 coverage (% of adults) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Doing Business 2012 Spain 56 GETTING CREDIT One way to put an economy’s getting credit indicators index for Spain in 2011 and shows the number of other into context is to see where the economy stands in the economies having the same score in 2011. Figure 6.3 distribution of scores across other economies. Figure shows the same thing for the depth of credit 6.2 highlights the score on the strength of legal rights information index. Figure 6.2 Have legal rights for borrowers and lenders Figure 6.3 Have the coverage and accessibility of credit become stronger? information grown? Number of economies with each score on strength of legal Number of economies with each score on depth of credit rights index (0–10), 2011 information index (0–6), 2011 Source: Doing Business database. Source: Doing Business database. Doing Business 2012 Spain 57 GETTING CREDIT When economies strengthen the legal rights of lenders credit information, they can increase entrepreneurs’ and borrowers under collateral and bankruptcy laws, access to credit. What credit reforms has Doing and increase the scope, coverage and accessibility of Business recorded in Spain (table 6.2)? Table 6.2 How has Spain made getting credit easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Spain 58 GETTING CREDIT What are the details? The getting credit indicators reported here for Spain The data on the legal rights of borrowers and lenders are based on detailed information collected in that are gathered through a survey of financial lawyers and economy. The data on credit information sharing are verified through analysis of laws and regulations as collected through a survey of a public credit registry or well as public sources of information on collateral and private credit bureau (if one exists). To construct the bankruptcy laws. For the strength of legal rights index, depth of credit information index, a score of 1 is a score of 1 is assigned for each of 8 aspects related to assigned for each of 6 features of the public credit legal rights in collateral law and 2 aspects in registry or private credit bureau (see summary of bankruptcy law. scoring below). Summary of scoring for the getting credit indicators in Spain OECD high Indicator Spain OECD high income income Strength of legal rights index (0-10) 6 7 Depth of credit information index (0-6) 5 5 Public registry coverage (% of adults) 54.7 9.5 Private bureau coverage (% of adults) 11.4 63.9 Strength of legal rights index (0–10) Index score: 6 Can any business use movable assets as collateral while keeping possession of the assets; Yes and any financial institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of No movable assets, without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of Yes its assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend No automatically to the products, proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement Yes include a maximum amount for which the assets are encumbered? Is a collateral registry in operation, that is unified geographically and by asset type, with an Yes electronic database indexed by debtor's names? Are secured creditors paid first (i.e. before general tax claims and employee claims) when a No debtor defaults outside an insolvency procedure? Doing Business 2012 Spain 59 Strength of legal rights index (0–10) Index score: 6 Are secured creditors paid first (i.e. before general tax claims and employee claims) when a Yes business is liquidated? Are secured creditors either not subject to an automatic stay or moratorium on enforcement procedures when a debtor enters a court-supervised reorganization procedure, or the law No provides secured creditors with grounds for relief from an automatic stay or Does the law allow parties to agree in a collateral agreement that the lender may enforce its Yes security right out of court, at the time a security interest is created? Private credit Public credit Depth of credit information index (0–6) Index score: 5 bureau registry Are data on both firms and individuals distributed? Yes Yes 1 Are both positive and negative data distributed? No Yes 1 Does the registry distribute credit information from retailers, trade creditors or utility companies as well as Yes No 1 financial institutions? Are more than 2 years of historical credit information No No 0 distributed? Is data on all loans below 1% of income per capita Yes No 1 distributed? Is it guaranteed by law that borrowers can inspect Yes Yes 1 their data in the largest credit registry? Note: An economy receives a score of 1 if there is a "yes" to either private bureau or public registry. Coverage Private credit bureau Public credit registry Number of firms 291,000 981,706 Number of individuals 3,300,000 16,193,013 Source: Doing Business database. Doing Business 2012 Spain 60 PROTECTING INVESTORS Investor protections matter for the ability of WHAT THE PROTECTING INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. If the laws do not provide such protections, investors may be reluctant to invest unless they become the controlling Extent of disclosure index (0–10) shareholders. Strong regulations clearly define Who can approve related-party transactions related-party transactions, promote clear and efficient Disclosure requirements in case of related- disclosure requirements, require shareholder party transactions participation in major decisions of the company and set clear standards of accountability for company Extent of director liability index (0–10) insiders. Ability of shareholders to hold interested What do the indicators cover? parties and members of the approving body liable in case of related-party transactions Doing Business measures the strength of minority Available legal remedies (damages, repayment shareholder protections against directors’ use of of profits, fines, imprisonment and rescission corporate assets for personal gain—or self-dealing. of the transaction) The indicators distinguish 3 dimensions of investor protections: transparency of related-party Ability of shareholders to sue directly or transactions (extent of disclosure index), liability for derivatively self-dealing (extent of director liability index) and Ease of shareholder suits index (0–10) shareholders’ ability to sue officers and directors for Access to internal corporate documents misconduct (ease of shareholder suits index). The (directly or through a government inspector) ranking on the strength of investor protection index is the simple average of the percentile rankings on Documents and information available during these 3 indices. To make the data comparable across trial economies, a case study uses several assumptions Strength of investor protection index (0–10) about the business and the transaction. Simple average of the extent of disclosure, The business (Buyer): extent of director liability and ease of shareholder suits indices  Is a publicly traded corporation listed on the economy’s most important stock exchange (or at least a large private company with multiple the company purchase used trucks from another shareholders). company he owns.  Has a board of directors and a chief executive  The price is higher than the going price for used officer (CEO) who may legally act on behalf of trucks, but the transaction goes forward. Buyer where permitted, even if this is not specifically required by law.  All required approvals are obtained, and all required disclosures made, though the transaction The transaction involves the following details: is prejudicial to Buyer.  Mr. James, a director and the majority  Shareholders sue the interested parties and the shareholder of the company, proposes that members of the board of directors. Doing Business 2012 Spain 61 PROTECTING INVESTORS Where does the economy stand today? How strong are investor protections in Spain? The index (figure 7.1). While the indicator does not economy has a score of 5.0 on the strength of investor measure all aspects related to the protection of protection index, with a higher score indicating minority investors, a higher ranking does indicate that stronger protections (see the summary of scoring at an economy’s regulations offer stronger investor the end of this chapter for details). protections against self-dealing in the areas measured. Globally, Spain stands at 97 in the ranking of 183 economies on the strength of investor protection Figure 7.1 How Spain and comparator economies rank on the strength of investor protection index Source: Doing Business database. Doing Business 2012 Spain 62 PROTECTING INVESTORS What are the changes over time? While the most recent Doing Business data reflect how ranking on the strength of investor protection index well regulations in Spain protect minority investors over time shows whether the economy is slipping today, data over time show whether the protections behind other economies in investor protections—or have been strengthened (table 7.1). And the global surpassing them. Table 7.1 The strength of investor protections in Spain over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. 93 97 Extent of disclosure 5 5 5 5 5 5 5 index (0-10) Extent of director 6 6 6 6 6 6 6 liability index (0-10) Ease of shareholder 4 4 4 4 4 4 4 suits index (0-10) Strength of investor 5.0 5.0 5.0 5.0 5.0 5.0 5.0 protection index (0-10) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Doing Business 2012 Spain 63 PROTECTING INVESTORS But the overall ranking on the strength of investor ease of shareholder suits indices may also be revealing protection index tells only part of the story. Economies (figure 7.2). Equally interesting may be the changes may offer strong protections in some areas but not over time in the regional average scores for those others. So the scores recorded over time for Spain on indices. the extent of disclosure, extent of director liability and Figure 7.2 Have investor protections become stronger? Strength of investor protection index (0-10) Extent of disclosure index (0-10) Doing Business 2012 Spain 64 PROTECTING INVESTORS Extent of director liability index (0-10) Ease of shareholder suits index (0-10) Note: The higher the score, the stronger the investor protections. The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. Source: Doing Business database. Doing Business 2012 Spain 65 PROTECTING INVESTORS Economies with the strongest protections of minority time. So reforms to strengthen investor protections investors from self-dealing require more disclosure may move ahead on different fronts—such as through and define clear duties for directors. They also have new or amended company laws or civil procedure well-functioning courts and up-to-date procedural rules. What investor protection reforms has Doing rules that give minority investors the means to prove Business recorded in Spain (table 7.2)? their case and obtain a judgment within a reasonable Table 7.2 How has Spain strengthened investor protections—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Spain 66 PROTECTING INVESTORS What are the details? The protecting investors indicators reported here for shareholder suits indices, a score is assigned for each Spain are based on detailed information collected of a range of conditions relating to disclosure, director through a survey of corporate and securities lawyers liability and shareholder suits in a standard case study and are based on securities regulations, company laws transaction (see the notes at the end of this chapter). and court rules of evidence. To construct the extent of The summary below shows the details underlying the disclosure, extent of director liability and ease of scores for Spain. Summary of scoring for the protecting investors indicators in Spain OECD high Indicator Spain OECD high income income Extent of disclosure index (0-10) 5 6 Extent of director liability index (0-10) 6 5 Ease of shareholder suits index (0-10) 4 7 Strength of investor protection index (0-10) 5.0 6.0 Score Extent of disclosure index (0-10) 5 What corporate body provides legally sufficient approval for the transaction? 0 Whether disclosure of the conflict of interest by Mr. James to the board of directors is 2 required? Whether immediate disclosure of the transaction to the public and/or shareholders is 1 required? Whether disclosure of the transaction in published periodic filings (annual reports) is 2 required? Whether an external body must review the terms of the transaction before it takes place? 0 Extent of director liability index (0-10) 6 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller 1 transaction causes to the company? Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller 1 transaction causes to the company? Whether shareholders can hold members of the approving body liable for the damage that 1 the Buyer-Seller transaction causes to the company? Whether a court can void the transaction upon a successful claim by a shareholder plaintiff? 0 Doing Business 2012 Spain 67 Score Whether Mr. James pays damages for the harm caused to the company upon a successful 1 claim by the shareholder plaintiff? Whether Mr. James repays profits made from the transaction upon a successful claim by the 1 shareholder plaintiff? Whether fines and imprisonment can be applied against Mr. James? 1 Ease of shareholder suits index (0-10) 4 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction 0 documents before filing suit? Whether shareholders owning 10% or less of Buyer's shares can request an inspector to 0 investigate the transaction? Whether the plaintiff can obtain any documents from the defendant and witnesses during 3 trial? Whether the plaintiff can request categories of documents from the defendant without 0 identifying specific ones? Whether the plaintiff can directly question the defendant and witnesses during trial? 1 Whether the level of proof required for civil suits is lower than that of criminal cases? 0 Strength of investor protection index (0-10) 5.0 Source: Doing Business database. Notes: Extent of disclosure index (0–10) Scoring for the extent of disclosure index is based on 5 components: Which corporate body can provide legally sufficient approval for the transaction 0 = CEO or managing director alone; 1 = shareholders or board of directors vote and Mr. James can vote; 2 = board of directors votes and Mr. James cannot vote; 3 = shareholders vote and Mr. James cannot vote. Whether disclosure of the conflict of interest by Mr. James to the board of directors is required 0 = no disclosure; 1 = disclosure of the existence of a conflict without any specifics; 2 = full disclosure of all material facts. Whether immediate disclosure of the transaction to the public, the regulator or the shareholders is required 0 = no disclosure; 1 = disclosure on the transaction only; 2 = disclosure on the transaction and Mr. James’s conflict of interest. Whether disclosure of the transaction in the annual report is required 0 = no disclosure; 1 = disclosure on the transaction only; 2 = disclosure on the transaction and Mr. James’s conflict of interest. Doing Business 2012 Spain 68 Whether it is required that an external body (for example, an external auditor) review the transaction before it takes place 0 = no; 1 = yes. Extent of director liability index (0–10) Scoring for the extent of director liability index is based on 7 components: Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction causes to the company 0 = suits are unavailable or available only for shareholders holding more than 10% of the company’s share capital; 1 = direct or derivative suits available for shareholders holding 10% of share capital or less. Whether shareholders can hold Mr. James liable for the damage that the transaction causes to the company 0 = Mr. James is not liable or is liable only if he acted fraudulently or in bad faith; 1 = Mr. James is liable if he influenced the approval or was negligent; 2 = Mr. James is liable if the transaction is unfair or prejudicial to the other shareholders. Whether shareholders can hold the approving body (the CEO or members of the board of directors) liable for the damage that the transaction causes to the company 0 = members of the approving body are either not liable or liable only if they acted fraudulently or in bad faith; 1 = liable for negligence in the approval of the transaction; 2 = liable if the transaction is unfair or prejudicial to the other shareholders. Whether a court can void the transaction upon a successful claim by a shareholder plaintiff 0 = rescission is unavailable or available only in case of Seller’s fraud or bad faith; 1 = rescission is available when the transaction is oppressive or prejudicial to the other shareholders; 2 = rescission is available when the transaction is unfair or entails a conflict of interest. Whether Mr. James pays damages for the harm caused to the company upon a successful claim by the shareholder plaintiff 0 = no; 1 = yes. Whether Mr. James repays profits made from the transaction upon a successful claim by the shareholder plaintiff 0 = no; 1 = yes. Whether both fines and imprisonment can be applied against Mr. James 0 = no; 1 = yes. Ease of shareholder suits index (0–10) Scoring for the ease of shareholder suits index is based on 6 components: What range of documents is available to the plaintiff from the defendant and witnesses during trial Score of 1 for each of the following: information that the defendant has indicated he intends to rely on for his defense; information that directly proves specific facts in the plaintiff’s claim; any information relevant to the subject matter of the claim; and any information that may lead to the discovery of relevant information. Doing Business 2012 Spain 69 Whether the plaintiff can directly examine the defendant and witnesses during trial 0 = no; 1 = yes, with prior approval by the court of the questions posed; 2 = yes, without prior approval. Whether the plaintiff can obtain categories of relevant documents from the defendant without identifying each document specifically 0 = no; 1 = yes. Whether shareholders owning 10% or less of the company’s share capital can request that a government inspector investigate the transaction without filing suit in court 0 = no; 1 = yes. Whether shareholders owning 10% or less of the company’s share capital have the right to inspect the transaction documents before filing suit 0 = no; 1 = yes. Whether the standard of proof for civil suits is lower than that for a criminal case 0 = no; 1 = yes. Strength of investor protection index (0–10) Simple average of the extent of disclosure, extent of director liability and ease of shareholder suits indices. Doing Business 2012 Spain 70 PAYING TAXES Taxes are essential. They fund the public amenities, WHAT THE PAYING TAXES INDICATORS infrastructure and services that are crucial for a MEASURE properly functioning economy. But the level of tax rates needs to be carefully chosen—and needless complexity in tax rules avoided. According to Tax payments for a manufacturing company Doing Business data, in economies where it is more in 2010 (number per year adjusted for difficult and costly to pay taxes, larger shares of electronic or joint filing and payment) economic activity end up in the informal sector— Total number of taxes and contributions paid, where businesses pay no taxes at all. including consumption taxes (value added tax, sales tax or goods and service tax) What do the indicators cover? Method and frequency of filing and payment Using a case scenario, Doing Business measures the taxes and mandatory contributions that a Time required to comply with 3 major taxes medium-size company must pay in a given year as (hours per year) well as the administrative burden of paying taxes Collecting information and computing the tax and contributions. This case scenario uses a set of payable financial statements and assumptions about Completing tax return forms, filing with transactions made over the year. Information is proper agencies also compiled on the frequency of filing and payments as well as time taken to comply with tax Arranging payment or withholding laws. The ranking on the ease of paying taxes is Preparing separate tax accounting books, if the simple average of the percentile rankings on required its component indicators: number of annual Total tax rate (% of profit before all taxes) payments, time and total tax rate, with a threshold 2 being applied to the total tax rate. To make the Profit or corporate income tax data comparable across economies, several Social contributions and labor taxes paid by assumptions about the business and the taxes and the employer contributions are used. Property and property transfer taxes  TaxpayerCo is a medium-size business that Dividend, capital gains and financial started operations on January 1, 2009. transactions taxes  The business starts from the same financial Waste collection, vehicle, road and other taxes position in each economy. All the taxes and mandatory contributions paid during the second year of operation are recorded.  Taxes and mandatory contributions include  Taxes and mandatory contributions are corporate income tax, turnover tax and all measured at all levels of government. labor taxes and contributions paid by the company.  A range of standard deductions and exemptions are also recorded. 2 The threshold is defined as the highest total tax rate among the top 30% of economies in the ranking on the total tax rate. It will be calculated and adjusted on a yearly basis. The threshold is not based on any underlying theory. Instead, it is intended to mitigate the effect of very low tax rates on the ranking on the ease of paying taxes. Doing Business 2012 Spain 71 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with Globally, Spain stands at 48 in the ranking of 183 taxes in Spain—and how much do firms pay in taxes? economies on the ease of paying taxes (figure 8.1). The On average, firms make 8 tax payments a year, spend rankings for comparator economies and the regional 187 hours a year filing, preparing and paying taxes and average ranking provide other useful information for pay total taxes amounting to 1.2% of profit (see the assessing the tax compliance burden for businesses in summary at the end of this chapter for details). Spain. Figure 8.1 How Spain and comparator economies rank on the ease of paying taxes Note: DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 Spain 72 PAYING TAXES What are the changes over time? While the most recent Doing Business data reflect how process have changed — and which have not (table easy (or difficult) it is to comply with tax rules in Spain 8.1). That can help identify where the potential for today, data over time show which aspects of the easing tax compliance is greatest. Table 8.1 The ease of paying taxes in Spain over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. 76 48 Payments (number per 7 7 8 8 8 8 8 year) Time (hours per year) 298 298 298 234 213 197 187 Total tax rate (% profit) 61.8 61.8 62.0 60.2 56.9 56.5 38.7 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the rank on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 Spain 73 PAYING TAXES Equally helpful may be the benchmarks provided by ways to ease the administrative burden of tax the economies that today have the best performance compliance. And changes in regional averages can regionally or globally on the number of payments or show where Spain is keeping up—and where it is the time required to prepare and file taxes (figure 8.2). falling behind. These economies may provide a model for Spain on Figure 8.2 Has paying taxes become easier over time? Payments (number per year) Time (hours per year) Doing Business 2012 Spain 74 PAYING TAXES Total tax rate (% of profit) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. The best performer globally on an indicator has implemented the most efficient practices in its tax system but is not necessarily the one with the highest ranking on the indicator. In some cases 2 or more economies share the top regional ranking on an indicator. DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 Spain 75 PAYING TAXES Economies around the world have made paying taxes concrete results. Some economies simplifying tax faster and easier for businesses—such as by payment and reducing rates have seen tax revenue consolidating filings, reducing the frequency of rise. What tax reforms has Doing Business recorded in payments or offering electronic filing and payment. Spain (table 8.2)? Many have lowered tax rates. Changes have brought Table 8.2 How has Spain made paying taxes easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. The tax burden on business was eased by reducing the corporate income tax rate from 32.5 percent to 30 percent DB2010 and increasing efficiency through an electronic filing and payment system. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Spain 76 PAYING TAXES What are the details? The indicators reported here for Spain are based on a completed during the year. Respondents are asked standard set of taxes and contributions that would be how much in taxes and mandatory contributions the paid by the case study company used by Doing business must pay and what the process is for doing Business in collecting the data (see the section in this so. The taxes and contributions paid are listed in the chapter on what the indicators cover). Tax practitioners summary below, along with the associated number of are asked to review standard financial statements as payments, time and tax rate. well as a standard list of transactions that the company Summary of tax rates and administrative burden in Spain OECD high Indicator Spain OECD high income income Payments (number per year) 8 13 Time (hours per year) 187 186 Profit tax (%) 1.2 15.4 Labor tax and contributions (%) 36.7 24.0 Other taxes (%) 0.7 3.2 Total tax rate (% profit) 38.7 42.7 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate gross Social security 1 online filing 90 30.9% 36.7 salaries taxable Corporate income tax 1 online filing 33 30.0% 1.2 income 40% of Property tax 1 0 0.6% property 0.5 cost type of various activity and Environmental tax 1 0 0.1 rates square meters insurance Tax on insurance contracts 1 0 6.0% 0.1 premium Doing Business 2012 Spain 77 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate fixed fee type of Transport tax 1 0 0 (EUR 592) truck included in Fuel tax 1 0 0 fuel price interest Tax on interest 0 0 19.0% 0 not included income Value added tax (VAT) 1 online filing 64 18.0% value added 0 not included Totals 8 187 38.7 Note: DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 Spain 78 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from Customs clearance documents a 10% drop in their trading costs than from a similar reduction in the tariffs applied to their Port and terminal handling documents products in global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining all the documents (excluding tariffs) associated with exporting and Inland transport and handling importing a standard shipment of goods by ocean transport, and the number of documents necessary Customs clearance and inspections to complete the transaction. The indicators cover Port and terminal handling procedural requirements such as documentation requirements and procedures at customs and other Does not include ocean transport time regulatory agencies as well as at the port. They also Cost required to export and import (US$ per cover trade logistics, including the time and cost of container) inland transport to the largest business city. The All documentation ranking on the ease of trading across borders is the simple average of the percentile rankings on its Inland transport and handling component indicators: documents, time and cost Customs clearance and inspections to export and import. Port and terminal handling To make the data comparable across economies, Official costs only, no bribes Doing Business uses several assumptions about the business and the traded goods. The business:  Is of medium size and employs 60 people.  Do not require refrigeration or any other  Is located in the periurban area of the special environment. economy’s largest business city.  Do not require any special phytosanitary or  Is a private, limited liability company, environmental safety standards other than domestically owned, formally registered accepted international standards. and operating under commercial laws and regulations of the economy.  Are one of the economy’s leading export or import products. The traded goods:  Are transported in a dry-cargo, 20-foot full  Are not hazardous nor do they include container load. military items. Doing Business 2012 Spain 79 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Spain? Globally, Spain stands at 55 in the ranking of 183 According to data collected by Doing Business, economies on the ease of trading across borders exporting a standard container of goods requires 6 (figure 9.1). The rankings for comparator economies documents, takes 9 days and costs $1221. Importing and the regional average ranking provide other useful the same container of goods requires 7 documents, information for assessing how easy it is for a business takes 10 days and costs $1221 (see the summary of in Spain to export and import goods. procedures and documents at the end of this chapter for details). Figure 9.1 How Spain and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2012 Spain 80 TRADING ACROSS BORDERS What are the changes over time? While the most recent Doing Business data reflect how process have changed—and which have not (table 9.1). easy (or difficult) it is to export or import in Spain That can help identify where the potential for today, data over time show which aspects of the improvement is greatest. Table 9.1 The ease of trading across borders in Spain over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. 57 55 Documents to export 6 6 6 6 6 6 6 (number) Time to export (days) 9 9 9 9 9 9 9 Cost to export (US$ per 1,000 1,000 1,000 1,121 1,221 1,221 1,221 container) Documents to import 8 8 8 8 8 7 7 (number) Time to import (days) 10 10 10 10 10 10 10 Cost to import (US$ per 1,000 1,000 1,000 1,121 1,221 1,221 1,221 container) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Equally helpful may be the benchmarks provided by economies may provide a model for Spain on ways to the economies that today have the best performance improve the ease of trading across borders. And regionally or globally on the documents, time or cost changes in regional averages can show where Spain is required to export or import (figure 9.2). These keeping up—and where it is falling behind. Doing Business 2012 Spain 81 TRADING ACROSS BORDERS Figure 9.2 Has trading across borders become easier over time? Documents to export (number) Time to export (days) Doing Business 2012 Spain 82 TRADING ACROSS BORDERS Cost to export (US$ per container) Documents to import (number) Doing Business 2012 Spain 83 TRADING ACROSS BORDERS Time to import (days) Cost to import (US$ per container) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. Source: Doing Business database. Doing Business 2012 Spain 84 TRADING ACROSS BORDERS In economies around the world, trading across borders systems. These changes help improve the trading as measured by Doing Business has become faster and environment and boost firms’ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing tools to facilitate trade—including single windows, Business recorded in Spain (table 9.2)? risk-based inspections and electronic data interchange Table 9.2 How has Spain made trading across borders easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. Spain streamlined the documentation for imports by DB2011 including tax-related information on its single administrative document. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Spain 85 TRADING ACROSS BORDERS What are the details? The indicators reported here for Spain are based on a freight forwarders, shipping lines, customs brokers, set of specific procedural requirements for trading a port officials and banks. The procedural requirements, standard shipment of goods by ocean transport (see and the associated time and cost, for exporting and the section in this chapter on what the indicators importing a standard shipment of goods are listed in cover). Information on the procedures as well as the the summary below, along with the required required documents and the time and cost to documents. complete each procedure is collected from local Summary of procedures and documents for trading across borders in Spain OECD high Indicator Spain OECD high income income Documents to export (number) 6 4 Time to export (days) 9 10 Cost to export (US$ per container) 1221 1,032 Documents to import (number) 7 5 Time to import (days) 10 11 Cost to import (US$ per container) 1221 1,085 Procedures to export Time (days) Cost (US$) Documents preparation 4 250 Customs clearance and technical control 1 150 Ports and terminal handling 2 221 Inland transportation and handling 2 600 Totals 9 1221 Procedures to import Time (days) Cost (US$) Documents preparation 4 250 Customs clearance and technical control 2 150 Ports and terminal handling 2 221 Inland transportation and handling 2 600 Totals 10 1221 Doing Business 2012 Spain 86 TRADING ACROSS BORDERS Documents to export Documents to import Bill of lading Bill of lading Cargo release order Cargo release order Commercial invoice Certificate of origin Customs export declaration Commercial invoice Packing list Customs import declaration Technical standard/health certificate Packing list Technical standard/health certificate Doing Business 2012 Spain 87 ENFORCING CONTRACTS Well-functioning courts help businesses expand WHAT THE ENFORCING CONTRACTS their network and markets. Without effective INDICATORS MEASURE contract enforcement, people might well do business only with family, friends and others with whom they have established relationships. Where Procedures to enforce a contract through contract enforcement is efficient, firms are more the courts (number) likely to engage with new borrowers or customers, Any interaction between the parties in a and they have greater access to credit. commercial dispute, or between them and the judge or court officer What do the indicators cover? Steps to file and serve the case Doing Business measures the efficiency of the judicial system in resolving a commercial dispute Steps for trial and judgment before local courts. Following the step-by-step Steps to enforce the judgment evolution of a standardized case study, it collects data relating to the time, cost and procedural Time required to complete procedures complexity of resolving a commercial lawsuit. The (calendar days) ranking on the ease of enforcing contracts is the Time to file and serve the case simple average of the percentile rankings on its Time for trial and obtaining judgment component indicators: procedures, time and cost. Time to enforce the judgment The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. Cost required to complete procedures (% of The case study assumes that the court hears an claim) expert on the quality of the goods in dispute. This No bribes distinguishes the case from simple debt Average attorney fees enforcement. To make the data comparable across economies, Doing Business uses several Court costs, including expert fees assumptions about the case: Enforcement costs  The seller and buyer are located in the economy’s largest business city.  The buyer orders custom-made goods,  The dispute on the quality of the goods then fails to pay. requires an expert opinion.  The seller sues the buyer before a  The judge decides in favor of the seller; there competent court. is no appeal.  The value of the claim is 200% of income  The seller enforces the judgment through a per capita. public sale of the buyer’s movable assets.  The seller requests a pretrial attachment to secure the claim. Doing Business 2012 Spain 88 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial Globally, Spain stands at 54 in the ranking of 183 dispute through the courts in Spain? According to data economies on the ease of enforcing contracts (figure collected by Doing Business, enforcing a contract 10.1). The rankings for comparator economies and the requires 39 procedures, takes 515 days and costs regional average ranking provide other useful 17.2% of the value of the claim (see the summary at benchmarks for assessing the efficiency of contract the end of this chapter for details). enforcement in Spain. Figure 10.1 How Spain and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2012 Spain 89 ENFORCING CONTRACTS What are the changes over time? While the most recent Doing Business data reflect how identify which areas have changed and where the easy (or difficult) it is to enforce a contract in Spain potential for improvement is greatest (table 10.1). today, data on the underlying indicators over time help Table 10.1 The ease of enforcing contracts in Spain over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. .. 53 54 Time (days) 515 515 515 515 515 515 515 515 515 Cost (% of claim) 17.2 17.2 17.2 17.2 17.2 17.2 17.2 17.2 17.2 Procedures (number) 40 40 40 40 40 40 40 39 39 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Doing Business 2012 Spain 90 ENFORCING CONTRACTS Equally helpful may be the benchmarks provided by for Spain on ways to improve the efficiency of contract the economies that today have the best performance enforcement. And changes in regional averages can regionally or globally on the number of steps, time or show where Spain is keeping up—and where it is cost required to enforce a contract through the courts falling behind. (figure 10.2). These economies may provide a model Figure 10.2 Has enforcing contracts become easier over time? Procedures (number) Time (days) Doing Business 2012 Spain 91 ENFORCING CONTRACTS Cost (% of claim) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. Source: Doing Business database. Doing Business 2012 Spain 92 ENFORCING CONTRACTS Economies in all regions have improved contract often work on reducing backlogs by introducing enforcement in recent years. A judiciary can be periodic reviews to clear inactive cases from the docket improved in different ways. Higher-income economies and by making procedures faster. What reforms tend to look for ways to enhance efficiency by making it easier (or more difficult) to enforce contracts introducing new technology. Lower-income economies has Doing Business recorded in Spain (table 10.2)? Table 10.2 How has Spain made enforcing contracts easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Spain 93 ENFORCING CONTRACTS What are the details? The indicators reported here for Spain are based on a codes of civil procedure and other court regulations, as set of specific procedural steps required to resolve a well as through surveys completed by local litigation standardized commercial dispute through the courts lawyers (and, in a quarter of the economies covered by (see the section in this chapter on what the indicators Doing Business, by judges as well). The procedures for cover). These procedures, and the time and cost of resolving a commercial lawsuit, and the associated completing them, are identified through study of the time and cost, are listed in the summary below. Summary of procedures for enforcing a contract in Spain—and the time and cost OECD high Indicator Spain OECD high income income Time (days) 515 518.03 518.03 Filing and service 50 Trial and judgment 285 Enforcement of judgment 180 Cost (% of claim) 17.2 19.71 19.71 Attorney cost (% of claim) 12.7 Court cost (% of claim) 4.5 Enforcement Cost (% of claim) 0 Procedures (number) 39 31.42 31.42 Source: Doing Business database. Doing Business 2012 Spain 94 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of Time required to recover debt (years) businesses to normal operation and increase Measured in calendar years returns to creditors. By improving the expectations of creditors and debtors about the outcome of Appeals and requests for extension are insolvency proceedings, well-functioning included insolvency systems can facilitate access to finance, Cost required to recover debt (% of debtor’s save more viable businesses and thereby improve estate) growth and sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome Fees of insolvency administrators of insolvency proceedings involving domestic entities. It does not measure insolvency Lawyers’ fees proceedings of individuals and financial Assessors’ and auctioneers’ fees institutions. The data are derived from survey Other related fees responses by local insolvency practitioners and verified through a study of laws and regulations as Recovery rate for creditors (cents on the well as public information on bankruptcy systems. dollar) The ranking on the ease of resolving insolvency is Measures the cents on the dollar recovered based on the recovery rate, which is recorded as by creditors cents on the dollar recouped by creditors through Present value of debt recovered reorganization, liquidation or debt enforcement (foreclosure) proceedings. The recovery rate is a Official costs of the insolvency proceedings are deducted function of time, cost and other factors, such as lending rate and the likelihood of the company Depreciation of furniture is taken into continuing to operate. account To make the data comparable across economies, Outcome for the business (survival or not) Doing Business uses several assumptions about the affects the maximum value that can be business and the case. It assumes that the recovered company:  Is a domestically owned, limited liability company operating a hotel.  Has 201 employees, 1 main secured creditor  Operates in the economy’s largest business and 50 unsecured creditors. city.  Has a higher value as a going concern—and the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2012 Spain 95 RESOLVING INSOLVENCY Where does the economy stand today? Speed, low costs and continuation of viable businesses Globally, Spain stands at 20 in the ranking of 183 characterize the top-performing economies. How economies on the ease of resolving insolvency (figure efficient are insolvency proceedings in Spain? 11.1). The rankings for comparator economies and the According to data collected by Doing Business, regional average ranking provide other useful resolving insolvency takes 1.5 years on average and benchmarks for assessing the efficiency of insolvency costs 11% of the debtor’s estate. The average recovery proceedings in Spain. rate is 75.6 cents on the dollar. Figure 11.1 How Spain and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2012 Spain 96 RESOLVING INSOLVENCY What are the changes over time? While the most recent Doing Business data reflect the changed—and where it has not (table 11.1). That can efficiency of insolvency proceedings in Spain today, help identify where the potential for improvement is data over time show where the efficiency has greatest. Table 11.1 The ease of resolving insolvency in Spain over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. .. 21 20 Time (years) 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 Cost (% of estate) 15 15 15 15 15 15 15 11 11 Recovery rate (cents on 73.5 73.2 74.1 73.8 72.8 67.6 67.6 70.5 75.6 the dollar) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. ―No practice‖ indicates that in each of the previous 5 years the economy had no cases involving a judicial reorganization, judicial liquidation or debt enforcement procedure (foreclosure). This means that creditors are unlikely to recover their money through a formal legal process (in or out of court). The recovery rate for ―no practice‖ economies is 0. Source: Doing Business database. Doing Business 2012 Spain 97 RESOLVING INSOLVENCY Equally helpful may be the benchmarks provided by ways to improve the efficiency of insolvency the economies that today have the best performance proceedings. And changes in regional averages can regionally or globally on the time or cost of insolvency show where Spain is keeping up—and where it is proceedings or on the recovery rate (figure 11.2). falling behind. These economies may provide a model for Spain on Figure 11.2 Has resolving insolvency become easier over time? Time (years) Cost (% of estate) Doing Business 2012 Spain 98 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. In cases where no data are displayed above for the economy, this indicates that the economy has received a “no practice� mark; see the data notes for details. Source: Doing Business database. Doing Business 2012 Spain 99 RESOLVING INSOLVENCY A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in Spain (table 11.2)? even viable businesses are liquidated. This is starting to Table 11.2 How has Spain made resolving insolvency easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. Spain amended its regulations governing insolvency DB2011 proceedings with the aim of reducing the cost and time. The new regulations also introduced out-of-court workouts. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Spain 100 DATA NOTES The indicators presented and analyzed in Doing Business measure business regulation and the ECONOMY CHARACTERISTICS protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of Gross national income (GNI) per capita regulation, such as the number of procedures to start a business or to register and transfer commercial Doing Business 2012 reports 2010 income per capita property. Second, they gauge the time and cost of as published in the World Bank’s World Development achieving a regulatory goal or complying with Indicators 2011. Income is calculated using the Atlas method (current US$). For cost indicators expressed regulation, such as the time and cost to enforce a as a percentage of income per capita, 2010 GNI in contract, go through bankruptcy or trade across U.S. dollars is used as the denominator. Data were borders. Third, they measure the extent of legal not available from the World Bank for Afghanistan; protections of property, for example, the protections Australia; The Bahamas; Bahrain; Brunei Darussalam; of investors against looting by company directors or Canada; Cyprus; Djibouti; the Islamic Republic of the range of assets that can be used as collateral Iran; Kuwait; New Zealand; Oman; Puerto Rico according to secured transactions laws. Fourth, a set of (territory of the United States); Qatar; Saudi Arabia; indicators documents the tax burden on businesses. Suriname; Taiwan, China; the United Arab Emirates; Finally, a set of data covers different aspects of West Bank and Gaza; and the Republic of Yemen. In employment regulation. these cases GDP or GNP per capita data and growth rates from the International Monetary Fund’s World The data for all sets of indicators in Doing Business Economic Outlook database and the Economist 3 2012 are for June 2011. Intelligence Unit were used. Region and income group Methodology Doing Business uses the World Bank regional and income group classifications, available at The Doing Business data are collected in a http://www.worldbank.org/data/countryclass. The standardized way. To start, the Doing Business team, World Bank does not assign regional classifications with academic advisers, designs a questionnaire. The to high-income economies. For the purpose of the questionnaire uses a simple business case to ensure Doing Business report, high-income OECD comparability across economies and over time—with economies are assigned the ―regional‖ classification assumptions about the legal form of the business, its OECD high income. Figures and tables presenting size, its location and the nature of its operations. regional averages include economies from all Questionnaires are administered through more than income groups (low, lower middle, upper middle 9,028 local experts, including lawyers, business and high income). consultants, accountants, freight forwarders, Population government officials and other professionals routinely administering or advising on legal and regulatory Doing Business 2012 reports midyear 2010 population statistics as published in World requirements. These experts have several rounds of Development Indicators 2011. interaction with the Doing Business team, involving conference calls, written correspondence and visits by the team. For Doing Business 2012 team members The Doing Business methodology offers several visited 40 economies to verify data and recruit advantages. It is transparent, using factual information respondents. The data from questionnaires are about what laws and regulations say and allowing subjected to numerous rounds of verification, leading multiple interactions with local respondents to clarify to revisions or expansions of the information collected. potential misinterpretations of questions. Having representative samples of respondents is not an issue; 3 The data for paying taxes refer to January – December 2010. Doing Business 2012 Spain 101 Doing Business is not a statistical survey, and the texts entrepreneurs reported in the World Bank Enterprise of the relevant laws and regulations are collected and Surveys or other perception surveys. answers checked for accuracy. The methodology is inexpensive and easily replicable, so data can be collected in a large sample of economies. Because Subnational Doing Business indicators standard assumptions are used in the data collection, This year Doing Business published a subnational study comparisons and benchmarks are valid across for the Philippines and a regional report for Southeast economies. Finally, the data not only highlight the Europe covering 7 economies (Albania, Bosnia and extent of specific regulatory obstacles to business but Herzegovina, Kosovo, the former Yugoslav Republic of also identify their source and point to what might be Macedonia, Moldova, Montenegro and Serbia) and 22 reformed. cities. It also published a city profile for Juba, in the Information on the methodology for each Doing Republic of South Sudan. Business topic can be found on the Doing Business The subnational studies point to differences in website at http://www.doingbusiness.org/methodology/. business regulation and its implementation—as well as in the pace of regulatory reform—across cities in the same economy. For several economies subnational Limits to what is measured studies are now periodically updated to measure The Doing Business methodology has 5 limitations that change over time or to expand geographic coverage should be considered when interpreting the data. First, to additional cities. This year that is the case for the the collected data refer to businesses in the economy’s subnational studies in the Philippines; the regional largest business city and may not be representative of report in Southeast Europe; the ongoing studies in regulation in other parts of the economy. To address Italy, Kenya and the United Arab Emirates; and the this limitation, subnational Doing Business indicators projects implemented jointly with local think tanks in were created (see the section on subnational Doing Indonesia, Mexico and the Russian Federation. Business indicators). Second, the data often focus on a Besides the subnational Doing Business indicators, specific business form—generally a limited liability Doing Business conducted a pilot study this year on company (or its legal equivalent) of a specified size— the second largest city in 3 large economies to assess and may not be representative of the regulation on within-country variations. The study collected data for other businesses, for example, sole proprietorships. Rio de Janeiro in addition to São Paulo in Brazil, for Third, transactions described in a standardized case Beijing in addition to Shanghai in China and for St. scenario refer to a specific set of issues and may not Petersburg in addition to Moscow in Russia. represent the full set of issues a business encounters. Fourth, the measures of time involve an element of judgment by the expert respondents. When sources Changes in what is measured indicate different estimates, the time indicators reported in Doing Business represent the median The methodology for 3 of the Doing Business topics values of several responses given under the was updated this year—getting credit, dealing with assumptions of the standardized case. construction permits and paying taxes. Finally, the methodology assumes that a business has First, for getting credit, the scoring of one of the 10 full information on what is required and does not components of the strength of legal rights index was waste time when completing procedures. In practice, amended to recognize additional protections of completing a procedure may take longer if the secured creditors and borrowers. Previously the business lacks information or is unable to follow up highest score of 1 was assigned if secured creditors promptly. Alternatively, the business may choose to were not subject to an automatic stay or moratorium disregard some burdensome procedures. For both on enforcement procedures when a debtor entered a reasons the time delays reported in Doing Business court-supervised reorganization procedure. Now the 2012 would differ from the recollection of highest score of 1 is also assigned if the law provides secured creditors with grounds for relief from an Doing Business 2012 Spain 102 automatic stay or moratorium (for example, if the regulatory environment for local entrepreneurs in each movable property is in danger) or sets a time limit for economy has changed over time. the automatic stay. Ease of doing business Second, because the ease of doing business index now The ease of doing business index ranks economies includes the getting electricity indicators, procedures, from 1 to 183. For each economy the ranking is time and cost related to obtaining an electricity calculated as the simple average of the percentile connection were removed from the dealing with rankings on each of the 10 topics included in the index construction permits indicators. in Doing Business 2012: starting a business, dealing Third, a threshold has been introduced for the total tax with construction permits, registering property, getting rate for the purpose of calculating the ranking on the credit, protecting investors, paying taxes, trading ease of paying taxes. All economies with a total tax across borders, enforcing contracts, resolving rate below the threshold (which will be calculated and insolvency and, new this year, getting electricity. The adjusted on a yearly basis) will now receive the same employing workers indicators are not included in this ranking on the total tax rate indicator. The threshold is year’s aggregate ease of doing business ranking. In not based on any underlying theory. Instead, it is addition to this year’s ranking, Doing Business presents meant to emphasize the purpose of the indicator: to a comparable ranking for the previous year, adjusted highlight economies where the tax burden on business for any changes in methodology as well as additions of 4 is high relative to the tax burden in other economies. economies or topics. Giving the same ranking to all economies whose total Construction of the ease of doing business index tax rate is below the threshold avoids awarding economies in the scoring for having an unusually low Here is one example of how the ease of doing business total tax rate, often for reasons unrelated to index is constructed. In the Republic of Korea it takes 5 government policies toward enterprises. For example, procedures, 7 days and 14.6% of annual income per economies that are very small or that are rich in capita in fees to open a business. There is no minimum natural resources do not need to levy broad-based capital required. On these 4 indicators Korea ranks in th th rd taxes. the 18 , 14 , 53 and 0 percentiles. So on average st Korea ranks in the 21 percentile on the ease of th starting a business. It ranks in the 12 percentile on Data challenges and revisions th getting credit, 25 percentile on paying taxes, 8 th th percentile on enforcing contracts, 7 percentile on Most laws and regulations underlying the Doing resolving insolvency and so on. Higher rankings Business data are available on the Doing Business indicate simpler regulation and stronger protection of website at http://www.doingbusiness.org. All the property rights. The simple average of Korea’s sample questionnaires and the details underlying the st percentile rankings on all topics is 21 . When all indicators are also published on the website. Questions economies are ordered by their average percentile on the methodology and challenges to data can be rankings, Korea stands at 8 in the aggregate ranking submitted through the website’s ―Ask a Question‖ on the ease of doing business. function at http://www.doingbusiness.org. More complex aggregation methods—such as principal components and unobserved components— Ease of doing business and distance to frontier 4 In case of revisions to the methodology or corrections to the underlying data, the data are back-calculated to provide a This year’s report presents results for 2 aggregate comparable time series since the year the relevant economy or topic measures: the aggregate ranking on the ease of doing was first included in the data set. The time series is available on the business and a new measure, the ―distance to frontier.‖ Doing Business website (http://www.doingbusiness.org). The Doing While the ease of doing business ranking compares Business report publishes yearly rankings for the year of publication as well as the previous year to shed light on year-to-year economies with one another at a point in time, the developments. Six topics and more than 50 economies have been distance to frontier measure shows how much the added since the inception of the project. Earlier rankings on the ease of doing business are therefore not comparable. Doing Business 2012 Spain 103 yield a ranking nearly identical to the simple average Consider the example of Canada. It stands at 12 in the 5 used by Doing Business. Thus, Doing Business uses aggregate ranking on the ease of doing business. Its the simplest method: weighting all topics equally and, ranking is 3 on both starting a business and resolving within each topic, giving equal weight to each of the insolvency, and 5 on protecting investors. But its 6 topic components. ranking is only 59 on enforcing contracts, 42 on trading across borders and 156 on getting electricity. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a Variation in performance across the indicator sets is ―no practice‖ mark. Similarly, an economy receives a not at all unusual. It reflects differences in the degree ―no practice‖ or ―not possible‖ mark if regulation exists of priority that government authorities give to but is never used in practice or if a competing particular areas of business regulation reform and the regulation prohibits such practice. Either way, a ―no ability of different government agencies to deliver practice‖ mark puts the economy at the bottom of the tangible results in their area of responsibility. ranking on the relevant indicator. Economies that improved the most across 3 or more The ease of doing business index is limited in scope. It Doing Business topics in 2010/11 does not account for an economy’s proximity to large Doing Business 2012 uses a simple method to calculate markets, the quality of its infrastructure services (other which economies improved the most in the ease of than services related to trading across borders and doing business. First, it selects the economies that in getting electricity), the strength of its financial system, 2010/11 implemented regulatory reforms making it the security of property from theft and looting, its easier to do business in 3 or more of the 10 topics macroeconomic conditions or the strength of 7 included in this year’s ease of doing business ranking. underlying institutions. Thirty economies meet this criterion: Armenia, Burkina Variability of economies’ rankings across topics Faso, Burundi, Cape Verde, the Central African Republic, Chile, Colombia, the Democratic Republic of Each indicator set measures a different aspect of the Congo, Côte d'Ivoire, The Gambia, Georgia, Korea, business regulatory environment. The rankings of an Latvia, Liberia, FYR Macedonia, Mexico, Moldova, economy can vary, sometimes significantly, across Montenegro, Morocco, Nicaragua, Oman, Peru, Russia, indicator sets. The average correlation coefficient São Tomé and Príncipe, Senegal, Sierra Leone, between the 10 indicator sets included in the Slovenia, the Solomon Islands, South Africa and aggregate ranking is 0.36, and the coefficients Ukraine. Second, Doing Business ranks these between any 2 sets of indicators range from 0.17 economies on the increase in their ranking on the ease (between protecting investors and getting electricity) of doing business from the previous year using to 0.57 (between starting a business and protecting comparable rankings. investors). These correlations suggest that economies rarely score universally well or universally badly on the Selecting the economies that implemented regulatory indicators. reforms in at least 3 topics and improved the most in the aggregate ranking is intended to highlight economies with ongoing, broad-based reform programs. 5 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, ―Doing Business Indicators: Why Aggregate, and How to Distance to frontier measure Do It‖ (World Bank, Washington, DC, 2005). Principal components This year’s report introduces a new measure to and unobserved components methods yield a ranking nearly identical to that from the simple average method because both illustrate how the regulatory environment for local these methods assign roughly equal weights to the topics, since the businesses in each economy has changed over time. pairwise correlations among indicators do not differ much. An The distance to frontier measure illustrates the alternative to the simple average method is to give different weights distance of an economy to the ―frontier‖ and shows to the topics, depending on which are considered of more or less importance in the context of a specific economy. 6 7 A technical note on the different aggregation and weighting Doing Business reforms making it more difficult to do business are methods is available on the Doing Business website subtracted from the total number of those making it easier to do (http://www.doingbusiness.org). business. Doing Business 2012 Spain 104 the extent to which the economy has closed this gap The difference between an economy’s distance to over time. The frontier is a score derived from the most frontier score in 2005 and its score in 2011 illustrates efficient practice or highest score achieved on each of the extent to which the economy has closed the gap to the component indicators in 9 Doing Business indicator the frontier over time. sets (excluding the employing workers and getting The maximum (max) and minimum (min) observed electricity indicators) by any economy since 2005. In values are computed for the 174 economies included starting a business, for example, New Zealand has in the Doing Business sample since 2005 and for all achieved the highest performance on the time (1 day), years (from 2005 to 2011). The year 2005 was chosen Canada and New Zealand on the number of as the baseline for the economy sample because it was procedures required (1), Denmark and Slovenia on the the first year in which data were available for the cost (0% of income per capita) and Australia on the majority of economies (a total of 174) and for all 9 paid-in minimum capital requirement (0% of income indicator sets included in the measure. To mitigate the per capita). effects of extreme outliers in the distributions of the Calculating the distance to frontier for each economy rescaled data (very few economies need 694 days to involves 2 main steps. First, individual indicator scores complete the procedures to start a business, but many th are normalized to a common unit. To do so, each of need 9 days), the maximum (max) is defined as the 95 the 32 component indicators y is rescaled to (y − percentile of the pooled data for all economies and all min)/(max − min), with the minimum value (min) years for each indicator. representing the frontier—the highest performance on Take Colombia, which has a score of 0.21 on the that indicator across all economies since 2005. Second, distance to frontier measure for 2011. This score for each economy the scores obtained for individual indicates that the economy is 21 percentage points indicators are aggregated through simple averaging away from the frontier constructed from the best into one distance to frontier score. An economy’s performances across all economies and all years. distance to the frontier is indicated on a scale from 0 Colombia was further from the frontier in 2005, with a to 100, where 0 represents the frontier and 100 the score of 0.43. The difference between the scores shows lowest performance. an improvement over time. Doing Business 2012 Spain 105 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Doing Business reforms News on the Doing Business project Short summaries of DB2012 business regulation http://www.doingbusiness.org reforms, lists of reforms since DB2008 and a ranking simulation tool Rankings http://www.doingbusiness.org/reforms/ How economies rank—from 1 to 183 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Reports http://www.doingbusiness.org/custom-query/ Access to Doing Business reports as well as subnational and regional reports, reform case Law library studies and customized economy and regional Online collection of business laws and profiles regulations relating to business and gender http://www.doingbusiness.org/reports/ issues http://www.doingbusiness.org/law-library/ Methodology http://wbl.worldbank.org/ The methodologies and research papers underlying Doing Business Contributors http://www.doingbusiness.org/methodology/ More than 9,000 specialists in 183 economies who participate in Doing Business Research http://www.doingbusiness.org/contributors/doing- Abstracts of papers on Doing Business topics business/ and related policy issues http://www.doingbusiness.org/research/ Doing Business 2012 Spain 106