74026 Economy Profile: Spain Doing Business 2013 Spain 2 © 2013 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 15 14 13 12 A copublication of The World Bank and the International Finance Corporation. This work is a product of the staff of The World Bank with external contributions. Note that The World Bank does not necessarily own each component of the content included in the work. The World Bank therefore does not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. 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Doing Business 2013 Spain 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 25 Getting electricity ....................................................................................................................... 37 Registering property .................................................................................................................. 45 Getting credit .............................................................................................................................. 55 Protecting investors ................................................................................................................... 62 Paying taxes ................................................................................................................................ 71 Trading across borders .............................................................................................................. 79 Enforcing contracts .................................................................................................................... 88 Resolving insolvency .................................................................................................................. 99 Employing workers .................................................................................................................. 105 Data notes ................................................................................................................................. 112 Resources on the Doing Business website ............................................................................ 117 Doing Business 2013 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 2011). 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 11 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, resolving transparency of government procurement, insolvency and employing workers. 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 185 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, 33 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, 19 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 2013 presents the indicators, analyzes their This economy profile presents the Doing Business relationship with economic outcomes and presents indicators for Spain. To allow useful comparison, it also business regulatory reforms. The data, along with provides data for other selected economies information on ordering Doing Business 2013, are (comparator economies) for each indicator. The data in available on the Doing Business website at this report are current as of June 1, 2012 (except for http://www.doingbusiness.org. Doing Business 2013 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 185 by the ease of Population: 46,235,000 doing business index. For each economy the index is calculated as the ranking on the simple average of its GNI per capita (US$): 30,990 percentile rankings on each of the 10 topics included in the index in Doing Business 2013: starting a business, DB2013 rank: 44 dealing with construction permits, getting electricity, registering property, getting credit, protecting DB2012 rank: 42* investors, paying taxes, trading across borders, Change in rank: -2 enforcing contracts and resolving insolvency. The ranking on each topic is the simple average of the percentile rankings on its component indicators (see * DB2012 ranking shown is not last year‘s published the data notes for more details). The employing workers ranking but a comparable ranking for DB2012 that indicators are not included in this year‘s aggregate ease captures the effects of such factors as data of doing business ranking, but the data are presented corrections and the addition of 2 economies in this year‘s economy profile. (Barbados and Malta) to the sample this year. See the data notes for sources and 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. Doing Business 2013 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 2013 Spain 7 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy relative to the regional average (figure 1.2). The stands in the aggregate ranking on the ease of economy‘s rankings on the topics included in the doing business is useful. Also useful is to know how ease of doing business index provide another it ranks relative to comparator economies and perspective (figure 1.3). Figure 1.2 How Spain and comparator economies rank on the ease of doing business Source: Doing Business database. Doing Business 2013 Spain 8 THE BUSINESS ENVIRONMENT Figure 1.3 How Spain ranks on Doing Business topics Source: Doing Business database. Doing Business 2013 Spain 9 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business year Doing Business introduced the distance to frontier tells only part of the story, so do changes in that ranking. measure. This measure shows how far each economy is Yearly movements in rankings can provide some indication from the best performance achieved by any economy since of changes in an economy‘s regulatory environment for 2005 on each indicator in 9 Doing Business indicator sets. firms, but they are always relative. An economy‘s ranking Comparing the measure for an economy at 2 points in might change because of developments in other time allows users to assess how much the economy‘s economies. An economy that implemented business regulatory environment as measured by Doing Business regulation reforms may fail to rise in the rankings (or may has changed over time—how far it has moved toward (or even drop) if it is passed by others whose business away from) the most efficient practices and strongest regulation reforms had a more significant impact as regulations in areas covered by Doing Business (figure 1.4). measured by Doing Business. The results may show that the pace of change varies widely Moreover, year-to-year changes in the overall rankings do across the areas measured. They also may show that an not reflect how the business regulatory environment in an economy is relatively close to the frontier in some areas economy has changed over time—or how it has changed and relatively far from it in others. in different areas. To aid in assessing such changes, last Figure 1.4 How far has Spain come in the areas measured by Doing Business? Note: The distance to frontier measure shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator since 2005. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). The overall distance to frontier is the average of the distance to frontier in the 9 indicator sets shown in the figure. See the data notes for more details on the distance to frontier measure. Source: Doing Business database. Doing Business 2013 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 DB2013 Best performer globally Switzerland DB2013 Germany DB2013 Indicator Portugal DB2013 Spain DB2013 Spain DB2012 Italy DB2013 DB2013 Starting a Business (rank) 136 134 106 84 31 97 19 New Zealand (1) Procedures (number) 10 10 9 6 5 6 6 New Zealand (1)* Time (days) 28 28 15 6 5 18 13 New Zealand (1) Cost (% of income per 4.7 4.7 4.9 16.5 2.3 2.1 0.7 Slovenia (0.0) capita) Paid-in Min. Capital (% of 13.2 13.2 0.0 9.7 0.0 26.3 0.0 91 Economies (0.0)* income per capita) Dealing with Construction Hong Kong SAR, China 38 33 14 103 78 50 20 Permits (rank) (1) Hong Kong SAR, China Procedures (number) 8 8 9 11 13 13 9 (6)* Time (days) 182 182 97 234 108 154 99 Singapore (26) Cost (% of income per 51.8 51.8 48.1 184.2 370.0 39.1 62.4 Qatar (1.1) capita) Doing Business 2013 Spain 11 United Kingdom DB2013 Best performer globally Switzerland DB2013 Germany DB2013 Portugal DB2013 Indicator Spain DB2013 Spain DB2012 Italy DB2013 DB2013 Getting Electricity (rank) 70 68 2 107 35 8 62 Iceland (1) Procedures (number) 5 5 3 5 5 3 5 Germany (3)* Time (days) 101 101 17 155 64 39 105 Germany (17) Cost (% of income per 232.1 231.9 48.3 319.2 52.7 61.1 108.9 Japan (0.0) capita) Registering Property 57 56 81 39 30 15 73 Georgia (1) (rank) Procedures (number) 5 5 5 3 1 4 6 Georgia (1)* Time (days) 13 13 40 24 1 16 29 Portugal (1) Cost (% of property value) 7.1 7.1 5.7 4.5 7.3 0.4 4.7 Belarus (0.0)* Getting Credit (rank) 53 52 23 104 104 23 1 United Kingdom (1)* Strength of legal rights 6 6 7 3 3 8 10 Malaysia (10)* index (0-10) Depth of credit 5 5 6 5 5 5 6 United Kingdom (6)* information index (0-6) Public registry coverage 53.3 54.7 1.3 24.1 90.7 0.0 0.0 Portugal (90.7) (% of adults) Private bureau coverage United Kingdom 13.2 11.4 100.0 100.0 22.9 26.8 100.0 (% of adults) (100.0)* Protecting Investors 100 98 100 49 49 169 10 New Zealand (1) (rank) Extent of disclosure index Hong Kong SAR, China 5 5 5 7 6 0 10 (0-10) (10)* Doing Business 2013 Spain 12 United Kingdom DB2013 Best performer globally Switzerland DB2013 Germany DB2013 Portugal DB2013 Indicator Spain DB2013 Spain DB2012 Italy DB2013 DB2013 Extent of director liability 6 6 5 4 5 5 7 Singapore (9)* index (0-10) Ease of shareholder suits 4 4 5 7 7 4 7 New Zealand (10)* index (0-10) Strength of investor 5.0 5.0 5.0 6.0 6.0 3.0 8.0 New Zealand (9.7) protection index (0-10) United Arab Emirates Paying Taxes (rank) 34 36 72 131 77 18 16 (1) Payments (number per Hong Kong SAR, China 8 8 9 15 8 19 8 year) (3)* United Arab Emirates Time (hours per year) 167 187 207 269 275 63 110 (12) Trading Across Borders 39 42 13 55 17 35 14 Singapore (1) (rank) Documents to export 5 5 4 4 4 4 4 France (2) (number) Time to export (days) 9 9 7 19 13 8 7 Singapore (5)* Cost to export (US$ per 1,260 1,221 872 1,145 685 1,435 950 Malaysia (435) container) Documents to import 6 6 5 4 5 5 4 France (2) (number) Time to import (days) 9 10 7 18 12 9 6 Singapore (4) Cost to import (US$ per 1,350 1,350 937 1,145 899 1,440 1,045 Malaysia (420) container) Enforcing Contracts (rank) 64 64 5 160 22 20 21 Luxembourg (1) Doing Business 2013 Spain 13 United Kingdom DB2013 Best performer globally Switzerland DB2013 Germany DB2013 Portugal DB2013 Indicator Spain DB2013 Spain DB2012 Italy DB2013 DB2013 Time (days) 510 515 394 1,210 547 390 399 Singapore (150) Cost (% of claim) 17.2 17.2 14.4 29.9 13.0 24.0 25.9 Bhutan (0.1) Procedures (number) 40 40 30 41 32 32 28 Ireland (21)* Resolving Insolvency 20 21 19 31 23 45 8 Japan (1) (rank) Time (years) 1.5 1.5 1.2 1.8 2.0 3.0 1.0 Ireland (0.4) Cost (% of estate) 11 11 8 22 9 4 6 Singapore (1)* Outcome (0 as piecemeal sale and 1 as going 1 1 1 1 0 1 concern) Recovery rate (cents on 76.5 75.6 78.1 63.4 74.6 47.5 88.6 Japan (92.8) the dollar) Note: DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. The ranking methodology for the paying taxes indicators changed in Doing Business 2013; see the data notes for details. For more information on “no practice� marks, see the data notes. Data for the outcome of the resolving insolvency indicator are not available for DB2012. * 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 2013 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 officially required or commonly done in received 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 the entrepreneur will  Has a turnover of at least 100 times income per pay no bribes. And it assumes that the business: capita.  Is a limited liability company, located in the  Does not qualify for any special benefits. largest business city.  Does not own real estate.  Has between 10 and 50 employees.  Is 100% domestically owned.  Conducts general commercial or industrial activities. Doing Business 2013 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: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2013 Spain 16 STARTING A BUSINESS Globally, Spain stands at 136 in the ranking of 185 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 2013 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 DB2013 Rank .. .. .. .. .. .. .. .. 134 136 Procedures 10 10 10 10 10 10 10 10 10 10 (number) Time (days) 114 114 47 47 47 47 47 47 28 28 Cost (% of income per 16.8 17.0 16.5 16.2 15.1 14.9 15.0 15.1 4.7 4.7 capita) Paid-in Min. Capital (% of 17.9 16.9 15.7 14.6 13.7 13.1 12.8 13.5 13.2 13.2 income per capita) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data correct ions and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Spain 18 STARTING A BUSINESS Equally helpful may be the benchmarks provided by a business (figure 2.3). These benchmarks help show the economies that over time have had the best what is possible in making it easier to start a business. performance regionally or globally on the procedures, And changes in regional averages can show where time, cost or paid-in minimum capital required to start Spain is keeping up—and where it is falling behind. Figure 2.3 Has starting a business become easier over time? Procedures (number) Time (days) Doing Business 2013 Spain 19 STARTING A BUSINESS Cost (% of income per capita) Paid-in minimum capital (% of income per capita) Note: Ninety-one economies globally have no paid-in minimum capital requirement. Source: Doing Business database. Doing Business 2013 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 DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. Spain eased the process of starting a business by reducing the DB2012 cost to start a business and decreasing the minimum capital requirement. DB2013 No reform as measured by Doing Business. 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 2013 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 professionals and the study of laws, regulations and (SRL) -Limited Liability Company publicly available information on business entry in Paid in Minimum Capital Requirement: EUR 3,000 that economy. Following is a detailed summary of those procedures, along with the associated time Start-up Capital: 10 times GNI per capita and cost. These procedures are those that apply to 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 + EUR 3 (stamps) Once the Registry issues the certification, , the requested corporate 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 2 The contributions can also be directly given to the notary public before 1 day no charge 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. 3 Grant a public deed of incorporation before a public notary 1 day approximately €500, Doing Business 2013 Spain 22 Time to No. Procedure Cost to complete complete depends on the The public deed of incorporation must include (a) the identity of the amount of the share company shareholders; (b) their will to incorporate the company; (c) the capital and disbursement made by each of shareholder and the number of shares complexity of the subscribed to by each; (d) the company bylaws; (e) the type of operation. administrative body that will manage the company; and (f) the identity of its administrators or directors. Submit Declaración Censal de Inicio de Actividad and obtain the Tax Identification Number (Numero de Identificación 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 registration with the Mercantile Registry. 6 6 days EUR 155 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 Doing Business 2013 Spain 23 Time to No. Procedure Cost to complete complete 226,863 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: the fee is EUR 6.01. • 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%. 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 Legalizing the Company Books is a formal obligation but it is not a prerequisite to begin the company´s business (articles 329 to 337 of Commercial Registry Regulation "Reglamento del Registro Mercantil"). Only the Company Book that registers the Minutes of the approximately EUR 25 shareholders, and the Board of Directors meetings precise to be to purchase the 7 15 days legalized before use (Art 116 Mercatile Register Reglament). The other books (2 books) + books can be legalized later (within 4 months after the closing of the EUR 21.49 to legalize economic year of the company), and can be legalized by electronic means or presented as physical books (Arts 329 and following Mercantile Register Reglament, and Instruction Ministry of Justice 31 dec 1999). * Submit a notification of start of operations (declaración responsable) to the municipality. Law 2/2011 of March 04, 2011 of Sustainable Economy substituted the requirement of obtaining a municipal license with a simple notification, for general companies that do not have a hazardous impact on the 7 days (simultaneous 8 EUR 350 environment, public health, security, or the preservation of national and with procedure 6) 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 no charge 9 1 day (simultaneous general treasury of social security (Tesorería General de la Doing Business 2013 Spain 24 Time to No. Procedure Cost to complete complete Seguridad Social) with procedure 7) 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 November 25, 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 2013 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 2013 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: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2013 Spain 27 DEALING WITH CONSTRUCTION PERMITS Globally, Spain stands at 38 in the ranking of 185 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 2013 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 DB2013 Rank .. .. .. .. .. .. 33 38 Procedures (number) 8 8 8 8 8 8 8 8 Time (days) 182 182 182 182 182 182 182 182 Cost (% of income 54.4 50.6 47.4 45.5 45.0 47.3 51.8 51.8 per capita) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. For more information on ―no practice‖ marks, see the data notes. Source: Doing Business database. Doing Business 2013 Spain 29 DEALING WITH CONSTRUCTION PERMITS Equally helpful may be the benchmarks provided by possible in making it easier to deal with construction the economies that over time have had the best permits. And changes in regional averages can show performance regionally or globally on the procedures, where Spain is keeping up—and where it is falling time or cost required to deal with construction permits behind. (figure 3.3). These benchmarks help show what is Figure 3.3 Has dealing with construction permits become easier over time? Procedures (number) Time (days) Doing Business 2013 Spain 30 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) Source: Doing Business database. Doing Business 2013 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 DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. 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 2013 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 • Official alignment, if required Doing Business 2013 Spain 33 Time to No. Procedure Cost to complete complete • 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 2013 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 declaration 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 EUR 1,260.00 for the surfaces between 100 and 500 square meters and additionally EUR 70.00 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 5 certificate must declare that the constructed building is in accordance 30 days EUR 1,820 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 EUR 1,260 for the surfaces between 100 and 500 square meters and additionally EUR 70.00 for every 100 square meters until 20,000 square Doing Business 2013 Spain 35 Time to No. Procedure Cost to complete complete meters. Register the new building Registration fees cannot exceed EUR 2,181.00 according to Real Decreto 1427/1989, de 17 de noviembre, por el que se aprueba el arancel de los registradores de la Propiedad. In addition to the 6 registration fee provided by the regulation, notary fees (EUR 644.10) 18 days EUR 2,831 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 6,325.00 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 • Confirmation of fee payment (EUR 11.80 must be paid at the counter) 1 day EUR 12 7 • 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 11 days EUR 84 8 works to supply the area. The necessary works inside the building have 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 Doing Business 2013 Spain 36 Time to No. Procedure Cost to complete complete normally be completed in 1 -- 2 weeks. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Spain 37 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 2013 Spain 38 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity procedures, takes 101 days and costs 232.1% 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: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2013 Spain 39 GETTING ELECTRICITY Globally, Spain stands at 70 in the ranking of 185 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 2013 Spain 40 GETTING ELECTRICITY Even more helpful than rankings on the ease of getting performers on these indicators may provide useful electricity may be the indicators underlying those benchmarks. rankings (table 4.1). And regional and global best Table 4.1 The ease of getting electricity in Spain Best performer in Best performer Indicator Spain DB2013 Spain DB2012 OECD high income globally DB2013 DB2013 Rank 70 68 Iceland (1) Iceland (1) Procedures (number) 5 5 Germany (3) Germany (3)* Time (days) 101 101 Germany (17) Germany (17) Cost (% of income per capita) 232.1 231.9 Japan (0.0) Japan (0.0) Note: DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. * Two or more economies share the top ranking on this indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2013 Spain 41 GETTING ELECTRICITY Obtaining an electricity connection is essential to safety in the connection process while keeping enable a business to conduct its most basic operations. connection costs reasonable, governments around the In many economies the connection process is world have worked to consolidate requirements for complicated by the multiple laws and regulations obtaining an electricity connection. What reforms in involved—covering service quality, general safety, getting electricity has Doing Business recorded in Spain technical standards, procurement practices and (table 4.2)? internal wiring installations. In an effort to ensure Table 4.2 How has Spain made getting electricity easier—or not? By Doing Business report year DB year Reform DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2013 Spain 42 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 2013 Spain 43 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 license for the external works from the municipality. The taxes on this license 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 licensed 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 (installation of the transformer, excavation for cables etc.), Iberdrola is 5 calendar days EUR 60.8 5 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 2013 Spain 44 Source: Doing Business database. Doing Business 2013 Spain 45 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 2013 Spain 46 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: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2013 Spain 47 REGISTERING PROPERTY Globally, Spain stands at 57 in the ranking of 185 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 2013 Spain 48 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 DB2013 Rank .. .. .. .. .. .. .. 56 57 Procedures (number) 4 4 4 4 4 4 4 5 5 Time (days) 25 20 13 13 13 13 13 13 13 Cost (% of property value) 7.1 7.2 7.3 7.1 7.2 7.2 7.1 7.1 7.1 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. For more information on ―no practice‖ marks, see the data notes. Source: Doing Business database. Doing Business 2013 Spain 49 REGISTERING PROPERTY Equally helpful may be the benchmarks provided by (figure 5.3). These benchmarks help show what is the economies that over time have had the best possible in making it easier to register property. And performance regionally or globally on the procedures, changes in regional averages can show where Spain is time or cost required to complete a property transfer keeping up—and where it is falling behind. Figure 5.3 Has registering property become easier over time? Procedures (number) Time (days) Doing Business 2013 Spain 50 REGISTERING PROPERTY Cost (% of property value) Source: Doing Business database. Doing Business 2013 Spain 51 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 DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. 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 2013 Spain 52 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: EUR 1,133,490 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 * Notary requests property information from the Property Registry 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 and encumbrances on the property, and consult the Property Registry 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 1-3 days EUR 9 1 average to obtain the information) and the printout from the internet is valid. Since June 2011, the information from the Land Registry is also available in English. Translations come at an additional fee of EUR 20 and take up to 4 days. * Notary obtains cadastral description no cost if obtained 2 1 day electronically Execution and delivery of the public deed of purchase of the Notary‘s fees property (decreasing scale): EUR 730 for a Property transfers are valid with a private contract between the parties, property of this plus the handing over of the posession of the property to the buyer (ie. value (minus 5% the "traditio" through, for example, the handing over of the keys to the discount) property to the buyer). However, in order to make the property transfer 2 days For property values 3 opposable to good faith third parties, it has to be registered at the Land Registry, and in order to be registered, the contract between the parties not exceeding EUR has to be notrarized. 6.010,12: EUR 90,151816. Notary fees are on a cumulative scale, as follows: for the excess amount between • Property value up to EUR 6,010.12: EUR 90.151816 EUR 6.010,13 and • For the excess amount between EUR 6,010.13 and EUR 30,050.61: 4.5 30.050,61: 0,45%. Doing Business 2013 Spain 53 Time to No. Procedure Cost to complete complete per 1,000 for the excess • For the excess amount between EUR 30,050.62 and EUR 60,101.21: 1,50 amount between per 1,000 EUR 30.050,62 and • For the excess amount between EUR 60,101.22 and EUR 150,253.03: 1 60.101,21: 0,15%. per 1,000 for the excess • For the excess amount between EUR 150,253.04 and EUR 601,012.10: amount between 0.5 per 1,000 • For the excess amount between EUR 601,012.11 and EUR 6,010,121.04: EUR 60.101,22 and 0.3 per 1,000 150.253,03: 0,1%. • For the excess amount above EUR 6,010,121.04 the fees are determin ed for the excess by agreement between the notary and client. amount between EUR 150.253,04 and The Real Decreto Ley 8/2010, of May 20 2010, modifies the Real Decreto 601.012,10: 0,05%. 1426/1989, of November 17th 1989, establishing notary fees. The 2010 for the excess decree establishes a 5% discount for notary fees. amount over EUR 601.012,10 until According to Royal Decree 45/2007, the notary must issue an authorized 6.010.121,04: 0,03%. 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 Payment of the Transfer Tax (ITP) First transfers of property or transfers made between entrepreneurs are subject to VAT (down to 4% from the previous 8% rate, according to Royal Decree-Law 9/2011 of August 19, 2011) and Stamp Duty (0.5-1.0% of the property value, depending on the autonomous region -- it is 1.5% in Madrid). 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 7% to 10% depending on the autonomous region of Spain 7% of purchase price 4 1 day (in Madrid, it is 7% of the property value). (ITP) 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 of granting of the notarial deed of transfer (a copy of the transfer deed is 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 Doing Business 2013 Spain 54 Time to No. Procedure Cost to complete complete 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 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%. The public deed is registered at the Land and Property Registry The notary submits the public deed to the Land Registry. The Land Registry will review and register the transfer within the legal time limit of 15 business days. 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. With the introduction of technology and online Procedures due to Law 24/2005 of November 18, in particular section II on electronic EUR 457 (minus 5% 5 8 days registration, the time to register is in the process of being reduced. The discount) average registration time is currently at 8 calendar days. The documentation to be presented to the Land Registry 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) * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Spain 55 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 whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses case scenarios to determine the scope of the  Has 100 employees. secured transactions system, involving a secured  Is 100% domestically owned, as is the lender. borrower and a secured lender and examining legal The ranking on the ease of getting credit is based on restrictions on the use of movable collateral. These the percentile rankings on the sum of its component scenarios assume that the borrower: indicators: the depth of credit information index and  Is a private, limited liability company. the strength of legal rights index.  Has its headquarters and only base of operations in the largest business city. Doing Business 2013 Spain 56 GETTING CREDIT Where does the economy stand today? How well do the credit information system and Globally, Spain stands at 53 in the ranking of 185 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 2013 Spain 57 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 DB2013 Rank .. .. .. .. .. .. .. 52 53 Strength of legal rights 6 6 6 6 6 6 6 6 6 index (0-10) Depth of credit 5 5 5 5 5 5 5 5 5 information index (0-6) Public registry 39.4 42.1 44.9 44.9 45.8 45.3 54.6 54.7 53.3 coverage (% of adults) Private bureau 6.5 6.5 7.4 8.3 8.1 7.6 10.7 11.4 13.2 coverage (% of adults) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Spain 58 GETTING CREDIT One way to put an economy‘s score on the getting shows the number of economies with this score in credit indicators into context is to see where the 2012 as well as the regional average score. Figure 6.3 economy stands in the distribution of scores across shows the same thing for the depth of credit economies. Figure 6.2 highlights the score on the information index. strength of legal rights index for Spain in 2012 and Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared— and lenders? and how widely? Number of economies with each score on strength of legal Number of economies with each score on depth of credit rights index (0–10), 2012 information index (0–6), 2012 Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a public credit registry or a private Source: Doing Business database. credit bureau, to facilitate lending decisions. Regional averages for the depth of credit information index exclude economies with no public registry or private bureau. Source: Doing Business database. Doing Business 2013 Spain 59 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 DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. 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 2013 Spain 60 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 OECD high income Indicator Spain income average average Strength of legal rights index (0-10) 6 7 Depth of credit information index (0-6) 5 5 Public registry coverage (% of adults) 53.3 31.5 Private bureau coverage (% of adults) 13.2 74.6 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only displayed once. Regional averages for the depth of credit information index exclude economies with no public registry or private bureau. Regional averages for the public registry coverage exclude economies with no public registry. Regional averages for the private bureau coverage exclude economies with no private bureau. 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 No of 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? Doing Business 2013 Spain 61 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 No debtor defaults outside an insolvency procedure? 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 Yes No 1 as 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 307,000 955,341 Number of individuals 3,845,000 15,744,824 Source: Doing Business database. Doing Business 2013 Spain 62 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 2013 Spain 63 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 100 in the ranking of 185 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 2013 Spain 64 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 DB2013 Rank .. .. .. .. .. .. 98 100 Extent of disclosure 5 5 5 5 5 5 5 5 index (0-10) Extent of director liability index (0- 6 6 6 6 6 6 6 6 10) Ease of shareholder 4 4 4 4 4 4 4 4 suits index (0-10) Strength of investor protection 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 index (0-10) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Spain 65 PROTECTING INVESTORS One way to put an economy‘s scores on the protecting the number of economies with this score in 2012 as investors indicators into context is to see where the well as the regional average score. Figure 7.3 shows economy stands in the distribution of scores across the same thing for the extent of director liability index, economies. Figure 7.2 highlights the score on the and figure 7.4 for the ease of shareholder suits index. extent of disclosure index for Spain in 2012 and shows Figure 7.2 How strong are disclosure requirements? Figure 7.3 How strong is the liability regime for directors? Number of economies with each score on extent of Number of economies with each score on extent of director liability index (0–10), 2012 disclosure index (0–10), 2012 Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. No economy receives a score of 10 on the extent of Source: Doing Business database. director liability index. Source: Doing Business database. Doing Business 2013 Spain 66 PROTECTING INVESTORS Figure 7.4 How easy is access to internal corporate documents? Number of economies with each score on ease of shareholder suits index (0–10), 2012 Note: Higher scores indicate greater powers of shareholders to challenge the transaction. Source: Doing Business database. Doing Business 2013 Spain 67 PROTECTING INVESTORS The scores recorded over time for Spain on the changes over time in the regional average score on strength of investor protection index may also be this index. revealing (figure 7.5). Equally interesting may be the Figure 7.5 Have investor protections become stronger over time? Strength of investor protection index (0–10) Note: The higher the score, the stronger the investor protections. Source: Doing Business database. Doing Business 2013 Spain 68 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 DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. 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 2013 Spain 69 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 as liability and shareholder suits in a standard case study well as on securities regulations, company laws and transaction (see the notes at the end of this chapter). 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 OECD high income Indicator Spain income average average 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 6.1 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only display ed once. Score Score description Extent of disclosure index (0-10) 5 What corporate body provides legally sufficient 0 CEO approval for the transaction? Whether disclosure of the conflict of interest by Mr. 2 Full disclosure of all material facts James to the board of directors is required? Whether immediate disclosure of the transaction to 1 Disclosure on the transaction only the public and/or shareholders is required? Whether disclosure of the transaction in published Disclosure on the transaction and Mr. 2 periodic filings (annual reports) is required? James' conflict of interest Whether an external body must review the terms of 0 No the transaction before it takes place? Extent of director liability index (0-10) 6 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction 1 Yes causes to the company? Doing Business 2013 Spain 70 Score Score description Whether shareholders can hold Mr. James liable for Liable for negligence or influencing the damage that the Buyer-Seller transaction causes 1 the approval of the transaction to the company? Whether shareholders can hold members of the approving body liable for the damage that the Buyer- 1 Liable for negligence Seller transaction causes to the company? Whether a court can void the transaction upon a Not possible or only in case of Seller's 0 successful claim by a shareholder plaintiff? fraud or bad faith Whether Mr. James pays damages for the harm caused to the company upon a successful claim by 1 Yes the shareholder plaintiff? Whether Mr. James repays profits made from the transaction upon a successful claim by the 1 Yes shareholder plaintiff? Whether fines and imprisonment can be applied 1 Yes against Mr. James? Ease of shareholder suits index (0-10) 4 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before 0 No filing suit? Whether shareholders owning 10% or less of Buyer's shares can request an inspector to investigate the 0 No transaction? Whether the plaintiff can obtain any documents from Any information that is relevant to the 3 the defendant and witnesses during trial? subject matter of the claim Whether the plaintiff can request categories of documents from the defendant without identifying 0 No specific ones? Whether the plaintiff can directly question the 1 Yes defendant and witnesses during trial? Whether the level of proof required for civil suits is 0 No lower than that of criminal cases? Strength of investor protection index (0-10) 5.0 Source: Doing Business database. Doing Business 2013 Spain 71 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 Tax payments for a manufacturing company complexity in tax rules avoided. According to in 2011 (number per year adjusted for Doing Business data, in economies where it is more electronic or joint filing and payment) difficult and costly to pay taxes, larger shares of 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 Time required to comply with 3 major taxes the taxes and mandatory contributions that a (hours per year) medium-size company must pay in a given year as 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 Arranging payment or withholding payments as well as time taken to comply with tax 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 1 Profit or corporate income tax being applied to the total tax rate. To make the 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, 2010. transactions taxes  The business starts from the same financial Waste collection, vehicle, road and other taxes position in each economy. All the taxes  Taxes and mandatory contributions include and mandatory contributions paid during corporate income tax, turnover tax and all the second year of operation are recorded. labor taxes and contributions paid by the  Taxes and mandatory contributions are company. measured at all levels of government.  A range of standard deductions and exemptions are also recorded. 1 The threshold is defined as the highest total tax rate among the top 15% of economies in the ranking on the total tax rate. It is calculated and adjusted on a yearly basis. The threshold is not based on any economic theory of an ―optimal tax rate‖ that minimizes distortions or maximizes efficiency in the tax system of an economy overall. Instead, it is mainly empirical in nature, set at the lower end of the distribution of tax rates levied on medium-size enterprises in the manufacturing sector as observed through the paying taxes indicators. This reduces the bias in the indicators toward economies that do not need to levy significant taxes on companies like the Doing Business standardized case study company because they raise public revenue in other ways—for example, through taxes on foreign companies, through taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of the methodology). This year‘s threshold is 25.7%. Doing Business 2013 Spain 72 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with Globally, Spain stands at 34 in the ranking of 185 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 167 hours a year filing, preparing and paying taxes and average ranking provide other useful information for pay total taxes amounting to 38.7% 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: DB2013 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 25.7% applied in DB2013, the total tax rate is set at 25.7% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2013 Spain 73 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 DB2013 Rank .. .. .. .. .. .. 36 34 Payments (number per 7 7 8 8 8 8 8 8 year) Time (hours per year) 298 298 298 234 213 197 187 167 Total tax rate (% profit) 61.8 61.9 62.0 60.2 56.9 56.5 38.7 38.7 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data correc tions and the addition of 2 economies (Barbados and Malta) to the sample this year. DB2013 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 25.7% applied in DB2013, the total tax rate is set at 25.7% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2013 Spain 74 PAYING TAXES Equally helpful may be the benchmarks provided by possible in easing the administrative burden of tax the economies that over time have had the best compliance. And changes in regional averages can performance regionally or globally on the number of show where Spain is keeping up—and where it is payments or the time required to prepare and file falling behind. taxes (figure 8.2). These benchmarks help show what is Figure 8.2 Has paying taxes become easier over time? Payments (number per year) Time (hours per year) Doing Business 2013 Spain 75 PAYING TAXES Total tax rate (% of profit) Source: Doing Business database. Doing Business 2013 Spain 76 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 Spain made it less costlier to pay taxes for companies, by DB2008 reducing CIT rates. DB2009 No reform as measured by Doing Business. Spain relieved the tax burden on business by reducing the corporate income tax rate from 32.5% to 30% and with DB2010 efficiency gains due to the electronic filing and payment system. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. 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 2013 Spain 77 PAYING TAXES What are the details? The indicators reported here for Spain are based on LOCATION OF STANDARDIZED COMPANY a standard set of taxes and contributions that would be paid by the case study company used by Doing Business in collecting the data (see the City: Madrid section in this chapter on what the indicators cover). Tax practitioners are asked to review standard financial statements as well as a standard list of transactions that the company completed The taxes and contributions paid are listed in the during the year. Respondents are asked how much summary below, along with the associated number of in taxes and mandatory contributions the business payments, time and tax rate. must pay and what the process is for doing so. Summary of tax rates and administrative burden in Spain OECD high OECD high income Indicator Spain income average average Payments (number per year) 8 12 Time (hours per year) 167 176 Profit tax (%) 1.2 15.2 Labor tax and contributions (%) 36.8 23.8 Other taxes (%) 0.7 3.7 Total tax rate (% profit) 38.7 42.7 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only displayed once. Total tax Tax or mandatory Payments Notes on Time Statutory Notes on Tax base rate (% of contribution (number) payments (hours) tax rate total tax rate profit) Employer paid - Social security gross 1 online filing 90 31% 36.8 contributions salaries taxable Corporate income tax 1 online filing 33 30% 1.2 profit Doing Business 2013 Spain 78 Total tax Tax or mandatory Payments Notes on Time Statutory Notes on Tax base rate (% of contribution (number) payments (hours) tax rate total tax rate profit) cadastral value (estimated in 40% of Property tax 1 0 1% 0.5 property cost for these purposes) interest Tax on interest 0 paid jointly 0 19% 0.5 not included income type of activity and Environmental tax 1 0 various rates 0.1 square meters insurance Tax on insurance contracts 1 0 6% 0.1 premium included in Fuel tax 1 0 0 fuel price Value added tax (VAT) 1 online filing 44 18% value added 0 not included type of Transport tax 1 0 EUR 592 0 truck Totals 8 167 38.7 Source: Doing Business database. Doing Business 2013 Spain 79 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, filling out and submitting all the (excluding tariffs and the time and cost for sea documents transport) associated with exporting and importing Inland transport and handling a standard shipment of goods by sea transport, and the number of documents necessary to Customs clearance and inspections complete the transaction. The indicators cover Port and terminal handling procedural requirements such as documentation Does not include sea transport time requirements and procedures at customs and other 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 special environment.  Is located in the periurban area of the economy‘s largest business city.  Do not require any special phytosanitary or environmental safety standards other than  Is a private, limited liability company, accepted international standards. domestically owned, formally registered and operating under commercial laws and  Are one of the economy‘s leading export or regulations of the economy. import products. The traded goods:  Are transported in a dry-cargo, 20-foot full container load.  Are not hazardous nor do they include military items. Doing Business 2013 Spain 80 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Spain? Globally, Spain stands at 39 in the ranking of 185 According to data collected by Doing Business, economies on the ease of trading across borders exporting a standard container of goods requires 5 (figure 9.1). The rankings for comparator economies documents, takes 9 days and costs $1260. Importing and the regional average ranking provide other useful the same container of goods requires 6 documents, information for assessing how easy it is for a business takes 9 days and costs $1350 (see the summary of in Spain to export and import goods. procedures and documents at the end of this chapter for details). Figure 9.1 How Spain and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2013 Spain 81 TRADING ACROSS BORDERS What are the changes over time? While the most recent Doing Business data reflect how process have changed—and which have not (table 9.1). easy (or difficult) it is to export or import in Spain That can help identify where the potential for today, data over time show which aspects of the improvement is greatest. Table 9.1 The ease of trading across borders in Spain over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. 42 39 Documents to export 5 5 5 5 5 5 5 5 (number) Time to export (days) 9 9 9 9 9 9 9 9 Cost to export (US$ per 1,000 1,000 1,000 1,121 1,221 1,221 1,221 1,260 container) Documents to import 7 7 7 7 7 6 6 6 (number) Time to import (days) 10 10 10 10 10 10 10 9 Cost to import (US$ per 1,129 1,129 1,129 1,250 1,350 1,350 1,350 1,350 container) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Spain 82 TRADING ACROSS BORDERS Equally helpful may be the benchmarks provided by These benchmarks help show what is possible in the economies that over time have had the best making it easier to trade across borders. And changes performance regionally or globally on the documents, in regional averages can show where Spain is keeping time or cost required to export or import (figure 9.2). up—and where it is falling behind. Figure 9.2 Has trading across borders become easier over time? Documents to export (number) Time to export (days) Doing Business 2013 Spain 83 TRADING ACROSS BORDERS Cost to export (US$ per container) Documents to import (number) Doing Business 2013 Spain 84 TRADING ACROSS BORDERS Time to import (days) Cost to import (US$ per container) Source: Doing Business database. Doing Business 2013 Spain 85 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 DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. Spain streamlined the documentation for imports by including DB2011 tax-related information on its single administrative document. DB2012 No reform as measured by Doing Business. Spain reduced the time to import by further expanding the use of electronic submission of customs declarations and DB2013 improving the sharing of information among customs and other agencies. 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 2013 Spain 86 TRADING ACROSS BORDERS What are the details? The indicators reported here for Spain are based on LOCATION OF STANDARDIZED COMPANY a set of specific procedural requirements for trading a standard shipment of goods by ocean transport (see the section in this chapter on what City: Madrid the indicators cover). Information on the procedures as well as the required documents and the time and cost to complete each procedure is The procedural requirements, and the associated time collected from local freight forwarders, shipping and cost, for exporting and importing a standard lines, customs brokers, port officials and banks. shipment of goods are listed in the summary below, along with the required documents. Summary of procedures and documents for trading across borders in Spain OECD high OECD high income Indicator Spain income average average Documents to export (number) 5 4 Time to export (days) 9 10 Cost to export (US$ per container) 1,260 1,028 Documents to import (number) 6 5 Time to import (days) 9 10 Cost to import (US$ per container) 1,350 1,080 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only displayed once. Procedures to export Time (days) Cost (US$) Documents preparation 4 150 Customs clearance and technical control 1 60 Ports and terminal handling 2 250 Inland transportation and handling 2 800 Totals 9 1,260 Procedures to import Time (days) Cost (US$) Documents preparation 4 150 Customs clearance and technical control 1 150 Doing Business 2013 Spain 87 Procedures to import Time (days) Cost (US$) Ports and terminal handling 2 250 Inland transportation and handling 2 800 Totals 9 1,350 Documents to export Documents to import Bill of lading Bill of lading Commercial invoice Certificate of origin Customs export declaration Commercial invoice Packing list Customs import declaration Technical standard/health certificate Packing list Source: Doing Business database. Technical standard/health certificate Doing Business 2013 Spain 88 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 Time required to complete procedures data relating to the time, cost and procedural (calendar days) complexity of resolving a commercial lawsuit. The 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 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 2013 Spain 89 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial Globally, Spain stands at 64 in the ranking of 185 dispute through the courts in Spain? According to data economies on the ease of enforcing contracts (figure collected by Doing Business, enforcing a contract takes 10.1). The rankings for comparator economies and the 510 days, costs 17.2% of the value of the claim and regional average ranking provide other useful requires 40 procedures (see the summary at the end of benchmarks for assessing the efficiency of contract 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 2013 Spain 90 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 DB2013 Rank .. .. .. .. .. .. .. .. 64 64 Time (days) 515 515 515 515 515 515 515 515 515 510 Cost (% of claim) 17.2 17.2 17.2 17.2 17.2 17.2 17.2 17.2 17.2 17.2 Procedures (number) 42 42 42 42 41 41 41 40 40 40 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Spain 91 ENFORCING CONTRACTS Equally helpful may be the benchmarks provided by help show what is possible in improving the efficiency the economies that over time have had the best of contract enforcement. And changes in regional performance regionally or globally on the number of averages can show where Spain is keeping up—and steps, time or cost required to enforce a contract where it is falling behind. through the courts (figure 10.2). These benchmarks Figure 10.2 Has enforcing contracts become easier over time? Time (days) Cost (% of claim) Doing Business 2013 Spain 92 ENFORCING CONTRACTS Procedures (number) Source: Doing Business database. Doing Business 2013 Spain 93 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 DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. 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 2013 Spain 94 ENFORCING CONTRACTS What are the details? The indicators reported here for Spain are based COMPETENT COURT on a set of specific procedural steps required to resolve a standardized commercial dispute through the courts (see the section in this chapter City: Madrid on what the indicators cover). These procedures, and the time and cost of completing them, are The procedures for resolving a commercial lawsuit, and identified through study of the codes of civil the associated time and cost, are listed in the summary procedure and other court regulations, as well as below. through surveys completed by local litigation lawyers (and, in a quarter of the economies covered by Doing Business, by judges as well). Summary of procedures for enforcing a contract in Spain—and the time and cost OECD high OECD high income Indicator Spain income average average Time (days) 510 510 510 Filing and service 50 Trial and judgment 280 Enforcement of judgment 180 Cost (% of claim) 17.2 20.1 20.1 Attorney cost (% of claim) 12.7 Court cost (% of claim) 4.5 Enforcement Cost (% of claim) 0.0 Procedures (number) 40 31 31 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only displayed once. Doing Business 2013 Spain 95 ENFORCING CONTRACTS No. Procedure Filing and service: 1 Plaintiff requests payment: Plaintiff or his lawyer asks Defendant orally or in writing to comply with the contract. A third person formally notifies Defendant: A person other than the Plaintiff or his lawyer, such as a notary public, 2 formally notifies Defendant of Plaintiff‘s request for payment. 3 Plaintiff’s hiring of lawyer: Plaintiff hires a lawyer to represent him before the court. Plaintiff’s filing of summons and complaint: Plaintiff files his summons and complaint with the court, orally or in * writing. * Plaintiff’s payment of court fees: Plaintiff pays court duties, stamp duties, or any other type of court fee. Registration of court case: The court administration registers the lawsuit or court case. This includes assigning a 4 reference number to the lawsuit or court case. Assignment of court case to a judge: The court case is assigned to a specific judge through a random procedure, * automated system, ruling of an administrative judge, court officer, etc. Judge admits summons and complaint: After verifying the formal requirements, the judge decides to admit * Plaintiff‘s summons and complaint. 5 Plaintiff’s request for service: Plaintiff makes a written request to the court that process be served on Defendant. 6 Court order for service: Upon Plaintiff‘s request, judge orders process be served on Defendant. Delivery of summons and complaint to person authorized to perform service of process on Defendant: The 7 judge or a court officer delivers the summons to a summoning office, officer, or authorized person (including Plaintiff), for service of process on Defendant. First attempt at physical delivery: A first attempt to physically deliver summons and complaint to Defendant is 8 successful in the majority of cases. Application for pre-judgment attachment: Plaintiff submits an application in writing for the attachment of * Defendant's property prior to judgment. (see assumption 5) Decision on pre-judgment attachment: The judge decides whether to grant Plaintiff‘s request for pre-judgment * attachment of Defendant‘s property and notifies Plaintiff and Defendant of the decision. This step may include requesting that Plaintiff submit guarantees or bonds to secure Defendant Guarantees securing attached property: Plaintiff typically submits guarantees or bonds to secure Defendant 9 against possible damages to attached property. (see assumption 5) Pre-judgment attachment.: Defendant's property is attached prior to judgment. Attachment is either physical or 10 achieved by registering, marking, debiting or separating assets. (see assumption 5) Custody of assets attached prior to judgment: Defendant's attached assets are put under enforcement officer's or 11 (private) bailiff's care. (see assumption 5) Doing Business 2013 Spain 96 No. Procedure Report on pre-judgment attachment: Court enforcement officer or (private) bailiff issues and delivers a report on 12 the attachment of Defendant‘s property to the judge. (see assumption 5) Hearing on pre-judgment attachment: A hearing takes place to resolve the question of whether Defendant‘s 13 assets can be attached prior to judgment. This process may include the submission of separate summons and petitions. (see assumption 5) Trial and judgment: Defendant’s filing of preliminary exemptions: Defendant presents preliminary exemptions to the court. * Preliminary exemptions differ from answers on the merits of the claim. Examples of preliminary exemptions are statute of limitations, jurisdictions, etc. Plaintiff’s answer to preliminary exemptions: Plaintiff responds to the preliminary exemptions raised by * Defendant. Judge’s resolution on preliminary exemptions: Judge decides on preliminary exemptions separately from the 14 merits of the case. Defendant’s filing of defense or answer to Plaintiff’s claim: Defendant files a written pleading which includes his 15 defense or answer on the merits of the case. Defendant's written answer may or may not include witness statements, expert statements, the documents Defendant relies on as evidence and the legal authori 16 Framing of issues: Plaintiff and Defendant assist the court in framing issues on which evidence is to be presented. Court appointment of independent expert: Judge appoints, either at the parties' request or at his own initiative, * an independent expert to decide whether the quality of the goods Plaintiff delivered to Defendant is adequate. (see assumption 6-b of this case) Notification of court-appointment of independent expert: The court notifies both parties that the court is 17 appointing an independent expert. (see assumption 6-b of this case) Delivery of expert report by court-appointed expert: The independent expert appointed by the court delivers his * or her expert report to the court. (see assumption 6-b of this case) Pre-trial conference on procedure: The judge meets with the parties to discuss procedural issues (for example 18 which applications and motions parties intend to file, which documents parties intend to rely on, what will be presented as evidence the oral hearing or trial, etc.) * Setting of date(s) for oral hearing or trial: The judge sets the date(s) for the oral hearing or trial. Preliminary hearing aimed at preparing for the oral hearing: The judge meets the parties to make practical 19 arrangements for the oral hearing on the merits of the case. * List of (expert) witnesses: The parties file a list of (expert) witnesses with the court. (see assumption 6-a) Summoning of (expert) witnesses: The court summons (expert) witnesses to appear in court for the oral hearing 20 or trial. (see assumption 6-a) Adjournments: Court proceedings are delayed because one or both parties request and obtain an adjournment to 21 prepare for the oral hearing or trial. Oral hearing (prevalent in civil law): The parties argue the merits of the case at an oral hearing before the judge. 22 Witnesses and a court-appointed independent expert may be heard and questioned at the oral hearing. Doing Business 2013 Spain 97 No. Procedure Adjournments: Court proceedings are delayed because one or both parties request and obtain an adjournment 23 during the oral hearing or trial, resulting in an additional or later trial or hearing date. Final arguments: The parties present their final factual and legal arguments to the court either by oral presentation * or by a written submission. 24 Notification of judgment in court: The parties are notified of the judgment at a court hearing. 25 Writing of judgment: The judge produces a written copy of the judgment. Court notification of availability of the written judgment: The court notifies the parties that the written 26 judgment is available at the courthouse. 27 Plaintiff's receipt of a copy of written judgment: Plaintiff receives a copy of the written judgment. Notification of Defendant of judgment: Plaintiff or court formally notifies the Defendant of the judgment. The 28 appeal period starts to run the day the Defendant is formally notified of the judgment. Appeal period: By law, Defendant has the opportunity to appeal the judgment during a period specified in the law. 29 Defendant decides not to appeal. Judgment becomes final the day the appeal period ends. Reimbursement by Defendant of Plaintiff's court fees: The judgment obliges Defendant to reimburse Plaintiff for 30 the court fees Plaintiff has advanced, because Defendant has lost the case. Enforcement of judgment: Plaintiff’s hiring of lawyer: Plaintiff hires a lawyer to enforce the judgment or continues to be represented by a * lawyer during the enforcement of judgment phase. Plaintiff's approaching of court enforcement officer or (private) bailiff to enforce the judgment: To enforce 31 the judgment, Plaintiff approaches a court enforcement officer such as a court bailiff or sheriff, or a private bailiff. 32 Publication of judgment: The judgment must be published in an official journal, gazette or local newspaper. Plaintiff’s request for enforcement order: Plaintiff applies to the court to obtain the enforcement order ('seal' on * judgment). Attachment of enforcement order to judgment: The judge attaches the enforcement order (‗seal‘) to the 33 judgment. Plaintiff’s identification of Defendant's assets for attachment: Plaintiff identifies Defendant's assets for 34 attachment. 35 Attachment: Defendant‘s movable goods are attached (physically or by registering, marking or separating assets). Report on execution of attachment: A court enforcement officer or private process server delivers a report on the 36 attachment of Defendant's movable goods to the judge. Valuation or appraisal of attached movable goods: The court or court appointed valuation expert evaluates the 37 attached goods. Call for public auction: The judge calls a public auction by, for example, advertising or publication in the 38 newspapers. 39 Sale through public auction: The Defendant‘s movable property is sold at public auction. Doing Business 2013 Spain 98 No. Procedure 40 Payment: Court orders that the proceeds of the public auction or the direct sale be delivered to Plaintiff. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Spain 99 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 Official costs of the insolvency proceedings (foreclosure) proceedings. The recovery rate is a 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 recovered business and the case. It assumes that the 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 2013 Spain 100 RESOLVING INSOLVENCY Where does the economy stand today? Speed, low costs and continuation of viable businesses concern. The average recovery rate is 76.5 cents on the characterize the top-performing economies. How dollar. efficient are insolvency proceedings in Spain? Globally, Spain stands at 20 in the ranking of 185 According to data collected by Doing Business, economies on the ease of resolving insolvency (figure resolving insolvency takes 1.5 years on average and 11.1). The rankings for comparator economies and the costs 11% of the debtor‘s estate, with the most likely regional average ranking provide other useful outcome being that the company will be sold as going benchmarks for assessing the efficiency of insolvency proceedings in Spain. Figure 11.1 How Spain and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2013 Spain 101 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 DB2013 Rank .. .. .. .. .. .. .. .. 21 20 Time (years) 1.5 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 11 Recovery rate (cents on the 73.5 73.2 74.1 73.8 72.8 67.6 67.6 70.5 75.6 76.5 dollar) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. ―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 2013 Spain 102 RESOLVING INSOLVENCY Equally helpful may be the benchmarks provided by possible in improving the efficiency of insolvency the economies that over time have had the best proceedings. And changes in regional averages can performance regionally or globally on the time or cost show where Spain is keeping up—and where it is of insolvency proceedings or on the recovery rate falling behind. (figure 11.2). These benchmarks help show what is Figure 11.2 Has resolving insolvency become easier over time? Time (years) Cost (% of estate) Doing Business 2013 Spain 103 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) Note: Regional averages on time and cost exclude economies with a “no practice� mark. Source: Doing Business database. Doing Business 2013 Spain 104 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 DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. 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. DB2012 No reform as measured by Doing Business. Spain strengthened its insolvency process by making workouts easier, offering more protections for refinancing agreements, allowing conversion from reorganization into liquidation at DB2013 any time, allowing reliefs of the stay under certain circumstances and permitting the judge to determine whether an asset of the insolvent company is necessary for its continued operation. 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 2013 Spain 105 EMPLOYING WORKERS Doing Business measures flexibility in the regulation of Particular data for Spain are presented here without employment, specifically as it affects the hiring and scoring. redundancy of workers and the rigidity of working hours. From 2007 to 2011 improvements were made to To make the data on employing workers comparable align the methodology for the employing workers across economies, several assumptions about the indicators with the letter and spirit of the International worker and the business are used. Labour Organization (ILO) conventions. Only 4 of the 188 ILO conventions cover areas measured by Doing The worker: Business: employee termination, weekend work, holiday with pay and night work. The Doing Business  Earns a salary plus benefits equal to the methodology is fully consistent with these 4 economy‘s average wage during the entire conventions. The ILO conventions covering areas period of his employment. related to the employing workers indicators do not  Has a pay period that is the most common for include the ILO core labor standards—8 conventions workers in the economy. covering the right to collective bargaining, the  Is a lawful citizen who belongs to the same elimination of forced labor, the abolition of child labor race and religion as the majority of the and equitable treatment in employment practices. economy‘s population.  Resides in the economy‘s largest business city. Between 2009 and 2011 the World Bank Group worked  Is not a member of a labor union, unless with a consultative group—including labor lawyers, membership is mandatory. employer and employee representatives, and experts from the ILO, the Organisation for Economic Co- The business: operation and Development, civil society and the private sector—to review the employing workers  Is a limited liability company. methodology and explore future areas of research.  Operates in the economy‘s largest business city. A full report with the conclusions of the consultative  Is 100% domestically owned. group is available at http://www.doingbusiness.org/  Operates in the manufacturing sector. methodology/employing-workers.  Has 60 employees.  Is subject to collective bargaining agreements Doing Business 2013 does not present rankings of in economies where such agreements cover economies on the employing workers indicators or more than half the manufacturing sector and include the topic in the aggregate ranking on the ease apply even to firms not party to them. of doing business. The report does present the data on  Abides by every law and regulation but does the employing workers indicators in an annex. Detailed not grant workers more benefits than data collected on labor regulations are available on the mandated by law, regulation or (if applicable) Doing Business website (http://www.doing business.org). collective bargaining agreement. Doing Business 2013 Spain 106 EMPLOYING WORKERS What do some of the data show? One of the employing workers indicators is the worker in his or her first job. Doing Business data show difficulty of hiring index. This measure assesses, among the trend in the minimum wage applied by Spain other things, the minimum wage for a 19-year-old (figure 12.1). Figure 12.1 Has the minimum wage for a 19-year-old worker or an apprentice increased over time? Minimum wage (US$ per month) Note: A horizontal line along the x-axis of the figure indicates that the economy has no minimum wage. Source: Doing Business database. Doing Business 2013 Spain 107 EMPLOYING WORKERS Employment laws are needed to protect workers from past 4 years did so in ways that increased labor market arbitrary or unfair treatment and to ensure efficient flexibility. What changes did Spain adopt that affected contracting between employers and workers. Many the Doing Business indicators on employing workers economies that changed their labor regulations in the (table 12.1)? Table 12.1 What changes did Spain make in employing workers in 2012? Reform Spain temporarily allowed unlimited duration of fixed-term contracts. Source: Doing Business database. Doing Business 2013 Spain 108 EMPLOYING WORKERS What are the details? The data on employing workers reported here for public officials. Employment laws and regulations as Spain are based on a detailed survey of employment well as secondary sources are reviewed to ensure regulations that is completed by local lawyers and accuracy. Rigidity of employment index The rigidity of employment index measures 3 areas of labor regulation: difficulty of hiring, rigidity of hours and difficulty of redundancy. Difficulty of hiring index The difficulty of hiring index measures whether fixed- worker. (The average value added per worker is the term contracts are prohibited for permanent tasks; the ratio of an economy‘s gross national income per capita maximum cumulative duration of fixed-term contracts; to the working-age population as a percentage of the and the ratio of the minimum wage for a trainee or total population.) first-time employee to the average value added per Difficulty of hiring index Data Fixed-term contracts prohibited for permanent tasks? Yes It depends on the type of fixed-term contract: (i) for a particular task or service, the contract terminates when the service Maximum length of a single fixed-term contract (months) or task is completed with a maximum duration of 36 months (that can be extended up to 12 months if provided in the relevant colle Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage for a 19-year old worker or an apprentice (US$/month) 1022.9 Ratio of minimum wage to value added per worker 0.27 Source: Doing Business database. Doing Business 2013 Spain 109 EMPLOYING WORKERS Rigidity of hours index The rigidity of hours index has 5 components: whether respond to a seasonal increase in production; and there are restrictions on night work; whether there are whether the average paid annual leave for a worker restrictions on weekly holiday work; whether the with 1 year of tenure, a worker with 5 years and a workweek can consist of 5.5 days or is more than 6 worker with 10 years is more than 26 working days or days; whether the workweek can extend to 50 hours or fewer than 15 working days. more (including overtime) for 2 months a year to Rigidity of hours index Data 8 hours/day as a general practice. 9 hours maximum unless established otherwise through collective Standard workday in manufacturing (hours) agreement. Average of 40 hours/week averaged on an annual basis. - Art. 34, Worker's Statute 50-hour workweek allowed for 2 months a year in case of a seasonal Yes increase in production? Maximum working days per week 5.5 Premium for night work (% of hourly pay) in case of continuous 25% operations Premium for work on weekly rest day (% of hourly pay) in case of 0% continuous operations Major restrictions on night work in case of continuous operations? Yes Major restrictions on weekly holiday in case of continuous operations? No Paid annual leave for a worker with 1 year of tenure (in working days) 22.0 Paid annual leave for a worker with 5 years of tenure (in working days) 22.0 Paid annual leave for a worker with 10 years of tenure (in working days) 22.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 22.0 working days) Source: Doing Business database. Doing Business 2013 Spain 110 EMPLOYING WORKERS Difficulty of redundancy index The difficulty of redundancy index has 8 components: worker; whether the employer needs approval from a whether redundancy is disallowed as a basis for third party to terminate a group of 9 redundant terminating workers; whether the employer needs to workers; whether the law requires the employer to notify a third party (such as a government agency) to reassign or retrain a worker before making the worker terminate 1 redundant worker; whether the employer redundant; whether priority rules apply for needs to notify a third party to terminate a group of 9 redundancies; and whether priority rules apply for redundant workers; whether the employer needs reemployment. approval from a third party to terminate 1 redundant Difficulty of redundancy index Data Dismissal due to redundancy allowed by law? Yes Third-party notification if 1 worker is dismissed? Yes Third-party approval if 1 worker is dismissed? No Third-party notification if 9 workers are dismissed? Yes Third-party approval if 9 workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? No Priority rules for reemployment? No Source: Doing Business database. Doing Business 2013 Spain 111 EMPLOYING WORKERS Redundancy cost The redundancy cost indicator measures the cost of notice requirements and severance payments advance notice requirements, severance payments and applicable to a worker with 1 year of tenure, a worker penalties due when terminating a redundant worker, with 5 years and a worker with 10 years is used to expressed in weeks of salary. The average value of assign the score. Redundancy cost indicator Data Notice period for redundancy dismissal (for a worker with 1 year of tenure, in salary 2.1 weeks) Notice period for redundancy dismissal (for a worker with 5 years of tenure, in 2.1 salary weeks) Notice period for redundancy dismissal (for a worker with 10 years of tenure, in 2.1 salary weeks) Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 2.1 of tenure, in salary weeks) Severance pay for redundancy dismissal (for a worker with 1 year of tenure, in 2.9 salary weeks) Severance pay for redundancy dismissal (for a worker with 5 years of tenure, in 14.3 salary weeks) Severance pay for redundancy dismissal (for a worker with 10 years of tenure, in 28.6 salary weeks) Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 15.2 of tenure, in salary weeks) Source: Doing Business database. Doing Business 2013 Spain 112 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 per capita regulation, such as the number of procedures to start a business or to register and transfer commercial Doing Business 2013 reports 2011 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 2012. 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, 2011 gross contract, go through bankruptcy or trade across national income (GNI) in U.S. dollars is used as the borders. Third, they measure the extent of legal denominator. GNI data were not available from the protections of property, for example, the protections World Bank for Afghanistan; Australia; The Bahamas; of investors against looting by company directors or Bahrain; Barbados; Brunei Darussalam; Cyprus; the range of assets that can be used as collateral Djibouti; Guyana; the Islamic Republic of Iran; according to secured transactions laws. Fourth, a set of Kuwait; Malta; New Zealand; Oman; Puerto Rico indicators documents the tax burden on businesses. (territory of the United States); Sudan; Suriname; the Finally, a set of data covers different aspects of Syrian Arab Republic; Timor-Leste; West Bank and employment regulation. Gaza; and the Republic of Yemen. In these cases GDP or GNP per capita data and growth rates from The data for all sets of indicators in Doing Business the International Monetary Fund‘s World Economic 2 2013 are for June 2012. Outlook database and the Economist Intelligence Unit were used. Region and income group Methodology Doing Business uses the World Bank regional and The Doing Business data are collected in a income group classifications, available at standardized way. To start, the Doing Business team, http://data.worldbank.org/about/country- with academic advisers, designs a questionnaire. The classifications. The World Bank does not assign questionnaire uses a simple business case to ensure regional classifications to high-income economies. comparability across economies and over time —with For the purpose of the Doing Business report, high- assumptions about the legal form of the business, its income OECD economies are assigned the ―regional‖ size, its location and the nature of its operations. classification OECD high income. Figures and tables Questionnaires are administered through more than presenting regional averages include economies 9,600 local experts, including lawyers, business from all income groups (low, lower middle, upper consultants, accountants, freight forwarders, middle and high income). government officials and other professionals routinely Population administering or advising on legal and regulatory Doing Business 2013 reports midyear 2011 requirements. These experts have several rounds of population statistics as published in World interaction with the Doing Business team, involving Development Indicators 2012. conference calls, written correspondence and visits by the team. For Doing Business 2013 team members visited 24 economies to verify data and recruit The Doing Business methodology offers several respondents. The data from questionnaires are advantages. It is transparent, using factual information subjected to numerous rounds of verification, leading about what laws and regulations say and allowing to revisions or expansions of the information collected. multiple interactions with local respondents to clarify potential misinterpretations of questions. Having 2 The data for paying taxes refer to January – December 2011. Doing Business 2013 Spain 113 representative samples of respondents is not an issue; 2013 would differ from the recollection of 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 completed subnational comparisons and benchmarks are valid across studies for Indonesia, Kenya, Mexico, the Russian economies. Finally, the data not only highlight the Federation and the United Arab Emirates. Each of extent of specific regulatory obstacles to business but these countries had already asked to have subnational also identify their source and point to what might be data in the past, and this year Doing Business updated reformed. the indicators, measured improvements over time and Information on the methodology for each Doing expanded geographic coverage to additional cities or Business topic can be found on the Doing Business added additional indicators. Doing Business also website at http://www.doingbusiness.org/methodology/. published regional studies for the Arab world, the East African Community and member states of the Organization for the Harmonization of Business Law in Limits to what is measured Africa (OHADA). The Doing Business methodology has 5 limitations that The subnational studies point to differences in should be considered when interpreting the data. First, business regulation and its implementation —as well as the collected data refer to businesses in the economy‘s in the pace of regulatory reform—across cities in the largest business city (which in some economies differs same economy. For several economies subnational from the capital) and may not be representative of studies are now periodically updated to measure regulation in other parts of the economy. To address change over time or to expand geographic coverage this limitation, subnational Doing Business indicators to additional cities. This year that is the case for all the were created (see the section on subnational Doing subnational studies published. Business indicators). Second, the data often focus on a specific business form—generally a limited liability company (or its legal equivalent) of a specified size — Changes in what is measured and may not be representative of the regulation on The ranking methodology for paying taxes was other businesses, for example, sole proprietorships. updated this year. The threshold for the total tax rate Third, transactions described in a standardized case introduced last year for the purpose of calculating the scenario refer to a specific set of issues and may not ranking on the ease of paying taxes was updated. All represent the full set of issues a business encounters. economies with a total tax rate below the threshold Fourth, the measures of time involve an element of (which is calculated and adjusted on a yearly basis) judgment by the expert respondents. When sources receive the same ranking on the total tax rate indicate different estimates, the time indicators indicator. The threshold is not based on any economic reported in Doing Business represent the median theory of an ―optimal tax rate‖ that minimizes values of several responses given under the distortions or maximizes efficiency in the tax system of assumptions of the standardized case. an economy overall. Instead, it is mainly empirical in Finally, the methodology assumes that a business has nature, set at the lower end of the distribution of tax full information on what is required and does not rates levied on medium-size enterprises in the waste time when completing procedures. In practice, manufacturing sector as observed through the paying completing a procedure may take longer if the taxes indicators. This reduces the bias in the indicators business lacks information or is unable to follow up toward economies that do not need to levy significant promptly. Alternatively, the business may choose to taxes on companies like the Doing Business disregard some burdensome procedures. For both standardized case study company because they raise reasons the time delays reported in Doing Business public revenue in other ways—for example, through Doing Business 2013 Spain 114 taxes on foreign companies, through taxes on sectors investors, paying taxes, trading across borders, other than manufacturing or from natural resources enforcing contracts, and resolving insolvency. The (all of which are outside the scope of the employing workers indicators are not included in this methodology). Giving the same ranking to all year‘s aggregate ease of doing business ranking. In economies whose total tax rate is below the threshold addition to this year‘s ranking, Doing Business presents avoids awarding economies in the scoring for having a comparable ranking for the previous year, adjusted an unusually low total tax rate, often for reasons for any changes in methodology as well as additions of 3 unrelated to government policies toward enterprises. economies or topics. For example, economies that are very small or that are Construction of the ease of doing business index rich in natural resources do not need to levy broad- based taxes. Here is one example of how the ease of doing business index is constructed. In Finland it takes 3 procedures, 14 days and 4% of annual income per capita in fees to Data challenges and revisions register a property. On these 3 indicators Finland ranks in the 6th, 16th and 39th percentiles. So on average Most laws and regulations underlying the Doing Finland ranks in the 20th percentile on the ease of Business data are available on the Doing Business registering property. It ranks in the 30th percentile on website at http://www.doingbusiness.org. All the th starting a business, 28 percentile on getting credit, sample questionnaires and the details underlying the 24th percentile on paying taxes, 13th percentile on indicators are also published on the website. Questions enforcing contracts, 5th percentile on trading across on the methodology and challenges to data can be borders and so on. Higher rankings indicate simpler submitted through the website‘s ―Ask a Question‖ regulation and stronger protection of property rights. function at http://www.doingbusiness.org. The simple average of Finland‘s percentile rankings on all topics is 21st. When all economies are ordered by Ease of doing business and distance to their average percentile rankings, Finland stands at 11 frontier in the aggregate ranking on the ease of doing business. Doing Business 2013 presents results for 2 aggregate measures: the aggregate ranking on the ease of doing More complex aggregation methods—such as business and the distance to frontier measure. The principal components and unobserved components— ease of doing business ranking compares economies yield a ranking nearly identical to the simple average 4 with one another, while the distance to frontier used by Doing Business. Thus, Doing Business uses measure benchmarks economies to the frontier in the simplest method: weighting all topics equally and, regulatory practice, measuring the absolute distance to the best performance on each indicator. Both measures can be used for comparisons over time. 3 In case of revisions to the methodology or corrections to the underlying data, the data are back-calculated to provide a When compared across years, the distance to frontier comparable time series since the year the relevant economy or topic measure shows how much the regulatory environment was first included in the data set. The time series is available on the for local entrepreneurs in each economy has changed Doing Business website (http://www.doingbusiness.org). Six topics over time in absolute terms, while the ease of doing and more than 50 economies have been added since the inception business ranking can show only relative change. of the project. Earlier rankings on the ease of doing business are therefore not comparable. Ease of doing business 4 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, ―Doing Business Indicators: Why Aggregate, and How to The ease of doing business index ranks economies Do It‖ (World Bank, Washington, DC, 2005). Principal components from 1 to 185. For each economy the ranking is and unobserved components methods yield a ranking nearly calculated as the simple average of the percentile identical to that from the simple average method because both rankings on each of the 10 topics included in the index these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An in Doing Business 2013: starting a business, dealing alternative to the simple average method is to give different weights with construction permits, getting electricity, to the topics, depending on which are considered of more or less registering property, getting credit, protecting importance in the context of a specific economy. Doing Business 2013 Spain 115 within each topic, giving equal weight to each of the ability of different government agencies to deliver 5 topic components. tangible results in their area of responsibility. If an economy has no laws or regulations covering a Economies that improved the most across 3 or more specific area—for example, insolvency—it receives a Doing Business topics in 2011/12 ―no practice‖ mark. Similarly, an economy receives a Doing Business 2013 uses a simple method to calculate ―no practice‖ or ―not possible‖ mark if regulation exists which economies improved the most in the ease of but is never used in practice or if a competing doing business. First, it selects the economies that in regulation prohibits such practice. Either way, a ―no 2011/12 implemented regulatory reforms making it practice‖ mark puts the economy at the bottom of the easier to do business in 3 or more of the 10 topics ranking on the relevant indicator. 6 included in this year‘s ease of doing business ranking. The ease of doing business index is limited in scope. It Twenty-three economies meet this criterion: Benin, does not account for an economy‘s proximity to large Burundi, Costa Rica, the Czech Republic, Georgia, markets, the quality of its infrastructure services (other Greece, Guinea, Kazakhstan, Korea, the Lao People‘s than services related to trading across borders and Democratic Republic, Liberia, Mongolia, the getting electricity), the strength of its financial system, Netherlands, Panama, Poland, Portugal, Serbia, the the security of property from theft and looting, Slovak Republic, Slovenia, Sri Lanka, Ukraine, the macroeconomic conditions or the strength of United Arab Emirates and Uzbekistan. Second, Doing underlying institutions. Business ranks these economies on the increase in their ranking on the ease of doing business from the Variability of economies‘ rankings across topics previous year using comparable rankings. Each indicator set measures a different aspect of the Selecting the economies that implemented regulatory business regulatory environment. The rankings of an reforms in at least 3 topics and improved the most in economy can vary, sometimes significantly, across the aggregate ranking is intended to highlight indicator sets. The average correlation coefficient economies with ongoing, broad-based reform between the 10 indicator sets included in the programs. aggregate ranking is 0.37, and the coefficients between any 2 sets of indicators range from 0.19 Distance to frontier measure (between dealing with construction permits and A drawback of the ease of doing business ranking is getting credit) to 0.60 (between starting a business that it can measure the regulatory performance of and protecting investors). These correlations suggest economies only relative to the performance of others. that economies rarely score universally well or It does not provide information on how the absolute universally badly on the indicators. quality of the regulatory environment is improving Consider the example of Canada. It stands at 17 in the over time. Nor does it provide information on how aggregate ranking on the ease of doing business. Its large the gaps are between economies at a single ranking is 3 on starting a business, and 4 on both point in time. resolving insolvency and protecting investors. But its The distance to frontier measure is designed to ranking is only 62 on enforcing contracts, 69 on address both shortcomings, complementing the ease dealing with construction permits and 152 on getting of doing business ranking. This measure illustrates the electricity. distance of an economy to the ―frontier,‖ and the Variation in performance across the indicator sets is change in the measure over time shows the extent to not at all unusual. It reflects differences in the degree which the economy has closed this gap. The frontier is of priority that government authorities give to a score derived from the most efficient practice or particular areas of business regulation reform and the highest score achieved on each of the component indicators in 9 Doing Business indicator sets (excluding 5 6 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 2013 Spain 116 the employing workers and getting electricity The maximum (max) and minimum (min) observed indicators) by any economy since 2005. In starting a values are computed for the 174 economies included business, for example, New Zealand has achieved the in the Doing Business sample since 2005 and for all highest performance on the time (1 day), Canada and years (from 2005 to 2012). The year 2005 was chosen New Zealand on the number of procedures required as the baseline for the economy sample because it was (1), Slovenia on the cost (0% of income per capita) and the first year in which data were available for the Australia and 90 other economies on the paid-in majority of economies (a total of 174) and for all 9 minimum capital requirement (0% of income per indicator sets included in the measure. To mitigate the capita). Calculating the distance to frontier for each effects of extreme outliers in the distributions of the economy involves 2 main steps. First, individual rescaled data (very few economies need 694 days to indicator scores are normalized to a common unit: complete the procedures to start a business, but many th except for the total tax rate. To do so, each of the 28 need 9 days), the maximum (max) is defined as the 95 component indicators y is rescaled to (max − y)/(max percentile of the pooled data for all economies and all − min), with the minimum value (min) representing the years for each indicator. The exceptions are the getting frontier—the highest performance on that indicator credit, protecting investors and resolving insolvency across all economies since 2005. For the total tax rate, indicators, whose construction precludes outliers. consistent with the calculation of the rankings, the Take Ghana, which has a score of 67 on the distance to frontier is defined as the total tax rate corresponding th frontier measure for 2012. This score indicates that the to the 15 percentile based on the overall distribution economy is 33 percentage points away from the of total tax rates for all years. Second, for each frontier constructed from the best performances economy the scores obtained for individual indicators across all economies and all years. Ghana was further are aggregated through simple averaging into one from the frontier in 2005, with a score of 54. The distance to frontier score. An economy‘s distance to difference between the scores shows an improvement frontier is indicated on a scale from 0 to 100, where 0 over time. represents the lowest performance and 100 the frontier. The distance to frontier measure can also be used for comparisons across economies in the same year, The difference between an economy‘s distance to complementing the ease of doing business ranking. frontier score in 2005 and its score in 2012 illustrates For example, Ghana stands at 64 this year in the ease the extent to which the economy has closed the gap to of doing business ranking, while Peru, which is 29 the frontier over time. And in any given year the score percentage points from the frontier, stands at 43. measures how far an economy is from the highest performance at that time. Doing Business 2013 Spain 117 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Doing Business reforms News on the Doing Business project Short summaries of DB2013 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 185 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Data http://www.doingbusiness.org/custom-query/ All the data for 185 economies—topic rankings, indicator values, lists of regulatory procedures and Law library details underlying indicators Online collection of business laws and regulations http://www.doingbusiness.org/data/ relating to business and gender issues http://www.doingbusiness.org/law-library/ Reports http://wbl.worldbank.org/ Access to Doing Business reports as well as subnational and regional reports, reform case Contributors studies and customized economy and regional More than 9,600 specialists in 185 economies who profiles participate in Doing Business http://www.doingbusiness.org/reports/ http://www.doingbusiness.org/contributors/doing- business/ Methodology The methodologies and research papers NEW! Entrepreneurship data underlying Doing Business Data on business density for 130 economies http://www.doingbusiness.org/methodology/ http://www.doingbusiness.org/data/exploretopics/e ntrepreneurship Research Abstracts of papers on Doing Business topics and More to come related policy issues Coming soon—information on good practices and http://www.doingbusiness.org/research/ data on transparency and on the distance to frontier Doing Business 2013 Spain 118