Exchange controls and capital movements are fully liberalized and in all areas, there is complete freedom of action.

The liberalization process reached its peak with the approval in December 1991 of Royal Decree 1816/1991 on Foreign Transactions, modified by Royal Decrees 42/1993 and 1638/1996, and with several implementing regulations which dramatically changed the previous situation. The main features of the Spanish exchange control scenario can be summarized as follows:

1. Freedom of action

As a general rule, all acts, business transactions and operations between residents and nonresidents which involve or may involve payments abroad or receipts from abroad are completely deregulated. This deregulation includes payments or receipts made either directly or by offset of the underlying transactions, as well as transfers to or from abroad derived from such payments or receipts. It also covers the import or export of means of payment.

2. Safeguarding clauses

The Spanish Government is authorized, under exceptional circumstances, to prohibit or limit certain transactions with nonresidents or the related payments, receipts or bank transfers if they seriously affect Spanish interests or in application of measures adopted by international bodies of which Spain is a member.

Additionally, preventive measures may be adopted by the Spanish Government if exceptionally extensive short-term capital movements are likely to gravely affect Spanish monetary policy. These measures will have to be adopted in accordance with EU legislation on capital movements.

3. Statistical information

In order to calculate the Spanish balance of payments and to maintain statistical and tax control of monetary flows, certain mechanisms are envisaged for payments to and receipts from abroad. These mechanisms are as follows:

• As a general rule, payments, receipts and transfers between residents and nonresidents, either in euros or in foreign currency, should be made through deposit-taking entities (usually banks) registered in the Bank of Spain’s Official Register. In these cases, the resident party must provide the registered entity with certain data (e.g. names and addresses of both parties) and specacally with a description of the transaction giving rise to the payment, receipt or transfer. This information must be periodically transmitted by the registered entities to the Ministry of Economy for tax and statistical control purposes.
  
  The debits and credits posted to bank accounts held in Spain by nonresidents are also subject to this regime.
  
  
• Payments and receipts between residents and nonresidents can be made, in Spain or abroad, in coins, bank notes or bearer checks, either in euros or in foreign currency, and must be declared by the resident party within 30 days if they I. Exchange control regulations 129 exceed g 6,010.12. This method of payment is also subject, where appropriate, to the rules mentioned below governing the import and export of such means of payment.
  
  Since residents are allowed to freely open and hold bank accounts abroad, either in euros or in foreign currency, these bank accounts can be credited and debited for payments to and receipts from nonresidents. These credits and debits must be notified to the Bank of Spain using specific forms if they exceed a specified threshold. Credits and debits under this threshold only need to be notified if expressly requested by the Bank of Spain. As a general rule, no netting-off is permitted in communicating these data, although certain exceptions are envisaged.
  
  
• Nonresidents intending to credit bank accounts held in Spain by nonresidents by means of bank notes or bearer checks, in euros or foreign currency, or to transfer abroad such means of payment, are obliged to evidence the origin of such funds. Otherwise, the registered entities will not be able to proceed with these transactions.

Exceptionally, the Spanish Ministry of Economy may, by making the relevant regulations, require prior clearance or declaration for payments, receipts or transfers to or from abroad arising from certain transactions yet to be specifically defined, if such clearance or declaration were advisable in order to have adequate knowledge of the transactions made and of compliance with tax obligations.

4. Specific transactions to be reported to the Bank of Spain

The following transactions made by Spanish residents must be reported to the Bank of Spain under the conditions to be defined by the latter:

• Financing and deferrals of payments and receipts for more than one year between residents and nonresidents deriving from commercial transactions or the provision of services.
  
  
• Offsets of credits and debits between residents and nonresidents deriving from commercial transactions or the provision of services.
  
  
• Offsets of credits and debits deriving from intermediation in financial markets by intermediary entities.
  
  
• Financial loans received by residents from nonresidents or granted by residents to nonresidents. Securities such as bonds, promissory notes, etc. not traded on Spanish stock exchanges issued by Spanish residents and acquired by nonresidents are considered as financial loans from nonresidents.

Additionally, the authorized banks and resident individuals or entities which perform business transactions and operations with nonresidents or have assets or liabilities abroad are obliged to provide the Spanish authorities and the Bank of Spain with any data that may be required in order to monitor such transactions for statistical and tax purposes.

5. Import and export of certain means of payment

The main feature of the Spanish exchange control system, as discussed above, is the complete freedom of action (subject to specified information requirements). This principle also applies to the import and export of certain means of payment.

The export of coins, bank notes and bearer checks, either in euros or in foreign currency, is only subject to prior declaration if the amount involved exceeds € 6,010.12 per individual per trip. If the declaration is not made, the Spanish customs officials will retain these means of payment.

The import of the above-mentioned means of payment by nonresidents is subject in certain cases to prior declaration to the Spanish customs authorities if higher than € 6,010.12.

6. Types of bank accounts

Nonresident individuals and legal entities can hold bank accounts on the same conditions as resident individuals and legal entities. The only requirement is to document evidence, on opening the bank account, the nonresident status of the holder of the account. Additionally, such status must be confirmed to the authorized bank every two years. Other minor formalities are stipulated.

Moreover, residents may, subject to certain declaration requirements, freely open and hold bank accounts abroad either in euros or in foreign currency. The opening of such bank accounts by resident parties must be declared to the Bank of Spain within 30 days and information must be provided on the debits and credits posted to the account if they exceed a certain threshold.

Finally, Spanish residents are allowed to freely open and hold bank accounts in Spain denominated in foreign currencies at registered entities, without subjection to any information requirement.

7. Residence for exchange control purposes

For exchange control purposes, individuals are deemed to be resident in Spain if they reside, or reside mainly, in Spain. Legal entities with registered offices in Spain, and the establishments and branches in Spain of foreign legal entities or of individuals resident abroad, are likewise resident in Spain for exchange control purposes.

Nonresidents for exchange control purposes are individuals domiciled abroad or whose principal residence is abroad, legal entities with registered offices abroad, and the permanent establishments and branches abroad of Spanish resident individuals or entities.

Spaniards are deemed to be resident in the absence of proof to the contrary, and foreign nationals are deemed to be nonresident unless they hold an official Spanish residence permit.