82965 Economy Profile: Spain Doing Business 2014 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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Cover design: The Word Express Doing Business 2014 Spain 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 26 Getting electricity ....................................................................................................................... 37 Registering property .................................................................................................................. 45 Getting credit .............................................................................................................................. 54 Protecting investors ................................................................................................................... 61 Paying taxes ................................................................................................................................ 70 Trading across borders .............................................................................................................. 77 Enforcing contracts .................................................................................................................... 85 Resolving insolvency .................................................................................................................. 95 Employing workers .................................................................................................................. 100 Data notes ................................................................................................................................. 107 Resources on the Doing Business website ............................................................................ 113 Doing Business 2014 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 2012). 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 189 economies, from Afghanistan to Zimbabwe, operating in the largest business city. Because over time. The data set covers 47 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 25 in East Asia and the Pacific, 25 in Eastern Europe economies. The data not only highlight the extent of and Central Asia, 20 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 2014 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 2014, are (comparator economies) for each indicator. The data in available on the Doing Business website at this report are current as of June 1, 2013 (except for http://www.doingbusiness.org. Doing Business 2014 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 189 by the ease of Population: 46,217,961 doing business index. For each economy the index is calculated as the ranking on the simple average of its GNI per capita (US$): 30,110 percentile rankings on each of the 10 topics included in the index in Doing Business 2014: starting a business, DB2014 rank: 52 dealing with construction permits, getting electricity, registering property, getting credit, protecting DB2013 rank: 46* investors, paying taxes, trading across borders, Change in rank: -6 enforcing contracts and resolving insolvency. The ranking on each topic is the simple average of the DB 2014 DTF: 71.39 percentile rankings on its component indicators (see the data notes for more details). The employing workers DB 2013 DTF: 72.7 indicators are not included in this year’s aggregate ease of doing business ranking, but the data are presented Change in DTF: -1.31 in this year’s economy profile. The aggregate ranking on the ease of doing business * DB2013 ranking shown is not last year’s published benchmarks each economy’s performance on the ranking but a comparable ranking for DB2013 that indicators against that of all other economies in the captures the effects of such factors as data Doing Business sample (figure 1.1). While this ranking corrections and the addition of 4 economies (Libya, tells much about the business environment in an Myanmar, San Marino and South Sudan) to the economy, it does not tell the whole story. The ranking on sample this year. See the data notes for sources and the ease of doing business, and the underlying definitions. 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 2014 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 2014 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 2014 Spain 8 THE BUSINESS ENVIRONMENT Figure 1.3 How Spain ranks on Doing Business topics Source: Doing Business database. Doing Business 2014 Spain 9 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business 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 on average an Yearly movements in rankings can provide some indication economy is from the best performance achieved by any of changes in an economy’s regulatory environment for economy on each Doing Business indicator since 2005, firms, but they are always relative. except for the getting electricity indicators, which were introduced in 2009. Moreover, year-to-year changes in the overall rankings do not reflect how the business regulatory environment in an Comparing the measure for an economy at 2 points in economy has changed over time—or how it has changed time allows users to assess how much the economy’s in different areas. To aid in assessing such changes, regulatory environment as measured by Doing Business has changed over time—how far it has moved toward (or away from) the most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.4). 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, except for the getting electricity indicators, which were introduced in 2009. 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 first 9 indicator sets shown in the figure and does not include getting electricity. Data on the overall distance to frontier including getting electricity is available at http://www.doingbusiness.org/data/distance-to-frontier. See the data notes for more details on the distance to frontier measure. Source: Doing Business database. Doing Business 2014 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 DB2014 Best performer globally Switzerland DB2014 Germany DB2014 Portugal DB2014 Indicator France DB2014 Spain DB2014 Spain DB2013 Italy DB2014 DB2014 Starting a Business 142 136 41 111 90 32 104 28 New Zealand (1) (rank) Procedures (number) 10 10 5 9 6 3 6 6 New Zealand (1)* Time (days) 23.0 28.0 6.5 14.5 6.0 2.5 18.0 12.0 New Zealand (0.5) Cost (% of income per 4.7 4.7 0.9 4.7 14.2 2.4 2.0 0.3 Slovenia (0.0) capita) Paid-in Min. Capital (% 13.4 13.2 0.0 0.0 9.8 0.0 25.6 0.0 112 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 98 91 92 12 112 76 58 27 China (1) (rank) Hong Kong SAR, Procedures (number) 9 9 9 9 11 13 13 12 China (6) Time (days) 230.0 230.0 184.0 97.0 233.5 99.0 154.0 88.0 Singapore (26.0) Doing Business 2014 Spain 11 United Kingdom DB2014 Best performer globally Switzerland DB2014 Germany DB2014 Portugal DB2014 Indicator France DB2014 Spain DB2014 Spain DB2013 Italy DB2014 DB2014 Cost (% of income per 172.9 171.3 244.4 46.7 186.4 374.9 38.1 66.0 Qatar (1.1) capita) Getting Electricity 62 71 42 3 89 36 8 74 Iceland (1) (rank) Procedures (number) 5 5 5 3 5 5 3 5 10 Economies (3)* Time (days) 85 101 79 17 124 64 39 126 Germany (17) Cost (% of income per 234.4 232.1 43.3 46.9 215.9 53.6 59.6 91.9 Japan (0.0) capita) Registering Property 60 56 149 81 34 30 16 68 Georgia (1) (rank) Procedures (number) 5 5 8 5 4 1 4 6 4 Economies (1)* Time (days) 12.5 12.5 49.0 40.0 16.0 1.0 16.0 21.5 New Zealand (1.0)* Cost (% of property 7.1 7.1 6.1 5.7 4.4 7.3 0.3 4.7 5 Economies (0.0)* value) Getting Credit (rank) 55 52 55 28 109 109 28 1 Malaysia (1)* Strength of legal rights 6 6 7 7 3 3 8 10 10 Economies (10)* index (0-10) Depth of credit 5 5 4 6 5 5 5 6 31 Economies (6)* information index (0-6) Public registry coverage 51.9 53.3 43.6 0.0 25.6 100.0 0.0 0.0 Portugal (100.0)* (% of adults) Private bureau 15.6 13.2 0.0 100.0 100.0 23.2 26.5 100.0 22 Economies (100.0)* coverage (% of adults) Protecting Investors 98 95 80 98 52 52 170 10 New Zealand (1) (rank) Extent of disclosure 5 5 10 5 7 6 0 10 10 Economies (10)* Doing Business 2014 Spain 12 United Kingdom DB2014 Best performer globally Switzerland DB2014 Germany DB2014 Portugal DB2014 Indicator France DB2014 Spain DB2014 Spain DB2013 Italy DB2014 DB2014 index (0-10) Extent of director 6 6 1 5 4 5 5 7 Cambodia (10) liability index (0-10) Ease of shareholder 4 4 5 5 7 7 4 7 3 Economies (10)* suits index (0-10) Strength of investor 5.0 5.0 5.3 5.0 6.0 6.0 3.0 8.0 New Zealand (9.7) protection index (0-10) United Arab Emirates Paying Taxes (rank) 67 33 52 89 138 81 16 14 (1) Payments (number per Hong Kong SAR, 8 8 7 9 15 8 19 8 year) China (3)* United Arab Emirates Time (hours per year) 167 167 132 218 269 275 63 110 (12) Trading Across Borders 32 35 36 14 56 25 35 16 Singapore (1) (rank) Documents to export 4 4 2 4 3 4 3 4 Ireland (2)* (number) Time to export (days) 10 10 10 9 19 15 8 8 5 Economies (6)* Cost to export (US$ per 1,310 1,310 1,335 905 1,195 780 1,635 1,005 Malaysia (450) container) Documents to import 4 4 2 4 3 4 4 4 Ireland (2)* (number) Time to import (days) 9 9 11 7 18 13 8 6 Singapore (4) Cost to import (US$ per 1,350 1,350 1,445 940 1,145 925 1,440 1,050 Singapore (440) container) Enforcing Contracts 59 58 7 5 103 24 20 56 Luxembourg (1) (rank) Doing Business 2014 Spain 13 United Kingdom DB2014 Best performer globally Switzerland DB2014 Germany DB2014 Portugal DB2014 Indicator France DB2014 Spain DB2014 Spain DB2013 Italy DB2014 DB2014 Time (days) 510 510 395 394 1,185 547 390 437 Singapore (150) Cost (% of claim) 18.5 17.2 17.4 14.4 23.1 13.0 24.0 39.9 Bhutan (0.1) Procedures (number) 40 40 29 30 37 34 32 28 Singapore (21)* Resolving Insolvency 22 20 46 13 33 23 47 7 Japan (1) (rank) Time (years) 1.5 1.5 1.9 1.2 1.8 2.0 3.0 1.0 Ireland (0.4) Cost (% of estate) 11 11 9 8 22 9 4 6 Norway (1) Outcome (0 as piecemeal sale and 1 as 1 1 0 1 1 1 0 1 going concern) Recovery rate (cents on 72.3 76.5 48.3 82.9 62.7 71.6 47.6 88.6 Japan (92.8) the dollar) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. * 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 2014 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 (2 business in an economy by recording all procedures cannot start on the same day). procedures officially required or commonly done in Procedures that can be fully completed practice by an entrepreneur to start up and online are an exception to this rule. formally operate an industrial or commercial Procedure completed once final document is business—as well as the time and cost required to received complete these procedures. It also records the paid-in minimum capital that companies must No prior contact with officials deposit before registration (or within 3 months). Cost required to complete each procedure The ranking on the ease of starting a business is (% of income per capita) the simple average of the percentile rankings on the 4 component indicators: procedures, time, cost Official costs only, no bribes and paid-in minimum capital requirement. No professional fees unless services required To make the data comparable across economies, by law Doing Business uses several assumptions about the Paid-in minimum capital (% of income business and the procedures. It assumes that all per capita) information is readily available to the entrepreneur and that there has been no prior contact with Deposited in a bank or with a notary before officials. It also assumes that the entrepreneur will registration (or within 3 months) pay no bribes. And it assumes that the business:  Has a start-up capital of 10 times income per  Is a limited liability company, located in the capita. largest business city and is 100% domestically  Has a turnover of at least 100 times income per owned. capita.  Has between 10 and 50 employees.  Does not qualify for any special benefits.  Conducts general commercial or industrial  Does not own real estate. activities. Doing Business 2014 Spain 15 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Spain? days, costs 4.7% of income per capita and requires According to data collected by Doing Business, starting paid-in minimum capital of 13.4% of income per capita a business there requires 10 procedures, takes 23.0 (figure 2.1). Figure 2.1 What it takes to start a business in Spain Paid-in minimum capital (% of income per capita): 13.4 Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. 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 2014 Spain 16 STARTING A BUSINESS Globally, Spain stands at 142 in the ranking of 189 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 2014 Spain 17 STARTING A BUSINESS What are the changes over time? The benchmarks provided by the economies that over 2.3) can help show what is possible in making it easier time have had the best performance regionally or to start a business. And changes in regional averages globally on the procedures, time, cost or paid-in can show where Spain is keeping up—and where it is minimum capital required to start a business (figure falling behind. Figure 2.3 Has starting a business become easier over time? Procedures (number) Time (days) Doing Business 2014 Spain 18 STARTING A BUSINESS Cost (% of income per capita) Paid-in minimum capital (% of income per capita) Note: Ninety economies globally have no paid-in minimum capital requirement. DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Spain 19 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 2.1)? 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 2.1 How has Spain made starting a business easier—or not? By Doing Business report year DB year Reform 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. Spain made starting a business easier by eliminating the requirement to obtain a municipal license before starting DB2014 operations and by improving the efficiency of the commercial registry. 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 2014 Spain 20 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 According to article 5 of the Spanish Royal Decree 13/2010, the certification of uniqueness will be granted within one day if its application is done online. In this case, applicants will need a digital signature. Otherwise, if applied in person at the Mercantile Registry, it will take three days. Alternatively, it can be requested by regular mail. Once the Registry issues the certification, the requested corporate 2 days EUR 13.52 1 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. Furthermore, once the certificate's validity has expired (3 months), the certificate can only be renewed once, after which a new certificate must be requested. The cost of the certificate is EUR 13.52 + VAT. Open a bank account for the company; deposit capital in the bank and obtain a deposit certificate The contributions can also be directly given to the notary public before 2 whom the deed of incorporation is going to be granted, at the time of 1 day no charge the granting, so that the notary can deposit them in the Company's bank account. Doing Business 2014 Spain 21 Time to No. Procedure Cost to complete complete Grant a public deed of incorporation before a public notary The public deed of incorporation must include (a) the identity of the company shareholders; (b) their will to incorporate the company; (c) the disbursement made by each of shareholder and the number of shares subscribed to by each; (d) the company bylaws; (e) the type of administrative body that will manage the company; and (f) the identity of its administrators or directors; (f) fiscal identification number for each shareholder and for each shareholder representative and director; (g) the certificate of uniqueness of the corporate name and the bank- issued certification must be attached to the public deed of incorporation. It must be noted that Royal Decree -Law 13/2010, dated 13 December 2010, concerning measures for encouraging investments and approximately employment, introduced new procedures for the incorporation of €500, depends on companies through electronic means. In the said procedures, the the amount of the 3 1 day Notary Public directly requests the certificate of uniqueness of the share capital and corporate name on behalf of the shareholders. Furthermore, once complexity of the granted, the public deed is sent by electronic means by the Notary operation. Public to the Commercial Registry for registration. These procedures are only applicable to the incorporation of companies that fulfill certain requirements, such as, among others, having (i) a maximum share capital of EUR 30,000 (simplified incorporation procedure) or EUR 3,100 (express incorporation procedure), (ii) a management body other than a Board of Directors and (iii) use standard by-laws passed by official authorities. In the event the future company fulfills all requirements indicated by the said Royal Decree-Law and is incorporated through the aforementioned procedures, the Notary fees can be reduced to EUR 60 (express incorporation procedure) or EUR 150 (simplified incorporation procedure). 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 The definite Tax Identification Number can only be obtained after the company has been duly registered in the Commercial Registry. Notwithstanding this, the provisional Tax Identity Number can be obtained from the Tax Authorities prior to the granting of the incorporation public deed through the filing with the Tax Authorities of 4 (a) a declaration of the shareholders regarding their will to incorporate 1 day no charge the company, (b) a copy of the original certification of uniqueness of the corporate name (see procedure 1 above), (c) copies of the identity documents of the shareholders, and (d) form 036 signed by the shareholder and the future director/s. It must be noted that the Spanish Royal Decree 13/2010 (article 5) also allows the Notary granting the Public Deed of incorporation to companies that fulfill certain requirements to apply telemetrically for a provisional NIF to the Agencia Estatal de la Administración Tributaria. Once the Limited Liability Company has been incorporated the Registry will notify it to the Agencia Estatal de la Administración Tributaria which Doing Business 2014 Spain 22 Time to No. Procedure Cost to complete complete will notify the definitive status of the NIF. In this case, it is not necessary to provide the original of the identity documents (DNI or NIE). A copy of such documents is accepted. Financial entities often request at least the provisional Tax Identification Number in order to open bank accounts where the initial share capital of the company can be deposited and, therefore, having the provisional Tax Identification Number is commonly a prior step to the granting of the public deed. 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 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 1 day no charge 5 Hacienda Comunidad Madrid (1% of the capital of the company). The application form (Form 600) to obtain a tax declaration of exemption has to be filed with the Autonomous tax authorities. Otherwise, the incorporation may be denied at the Company's registry. The Spanish Royal Decree 13/2010, allows the Notary, the interested party, the registrar or a third authorized party to electronically submit the corresponding application and taxes with the Agencia Estatal de Administración Tributaria (AEAT). File the public deed of incorporation of the company for its registration with the Mercantile Registry. The registration costs are based on variables such as the amount of the EUR 155 to EUR company share capital, the number of shareholders, and the type of 300, depending on administrative body. For example, for a company with share capital EUR the amount of the 226,863 with five shareholders and five members of the board of directors, the registration fee would be about EUR 159. share capital and complexity of the Fee schedule for registration: transaction. 6 days and up to 6 If company share capital does not exceed EUR 3,005.06: the fee is EUR 15 days 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 Doing Business 2014 Spain 23 Time to No. Procedure Cost to complete complete fees for public registrar have been reduced by 5%. It must be noted that amendments introduced by Royal Decree -Law 13/2010, dated 13 December 2010, establish specific registration fees for certain companies incorporated through electronic means which are generally subject to a special regime and fulfill certain requirements (e.g. the share capital must not exceed EUR 30,000 and the shareholders have to be individuals). In such cases, registration fees can be lowered to EUR 40 or EUR 100. Complementary to the registration fees, a provision of funds is also required when filing the incorporation deed with the corresponding Commercial Registry in order to cover the costs of publication of the registration in the Commercial Registry Official Gazette. At present, such provision of funds is set at EUR 55,10 for the Commercial Registry of Madrid. 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 shareholders, and the Board of Directors meetings precise to be legalized before use approximately EUR (Art 116 Mercatile Register Reglament). The other books can be 25 to purchase the 7 legalized later (within 4 months after the closing of the economic year 10 days books (2 books) + of the company), and can be legalized by electronic means or EUR 21.49 to presented as physical books (Arts 329 and following Mercantile legalize Register Reglament, and Instruction Ministry of Justice 31 dec 1999). Although this is not a step required to start a company, it is an ex post procedure required by law. * Submit a notification of start of operations (declaración responsable) to a private agency authorized by the municipality (ECLU) On December 26, 2012, Spain adopted law 12/2012. This law removes the requirement for certain commercial activities to obtain a municipal EUR 350. The cost 1 day license to initiate the execution of works and start operations. A varies depending (simultaneous with 8 company can start operations after submitting a simple notification on the location and previous (declaracion responsable sin certificado de conformidad) to the private the size of the procedure) agencies authorized by the Municipality (ECLU). Within 5 days, the ECLU business premises. will verify the documentation and conduct an ex-post inspection to ensure compliance. Doing Business 2014 Spain 24 Time to No. Procedure Cost to complete complete * File for social security and affiliate all workers with the local general treasury of social security (Tesorería General de la Seguridad Social) 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 1 day form (signed by both the company and the employee); (b) powers of (simultaneous with 9 no charge attorney of the company representative; (c) a copy of the employee's previous national identity document (such as DNI, NIE, or passport); and (c) a procedure) 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. 1 day Information that must be noted includes the details of the company (simultaneous with 10 no charge and the work place and a description of its business activity. previous procedure) The corresponding autonomous community must be notified within the first 30 days of the start of activities and the opening of the workplace. Every autonomous community has its own form. Some require that Doing Business 2014 Spain 25 Time to No. Procedure Cost to complete complete 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 Labor Inspection's resolution of November 25, 2008, the company can now register through the Labor Inspection's visits book's electronic system. * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Spain 26 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 Submitting 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 land telephone line cost for a business in the construction industry to Registering the warehouse after its obtain all the necessary approvals to build a completion (if required for use as collateral or warehouse in the economy’s largest business city, for transfer of the warehouse) connect it to basic utilities and register the Time required to complete each procedure property so that it can be used as collateral or (calendar days) transferred to another 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 that can be fully completed online procedures, time and cost. are an exception to this rule. To make the data comparable across economies, Procedure considered completed once final Doing Business uses several assumptions about the document is received business and the warehouse, including the utility connections. No prior contact with officials The business: Cost required to complete each procedure (% of income per capita)  Is a limited liability company operating in Official costs only, no bribes the construction business and located in the largest business city.  Will be connected to water, sewerage (sewage system, septic tank or their  Is domestically owned and operated. equivalent) and a fixed telephone line. The  Has 60 builders and other employees. connection to each utility network will be 10 The warehouse: meters (32 feet, 10 inches) long.  Is a new construction (there was no  Will be used for general storage, such as of previous construction on the land). books or stationery (not for goods requiring special conditions).  Has complete architectural and technical plans prepared by a licensed architect or  Will take 30 weeks to construct (excluding all engineer. delays due to administrative and regulatory requirements). Doing Business 2014 Spain 27 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to permits there requires 9 procedures, takes 230.0 days build a warehouse in Spain? According to data and costs 172.9% 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. Online procedures account for 0.5 days in the total time calculation. 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 2014 Spain 28 DEALING WITH CONSTRUCTION PERMITS Globally, Spain stands at 98 in the ranking of 189 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 2014 Spain 29 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? The benchmarks provided by the economies that over what is possible in making it easier to deal with time have had the best performance regionally or construction permits. And changes in regional globally on the procedures, time or cost required to averages can show where Spain is keeping up—and deal with construction permits (figure 3.3) help show where it is falling behind. Figure 3.3 Has dealing with construction permits become easier over time? Procedures (number) Time (days) Doing Business 2014 Spain 30 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. Source: Doing Business database. Doing Business 2014 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 3.1)? Construction is one of them. In an effort to ensure Table 3.1 How has Spain made dealing with construction permits easier—or not? By Doing Business report year DB year Reform 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. DB2014 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 2014 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, civil engineers, Estimated construction lawyers, construction firms, utility EUR 700,000 Warehouse Value : service providers and public officials who deal with building regulations. These procedures are those The procedures, along with the associated time and that apply to a company and structure matching cost, are summarized below. the standard 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 Certificate of Compliance (Certificado de Conformidad) Prior to applying for the construction permit, BuildCo must obtain a compliance certificate issued by ECLU (“Entidad Colaboradora en la gestión de licencias urbanísticas”). The ECLU has 2 months to examine 60 days EUR 7,312 1 the documentation and grant the compliance certificate. Once the compliance certificate has been granted, it must be attached to the building permit application. 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 2 planning regulations, and certificate of the structural feasibility, if 90 days EUR 28,000 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 • 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 Doing Business 2014 Spain 33 Time to No. Procedure Cost to complete complete 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 • 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) This procedure is regulated by the Ordenanza Fiscal Municipal Reguladora del Impuesto sobre Construcciones, Instalaciones y Obras (ICIO), dated October 9, 2001. According to article 19.2 of this regulation, the granting of any building license is taxed by a 4% of the construction 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 1 day no charge 3 takes place during the process. 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, Doing Business 2014 Spain 34 Time to No. Procedure Cost to complete complete 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, one at the beginning and one at the end of the process. In the case 1 day no charge 4 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 Due to the Ordenanza No. 158 of 26.06.2009, the Municipality of 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. 30 days no charge 5 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") 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 . 30 days EUR 603 6 As soon as construction is finished, to receive the first occupancy license (licencia de primera ocupación), the builder must submit to the ECLU the following documents: • Final certificate of terminated construction (declaration of conformity), which must be signed by the technical director of the work. This certificate must declare that the constructed building is in accordance with the issued license. For modifications that do not need approval of the City Council (23.2 of the Ordenanza Municipal de Tramitación de Doing Business 2014 Spain 35 Time to No. Procedure Cost to complete complete 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 cost is as follows: EUR 206.55 for surfaces up to 500 square meters and EUR 49.45 for every additional 100 square meters until 20,500 square 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 registration fee provided by the regulation, notary fees (EUR 644.10) 7 and a presentation and entry fee (EUR 6.01) are included in the total 18 days EUR 2,831 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) • Two copies of Form 2.1.3 (Impreso de Final de Obra) 2 days EUR 12 8 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 9 Spain, there are two possible processes for obtaining a 11 days EUR 84 telecommunication connection. First, the warehouse may be constructed in an area without Doing Business 2014 Spain 36 Time to No. Procedure Cost to complete complete 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 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 normally be completed in 1 -- 2 weeks. * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 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 to either the low-voltage or the medium-  Is a new construction being connected to voltage distribution network and either overhead electricity for the first time. or underground, whichever is more common in the economy and area where the warehouse is  Has 2 stories, both above ground, with a located. The length of any connection in the total surface of about 1,300.6 square customer’s private domain is negligible. meters (14,000 square feet), and is built on a plot of 929 square meters (10,000 square  Requires crossing of a 10-meter road but all the feet). works are carried out in a public land, so there is no crossing into other people's private property. The electricity connection:  Involves installing one electricity meter. The  Is 150 meters long and is a 3-phase, 4-wire Y, monthly electricity consumption will be 0.07 140-kilovolt-ampere (kVA) (subscribed gigawatt-hour (GWh). The internal electrical capacity) connection. wiring has been completed. Doing Business 2014 Spain 38 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity procedures, takes 85 days and costs 234.4% of income connection in Spain? According to data collected by 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 2014 Spain 39 GETTING ELECTRICITY Globally, Spain stands at 62 in the ranking of 189 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 2014 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 DB2014 Spain DB2013 OECD high income globally DB2014 DB2014 Rank 62 71 Iceland (1) Iceland (1) Procedures (number) 5 5 4 Economies* (3) 10 Economies* (3) Time (days) 85 101 Germany (17) Germany (17) Cost (% of income per capita) 234.4 232.1 Japan (0.0) Japan (0.0) Note: DB2013 rankings shown are not last year’s published rankings but comparable ranking s for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) 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 2014 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. DB2014 No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2014 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, ENERGÍA Y MINAS For any kind of electrical project an administrative authorization has to be obtained from the DIRECCIÓN GENERAL DE INDUSTRIA, ENERGÍA Y MINAS. The engineer in charge of preparing the electrical plans submits a project plan to the Dirección General for approval. The Dirección General reviews 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). 1 30 calendar days EUR 1,100.0 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. Doing Business 2014 Spain 43 Time to No. Procedure Cost to complete complete The customer submits his service application with Iberdrola and awaits the preparation of an estimate Most customers submit their service application to Iberdrola at the same time that they apply for the administrative approval with the Dirección General. Iberdrola prepares an estimate and informs the customer with a letter 20 calendar days EUR 3,604.0 2 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 Customers need to obtain a license for the external works from the 25 calendar days EUR 1,840.0 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. If no spare capacity exists, Iberdrola connects the new customer to the 55 calendar days EUR 46,000.0 4 medium voltage grid which will increase the connection costs for the customer. A transformer station has to be installed in and the station remains in the possession of the customer. 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. 5 5 calendar days EUR 105.2 Irrespective of who executes the actual works of the connection (installation of the transformer, excavation for cables etc.), Iberdrola is 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. | According to Article 79 of the Real Decreto 1955/2000, the utility can levy a security deposit in the amount of one Doing Business 2014 Spain 44 Time to No. Procedure Cost to complete complete month of future consumption (corresponding to 50 hours supply of the contracted load). | * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2014 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. Procedures that can be fully completed online are an exception to this rule. To make the data comparable across economies, Procedure considered completed once final several assumptions about the parties to the document is received transaction, the property and the procedures are used. No prior contact with officials The parties (buyer and seller): Cost required to complete each procedure (% of property value)  Are limited liability companies, 100% domestically and privately owned. Official costs only, no bribes  Are located in the economy’s largest No value added or capital gains taxes included business city. and no rezoning is required.  Have 50 employees each, all of whom are  Has no mortgages attached and has been nationals. under the same ownership for the past 10  Perform general commercial activities. years. The property (fully owned by the seller):  Consists of 557.4 square meters (6,000 square feet) of land and a 10-year-old, 2-story  Has a value of 50 times income per capita. warehouse of 929 square meters (10,000 The sale price equals the value. square feet). The warehouse is in good  Is registered in the land registry or cada- condition and complies with all safety stre, or both, and is free of title disputes. standards, building codes and legal requirements. There is no heating system. The  Is located in a periurban commercial zone, property will be transferred in its entirety. Doing Business 2014 Spain 46 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in 12.5 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. Online procedures account for 0.5 days in the total time calculation. 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 2014 Spain 47 REGISTERING PROPERTY Globally, Spain stands at 60 in the ranking of 189 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 2014 Spain 48 REGISTERING PROPERTY What are the changes over time? The benchmarks provided by the economies that over what is possible in making it easier to register time have had the best performance regionally or property. And changes in regional averages can show globally on the procedures, time or cost required to where Spain is keeping up—and where it is falling complete a property transfer (figure 5.3) help show behind. Figure 5.3 Has registering property become easier over time? Procedures (number) Time (days) Doing Business 2014 Spain 49 REGISTERING PROPERTY Cost (% of property value) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. Source: Doing Business database. Doing Business 2014 Spain 50 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 5.1)? Table 5.1 How has Spain made registering property easier—or not? By Doing Business report year DB year Reform 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. DB2014 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 2014 Spain 51 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 through information collected from local property City: Madrid lawyers, notaries and property registries. These procedures are those that apply to a transaction Property Value: EUR 1,123,061 matching the standard assumptions used by Doing Business in collecting the data (see the section in The procedures, along with the associated time and this chapter on what the indicators cover). cost, are summarized below. 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 average to obtain the information) and the printout from the internet is 1-3 days EUR 9 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 Less than a day no cost if obtained 2 (online electronically procedure) 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. 2 days value (minus 5% 3 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 For property opposable to good faith third parties, it has to be registered at the Land values not Registry, and in order to be registered, the contract between the parties exceeding EUR has to be notrarized. 6.010,12: EUR Doing Business 2014 Spain 52 Time to No. Procedure Cost to complete complete 90,151816. Notary fees are on a cumulative scale, as follows: for the excess amount between When the property value does not exceed 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 per 30.050,61: 0,45%. 1,000 for the excess For the excess amount between EUR 30,050.62 and EUR 60,101.21: 1,50 per 1,000 amount between For the excess amount between EUR 60,101.22 and EUR 150,253.03: 1 EUR 30.050,62 and per 1,000 60.101,21: 0,15%. For the excess amount between EUR 150,253.04 and EUR 601,012.10: 0.5 for the excess per 1,000 amount between For the excess amount between EUR 601,012.11 and EUR 6,010,121.04: 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 determined for the excess by agreement between the notary and client. amount between EUR 150.253,04 The Real Decreto Ley 8/2010, of May 20 2010, modifies the Real Decreto and 601.012,10: 1426/1989, of November 17th 1989, establishing notary fees. The 2010 0,05%. decree establishes a 5% discount for notary fees. for the excess According to Royal Decree 45/2007, the notary must issue an authorized amount over EUR copy of the deed on the same or next day and send it to the Registry 601.012,10 until electronically, unless otherwise requested by the interested party. 6.010.121,04: 0,03%. 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% Less than a day 7% of purchase 4 in Madrid). Second and subsequent property transfers are not subject to (online price (ITP) VAT, but to the Transfer Tax ("Impuesto sobre Transmisiones procedure) Patrimoniales y Actos Jurídicos Documentados", ITP). The rate of the transfer tax is 7% to 10% depending on the autonomous region of Spain (in Madrid, it is 7% of the property value). For the Doing Business case study, as it is assumed that the buyer is a Doing Business 2014 Spain 53 Time to No. Procedure Cost to complete complete 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 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 20/2012 of 1st September, on Estate General Budgets for 2010. By this law, as from the 1st of July 2010, the general rate increased from 18% to 21% and the reduced rate increased from 8% to 10%. 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 registration, the time to register is in the process of being reduced. The average registration time is currently at 8 calendar days. EUR 457 (minus 5 8 days 5% discount) 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. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Spain 54 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 borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders’ rights to view a potential borrower’s Strength of legal rights index (0–10) financial history (positive or negative)—valuable Rights of borrowers and lenders through information to consider when assessing risk. And collateral laws they permit borrowers to establish a good credit Protection of secured creditors’ rights throug h history that will allow easier access to credit. Sound bankruptcy laws collateral laws enable businesses to use their assets, especially movable property, as security to generate Depth of credit information index (0–6) capital—while strong creditors’ rights have been Scope and accessibility of credit information associated with higher ratios of private sector credit distributed by public credit registries and 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 up to 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, incorporated, limited liability the strength of legal rights index. company.  Has its headquarters and only base of operations in the largest business city. Doing Business 2014 Spain 55 GETTING CREDIT Where does the economy stand today? How well do the credit information system and Globally, Spain stands at 55 in the ranking of 189 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 2014 Spain 56 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 DB2014 Rank .. .. .. .. .. .. .. .. 52 55 Strength of legal rights 6 6 6 6 6 6 6 6 6 6 index (0-10) Depth of credit 5 5 5 5 5 5 5 5 5 5 information index (0-6) Public registry coverage 39.4 42.1 44.9 44.9 45.8 45.3 54.6 54.7 53.3 51.9 (% of adults) Private bureau 6.5 6.5 7.4 8.3 8.1 7.6 10.7 11.4 13.2 15.6 coverage (% of adults) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Spain 57 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 2013 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 2013 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), 2013 information index (0–6), 2013 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 credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. Regional averages for the depth of credit information index exclude economies with no credit registry or credit bureau. Source: Doing Business database. Doing Business 2014 Spain 58 GETTING CREDIT When economies strengthen the legal rights of lenders credit information, they can increase entrepreneur s’ 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 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. DB2014 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 2014 Spain 59 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 credit registry and/or well as public sources of information on collateral and credit bureau (if one exists). To construct the depth of bankruptcy laws. For the strength of legal rights index, credit information index, a score of 1 is assigned for a score of 1 is assigned for each of 8 aspects related to each of 6 features of the credit registry or credit legal rights in collateral law and 2 aspects in bureau (see summary of scoring below). bankruptcy law. Summary of scoring for the getting credit indicators in Spain OECD high income OECD high income Indicator Spain 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) 51.9 42.9 Private bureau coverage (% of adults) 15.6 73.9 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 credit registry or credit bureau. Regional averages for the credit registry coverage exclude economies with no credit registry. Regional averages for the credit bureau coverage exclude economies with no credit 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; and Yes any financial institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of No movable assets, without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of Yes its assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically No 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 2014 Spain 60 Strength of legal rights index (0–10) Index score: 6 Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor No defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is Yes liquidated? Are secured creditors either not subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure, or does the law provide secured No creditors with grounds for relief from an automatic stay or/and sets a time limit to it? 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? Depth of credit information index (0–6) Credit bureau Credit registry Index score: 5 Are data on both firms and individuals distributed? Yes Yes 1 Are both positive and negative data distributed? No Yes 1 Does the registry distribute credit information from retailers, trade creditors or utility companies as well as Yes No 1 financial institutions? Are more than 2 years of historical credit information No No 0 distributed? Is data on all loans below 1% of income per capita Yes No 1 distributed? Is it guaranteed by law that borrowers can inspect Yes Yes 1 their data in the largest credit registry? Note: An economy receives a score of 1 if there is a "yes" to either private bureau or public registry. Credit bureau Credit registry Coverage (% of adults) (% of adults) Number of firms 350,000 916,675 Number of individuals 4,500,000 15,210,366 Source: Doing Business database. Doing Business 2014 Spain 61 PROTECTING INVESTORS Protecting investors matters 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 protect minority shareholders, investors may be reluctant to provide funding to companies through Extent of disclosure index (0–10) the purchase of shares unless they become the Approval process for related-party controlling shareholders. Effective regulations define transactions related-party transactions precisely, promote clear Disclosure requirements in case of related- and efficient disclosure requirements, require party transactions shareholder participation in major decisions of the company and set detailed standards of accountability Extent of director liability index (0–10) for company insiders. Ability of minority shareholders to file a direct or derivative lawsuit What do the indicators cover? Ability of minority shareholders to hold Doing Business measures the strength of minority interested parties and members of the shareholder protections against directors’ use of approving body liable for prejudicial related- corporate assets for personal gain—or self-dealing. party transactions The indicators distinguish 3 dimensions of investor protections: transparency of related-party Available legal remedies (damages, repayment of profits, fines, imprisonment and rescission transactions (extent of disclosure index), liability for of the transaction) self-dealing (extent of director liability index) and minority shareholders’ access to evidence before and Ease of shareholder suits index (0–10) during trial (ease of shareholder suits index). The Access to internal corporate documents ranking on the strength of investor protection index is (directly or through a government inspector) the simple average of the percentile rankings on these 3 indices. To make the data comparable across Documents and information available during trial economies, a case study uses several assumptions about the business and the transaction. Strength of investor protection index (0–10) The business (Buyer): Simple average of the extent of disclosure, extent of director liability and ease of  Is a publicly traded corporation listed on the shareholder suits indices economy’s most important stock exchange (or at least a large private company with multiple shareholders). the company purchase used trucks from another company he owns.  Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of  The price is higher than the going price for used Buyer where permitted, even if this is not trucks, but the transaction goes forward. specifically required by law.  All required approvals are obtained, and all The transaction involves the following details: required disclosures made, though the transaction is prejudicial to Buyer.  Mr. James, a director and the majority shareholder of the company, proposes that  Shareholders sue the interested parties and the members of the board of directors. Doing Business 2014 Spain 62 PROTECTING INVESTORS Where does the economy stand today? How strong are investor protections against self- index (figure 7.1). While the indicator does not dealing in Spain? The economy has a score of 5.0 on measure all aspects related to the protection of the strength of investor protection index, with a higher minority investors, a higher ranking does indicate that score indicating stronger protections (see the an economy’s regulations offer stronger investor summary of scoring at the end of this chapter for protections against self-dealing in the areas measured. details). Globally, Spain stands at 98 in the ranking of 189 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 2014 Spain 63 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 DB2014 Rank .. .. .. .. .. .. .. 95 98 Extent of disclosure 5 5 5 5 5 5 5 5 5 index (0-10) Extent of director 6 6 6 6 6 6 6 6 6 liability index (0-10) Ease of shareholder 4 4 4 4 4 4 4 4 4 suits index (0-10) Strength of investor protection index (0- 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 10) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Spain 64 PROTECTING INVESTORS One way to put an economy’s scores on the protecting the number of economies with this score in 2013 as investors indicators into context is to see where the well as the regional average score. Figure 7.3 applies to economy stands in the distribution of scores across the extent of director liability index, and figure 7.4 to economies. Figure 7.2 highlights the score on the the ease of shareholder suits index. extent of disclosure index for Spain in 2013 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 the extent of Number of economies with each score on the extent of director liability index (0–10), 2013 disclosure index (0–10), 2013 Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. Source: Doing Business database. Source: Doing Business database. Doing Business 2014 Spain 65 PROTECTING INVESTORS Figure 7.4 How easy is accessing internal corporate documents? Number of economies with each score on the ease of shareholder suits index (0–10), 2013 Note: Higher scores indicate greater minority shareholder access to evidence before and during trial. Source: Doing Business database. Doing Business 2014 Spain 66 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 protections. Source: Doing Business database. Doing Business 2014 Spain 67 PROTECTING INVESTORS Economies with the strongest protections of minority reasonable time. As a result, reforms to strengthen investors from self-dealing require detailed disclosure investor protections may move ahead on different and define clear duties for directors. They also have fronts—such as through new or amended company well-functioning courts and up-to-date procedural laws, securities regulations or civil procedure rules. rules that give minority shareholders the means to What investor protection reforms has Doing Business prove their case and obtain a judgment within a recorded in Spain (table 7.2)? Table 7.2 How has Spain strengthened investor protections—or not? By Doing Business report year DB year Reform 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. DB2014 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 2014 Spain 68 PROTECTING INVESTORS What are the details? The protecting investors indicators reported here for ease of shareholder suits indices, scores are assigned Spain are based on detailed information collected to each based on a range of conditions relating to through a survey of corporate and securities lawyers disclosure, director liability and shareholder suits in a about securities regulations, company laws and court standard case study transaction (see the data notes at rules of evidence and procedure. To construct the the end of this chapter). The summary below shows extent of disclosure, extent of director liability and the details underlying the 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 7 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 6.2 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed 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? 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? Doing Business 2014 Spain 69 Score Score description 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 2014 Spain 70 PAYING TAXES Taxes are essential. They fund the public amenities, WHAT THE PAYING TAXES INDICATORS infrastructure and services that are crucial for a MEASURE properly functioning economy. But the level of tax rates needs to be carefully chosen—and needless Tax payments for a manufacturing company complexity in tax rules avoided. According to in 2012 (number per year adjusted for Doing Business data, in economies where it is more electronic and 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, 2011. 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 distort ions 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 25.5%. Doing Business 2014 Spain 71 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with Globally, Spain stands at 67 in the ranking of 189 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 58.6% 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 Source: Doing Business database. Doing Business 2014 Spain 72 PAYING TAXES What are the changes over time? The benchmarks provided by the economies that over show what is possible in easing the administrative time have had the best performance regionally or burden of tax compliance. And changes in regional globally on the number of payments or the time averages can show where Spain is keeping up—and required to prepare and file taxes (figure 8.2) help where it is falling behind. Figure 8.2 Has paying taxes become easier over time? Payments (number per year) Time (hours per year) Doing Business 2014 Spain 73 PAYING TAXES Total tax rate (% of profit) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. DB2013 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 25.5% applied in DB2014, the total tax rate is set at 25.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2014 Spain 74 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 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How has Spain made paying taxes easier—or not? By Doing Business report year DB year Reform 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. DB2014 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 2014 Spain 75 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 income OECD high income Indicator Spain average average Payments (number per year) 8 12 Time (hours per year) 167 175 Profit tax (%) 21.2 16.1 Labor tax and contributions (%) 36.8 23.1 Other taxes (%) 0.6 2.0 Total tax rate (% profit) 58.6 41.3 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate Employer paid - Social gross 1 online filing 90 30.9% 36.8 security contributions salaries taxable Corporate income tax 1 online filing 33 30% 21.2 profit interest not Tax on interest 0 paid jointly 0 21% 0.6 income included Doing Business 2014 Spain 76 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate cadastral value (estimated in 40% of Property tax 1 0 0.581% 0.5 property cost for these purposes) insurance Tax on insurance contracts 1 0 6% 0.1 premium included in Fuel tax 1 0 0 fuel price type of activity various Environmental tax 1 0 and 0 rates square meters type of Transport tax 1 0 EUR 592 0 truck value not Value added tax (VAT) 1 online filing 44 18%/21% 0 added included Totals 8 167 58.6 Source: Doing Business database. Doing Business 2014 Spain 77 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: military items.  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 Doing Business 2014 Spain 78 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Spain? Globally, Spain stands at 32 in the ranking of 189 According to data collected by Doing Business, economies on the ease of trading across borders exporting a standard container of goods requires 4 (figure 9.1). The rankings for comparator economies documents, takes 10 days and costs $1310. Importing and the regional average ranking provide other useful the same container of goods requires 4 documents, information for assessing how easy it is for a business takes 9 days and costs $1350 (see the summary of in Spain to export and import goods. procedures and documents at the end of this chapter for details). Figure 9.1 How Spain and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2014 Spain 79 TRADING ACROSS BORDERS What are the changes over time? The benchmarks provided by the economies that over possible in making it easier to trade across borders. time have had the best performance regionally or And changes in regional averages can show where globally on the documents, time or cost required to Spain is keeping up—and where it is falling behind. export or import (figure 9.2) help show what is Figure 9.2 Has trading across borders become easier over time? Documents to export (number) Time to export (days) Doing Business 2014 Spain 80 TRADING ACROSS BORDERS Cost to export (US$ per container) Documents to import (number) Doing Business 2014 Spain 81 TRADING ACROSS BORDERS Time to import (days) Cost to import (US$ per container) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Spain 82 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 9.1)? risk-based inspections and electronic data interchange Table 9.1 How has Spain made trading across borders easier—or not? By Doing Business report year DB year Reform 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. DB2014 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 2014 Spain 83 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 income OECD high income Indicator Spain average average Documents to export (number) 4 4 Time to export (days) 10 11 Cost to export (US$ per container) 1,310 1,070 Documents to import (number) 4 4 Time to import (days) 9 10 Cost to import (US$ per container) 1,350 1,090 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$) Documents preparation 5 200 Customs clearance and technical control 1 60 Ports and terminal handling 2 250 Inland transportation and handling 2 800 Totals 10 1,310 Procedures to import Time (days) Cost (US$) Documents preparation 4 150 Doing Business 2014 Spain 84 Procedures to import Time (days) Cost (US$) Customs clearance and technical control 1 150 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 Commercial invoice Customs export declaration Customs import declaration Packing list Packing list Source: Doing Business database. Doing Business 2014 Spain 85 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent Procedures to enforce a contract through courts encourage new business relationships the courts (number) because businesses know they can rely on the courts if a new customer fails to pay. Speedy trials Steps to file and serve the case are essential for small enterprises, which may lack Steps for trial and judgment the resources to stay in business while awaiting the outcome of a long court dispute. Steps to enforce the judgment Time required to complete procedures What do the indicators cover? (calendar days) Doing Business measures the efficiency of the Time to file and serve the case judicial system in resolving a commercial dispute before local courts. Following the step-by-step Time for trial and obtaining judgment evolution of a standardized case study, it collects Time to enforce the judgment data relating to the time, cost and procedural complexity of resolving a commercial lawsuit. The Cost required to complete procedures (% of ranking on the ease of enforcing contracts is the claim) simple average of the percentile rankings on its Average attorney fees component indicators: procedures, time and cost. Court costs The dispute in the case study involves the breach Enforcement costs of a sales contract between 2 domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. To make the data comparable across economies, Doing Business uses several assumptions about the case:  The seller and buyer are located in the economy’s largest business city.  The dispute on the quality of the goods requires an expert opinion.  The buyer orders custom-made goods, then fails to pay.  The judge decides in favor of the seller; there is no appeal.  The seller sues the buyer before a competent court.  The seller enforces the judgment through a public sale of the buyer’s movable assets.  The value of the claim is 200% of income per capita.  The seller requests a pretrial attachment to secure the claim. Doing Business 2014 Spain 86 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial Globally, Spain stands at 59 in the ranking of 189 dispute through the courts in Spain? According to data economies on the ease of enforcing contracts (figure collected by Doing Business, contract enforcement 10.1). The rankings for comparator economies and the takes 510 days, costs 18.5% of the value of the claim regional average ranking provide other useful and requires 40 procedures (see the summary at the benchmarks for assessing the efficiency of contract end of this chapter for details). enforcement in Spain. Figure 10.1 How Spain and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2014 Spain 87 ENFORCING CONTRACTS What are the changes over time? The benchmarks provided by the economies that over help show what is possible in improving the efficiency time have had the best performance regionally or of contract enforcement. And changes in regional globally on the number of steps, time or cost required averages can show where Spain is keeping up—and to enforce a contract through the courts (figure 10.2) where it is falling behind. Figure 10.2 Has enforcing contracts become easier over time? Time (days) Cost (% of claim) Doing Business 2014 Spain 88 ENFORCING CONTRACTS Procedures (number) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Spain 89 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 10.1)? Table 10.1 How has Spain made enforcing contracts easier—or not? By Doing Business report year DB year Reform 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. DB2014 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 2014 Spain 90 ENFORCING CONTRACTS What are the details? The indicators reported here for Spain are based COURT NAME 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 Claim Value LCU: 45340 identified through study of the codes of civil procedure and other court regulations, as well as Madrid Court of First through surveys completed by local litigation Court Name: Instance lawyers (and, in a quarter of the economies covered by Doing Business, by judges as well). The procedures for resolving a commercial lawsuit, and the associated time and cost, are listed in the summary below. Summary of procedures for enforcing a contract in Spain—and the time and cost OECD high income OECD high income Indicator Spain average average Time (days) 510 529 529 Filing and service 50 Trial and judgment 280 Enforcement of judgment 180 Cost (% of claim) 18.5 21.0 21.0 Attorney cost (% of claim) 12.7 Court cost (% of claim) 5.8 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 2014 Spain 91 ENFORCING CONTRACTS No. Procedure Filing and service: Plaintiff requests payment: Plaintiff or his lawyer asks Defendant orally or in writing to comply with the 1 contract. A third person formally notifies Defendant: A person other than the Plaintiff or his lawyer, such as a notary 2 public, 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 4 assigning a 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. Plaintiff’s request for service: Plaintiff makes a written request to the court that process be served on 5 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: 7 The 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 8 Defendant is 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 9 Defendant against possible damages to attached property. (see assumption 5) Pre-judgment attachment.: Defendant's property is attached prior to judgment. Attachment is either 10 physical or achieved by registering, marking, debiting or separating assets. (see assumption 5) Doing Business 2014 Spain 92 No. Procedure Custody of assets attached prior to judgment: Defendant's attached assets are put under enforcement 11 officer's or (private) bailiff's care. (see assumption 5) Report on pre-judgment attachment: Court enforcement officer or (private) bailiff issues and delivers a 12 report on 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 13 Defendant’s 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 pres ents 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 14 the merits of the case. Defendant’s filing of defense or answer to Plaintiff’s claim: D efendant files a written pleading which includes his defense or answer on the merits of the case. Defendant's written answer may or may not 15 include witness statements, expert statements, the documents Defendant relies on as evidence and the legal authori Framing of issues: Plaintiff and Defendant assist the court in framing issues on which evidence is to be 16 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 18 example 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 20 hearing or trial. (see assumption 6-a) Doing Business 2014 Spain 93 No. Procedure Adjournments: Court proceedings are delayed because one or both parties request and obtain an 21 adjournment to 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 22 judge. Witnesses and a court-appointed independent expert may be heard and questioned at the oral hearing. Adjournments: Court proceedings are delayed because one or both parties request and obtain an 23 adjournment 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. 28 The 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 29 the law. 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 30 Plaintiff for 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. Publication of judgment: The judgment must be published in an official journal, gazette or local 32 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. Attachment: Defendant’s movable goods are attached (physically or by registering, marking or separating 35 assets). Doing Business 2014 Spain 94 No. Procedure Report on execution of attachment: A court enforcement officer or private process server delivers a report 36 on the attachment of Defendant's movable goods to the judge. Valuation or appraisal of attached movable goods: The court or court appointed valuation expert 37 evaluates the 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 publ ic auction. 40 Payment: Court orders that the proceeds of the public auction or the direct sale be delivered to Plaintiff. * Not counted in the total number of procedures. Source: Doing Business database. Doing Business 2014 Spain 95 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 Outcome well as public information on bankruptcy systems. Whether business continues operating as a The ranking on the ease of resolving insolvency is going concern or business assets are sold based on the recovery rate, which is recorded as piecemeal cents on the dollar recouped by creditors through Recovery rate for creditors (cents on the reorganization, liquidation or debt enforcement dollar) (foreclosure) proceedings. The recovery rate is a Measures the cents on the dollar recovered function of time, cost and other factors, such as by creditors lending rate and the likelihood of the company continuing to operate. Present value of debt recovered To make the data comparable across economies, Official costs of the insolvency proceedings Doing Business uses several assumptions about the are deducted business and the case. It assumes that the Depreciation of furniture is taken into company: account  Is a domestically owned, limited liability Outcome for the business (survival or not) company operating a hotel. affects the maximum value that can be recovered  Operates in the economy’s largest business city.  Has 201 employees, 1 main secured  Has a higher value as a going concern—and creditor and 50 unsecured creditors. the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2014 Spain 96 RESOLVING INSOLVENCY Where does the economy stand today? Speed, low costs and continuation of viable businesses concern. The average recovery rate is 72.3 cents on the characterize the top-performing economies. How dollar. efficient are insolvency proceedings in Spain? Globally, Spain stands at 22 in the ranking of 189 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 2014 Spain 97 RESOLVING INSOLVENCY What are the changes over time? The benchmarks provided by the economies that over possible in improving the efficiency of insolvency time have had the best performance regionally or proceedings. And changes in regional averages can globally on the time or cost of insolvency proceedings show where Spain is keeping up—and where it is or on the recovery rate (figure 11.2) help show what is falling behind. Figure 11.2 Has resolving insolvency become easier over time? Time (years) Cost (% of estate) Doing Business 2014 Spain 98 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) 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. Regional averages on time and cost exclude economies with a “no practice” mark. Source: Doing Business database. Doing Business 2014 Spain 99 RESOLVING INSOLVENCY A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in Spain (table 11.1)? even viable businesses are liquidated. This is starting to Table 11.1 How has Spain made resolving insolvency easier—or not? By Doing Business report year DB year Reform 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. DB2014 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 2014 Spain 100 EMPLOYING WORKERS Doing Business measures flexibility in the regulation of employing workers methodology proposed by the employment, specifically as it affects the hiring and consultative group are available on the Doing Business redundancy of workers and the rigidity of working website (http://www.doingbusiness.org). The data on hours. Over the period from 2007 to 2011 employing workers are based on a detailed survey of improvements were made to align the methodology employment regulations that is completed by local for the employing workers indicators with the letter lawyers and public officials. Employment laws and and spirit of the International Labour Organization regulations as well as secondary sources are reviewed (ILO) conventions. Only 4 of the 188 ILO conventions to ensure accuracy. cover areas measured by Doing Business: employee To make the data comparable across economies, termination, weekend work, holiday with pay and night several assumptions about the worker and the work. The Doing Business methodology is fully business are used. consistent with these 4 conventions. The ILO conventions covering areas related to the Employing The worker: Workers indicators do not include the ILO core labor  Earns a salary plus benefits equal to the standards—8 conventions covering the right to economy’s average wage during the entire collective bargaining, the elimination of forced labor, period of his employment. the abolition of child labor and equitable treatment in  Has a pay period that is the most common for workers in the economy. employment practices.  Is a lawful citizen who belongs to the same race and religion as the majority of the Between 2009 and 2011 the World Bank Group worked economy’s population. with a consultative group—including labor lawyers,  Resides in the economy’s largest business city. employer and employee representatives, and experts  Is not a member of a labor union, unless from the ILO, OECD, civil society and the private membership is mandatory. sector—to review the employing workers methodology and explore future areas of research. A i The business:  Is a limited liability company. full report with the conclusions of the consultative  Operates in the economy’s largest business group is available at city. http://www.doingbusiness.org/methodology/employin  Is 100% domestically owned. g-workers.  Operates in the manufacturing sector.  Has 60 employees. This year Doing Business continued research collecting  Is subject to collective bargaining agreements additional data on regulations covering the in economies where such agreements cover probationary period for new employees. more than half the manufacturing sector and apply even to firms not party to them. Doing Business 2014 presents the data on the  Abides by every law and regulation but does not grant workers more benefits than employing workers indicators in an annex. The report mandated by law, regulation or (if applicable) does not present rankings of economies on the collective bargaining agreement. employing workers indicators nor include the topic in the aggregate ranking on the ease of doing business. Detailed data collected on labor regulations and the Doing Business 2014 Spain 101 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 2014 Spain 102 EMPLOYING WORKERS Employment laws are needed to protect workers from past 5 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 2013? DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. Spain reduced the notice period applicable in case of DB2011 redundancy dismissals. DB2012 No reform as measured by Doing Business. Spain temporarily allowed unlimited duration of fixed-term DB2013 contracts. Spain reduced the maximum cumulative duration of fixed- DB2014 term contracts and increased the minimum wage. Source: Doing Business database. Doing Business 2014 Spain 103 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) 12 Minimum wage for a 19-year old worker or an apprentice (US$/month) 1009.2 Ratio of minimum wage to value added per worker 0.27 Source: Doing Business database. Doing Business 2014 Spain 104 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 2014 Spain 105 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 2014 Spain 106 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 2014 Spain 107 DATA NOTES The indicators presented and analyzed in Doing rounds of verification, leading to revisions or Business measure business regulation and the expansions of the information collected. protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of ECONOMY CHARACTERISTICS regulation, such as the number of procedures to start a business or to register and transfer commercial property. Second, they gauge the time and cost to Gross national income per capita achieve a regulatory goal or comply with regulation, such as the time and cost to enforce a contract, go Doing Business 2014 reports 2012 income per capita through bankruptcy or trade across borders. Third, as published in the World Bank’s World Development they measure the extent of legal protections of Indicators 2013. Income is calculated using the Atlas property, for example, the protections of investors method (current U.S. dollars). For cost indicators against looting by company directors or the range of expressed as a percentage of income per capita, assets that can be used as collateral according to 2012 gross national income (GNI) in U.S. dollars is secured transactions laws. Fourth, a set of indicators used as the denominator. GNI data were not documents the tax burden on businesses. Finally, a set available from the World Bank for Afghanistan, The of data covers different aspects of employment Bahamas, Bahrain, Barbados, Brunei Darussalam, regulation. The 11 sets of indicators measured in Djibouti, the Islamic Republic of Iran, Kuwait, Libya, Doing Business were added over time, and the sample Myanmar, New Zealand, Oman, San Marino, the of economies expanded. Syrian Arab Republic, West Bank and Gaza, and the Republic of Yemen. In these cases GDP or GNP per The data for all sets of indicators in Doing Business 2 capita data and growth rates from other sources, 2014 are for June 2013. such as the International Monetary Fund’s World Economic Outlook database and the Economist Intelligence Unit, were used. Methodology Region and income group The Doing Business data are collected in a standardized way. To start, the Doing Business team, Doing Business uses the World Bank regional and with academic advisers, designs a questionnaire. The income group classifications, available at questionnaire uses a simple business case to ensure http://data.worldbank.org/about/country- classifications. The World Bank does not assign comparability across economies and over time—with regional classifications to high-income economies. assumptions about the legal form of the business, its For the purpose of the Doing Business report, high- size, its location and the nature of its operations. income OECD economies are assigned the “regional” Questionnaires are administered to more than 10,200 classification OECD high income. Figures and tables local experts, including lawyers, business consultants, presenting regional averages include economies accountants, freight forwarders, government officials from all income groups (low, lower middle, upper and other professionals routinely administering or middle and high income). advising on legal and regulatory requirements (table Population 21.2). These experts have several rounds of interaction with the Doing Business team, involving conference Doing Business 2014 reports midyear 2012 calls, written correspondence and visits by the team. population statistics as published in World For Doing Business 2014 team members visited 33 Development Indicators 2013. economies to verify data and recruit respondents. The data from questionnaires are subjected to numerous The Doing Business methodology offers several advantages. It is transparent, using factual information about what laws and regulations say and allowing 2 The data for paying taxes refer to January – December 2012. multiple interactions with local respondents to clarify Doing Business 2014 Spain 108 potential misinterpretations of questions. Having entrepreneurs reported in the World Bank Enterprise representative samples of respondents is not an issue; Surveys or other perception surveys. Doing Business is not a statistical survey, and the texts This year Doing Business completed subnational of the relevant laws and regulations are collected and studies in Colombia, Italy and the city of Hargeisa answers checked for accuracy. The methodology is (Somaliland) and is currently updating indicators in inexpensive and easily replicable, so data can be Egypt, Mexico and Nigeria. Doing Business also collected in a large sample of economies. Because published regional studies for the g7+ and the East standard assumptions are used in the data collection, African Community. The g7+ group is a country- comparisons and benchmarks are valid across owned and country-led global mechanism established economies. Finally, the data not only highlight the in April 2010 to monitor, report and draw attention to extent of specific regulatory obstacles to business but the unique challenges faced by fragile states. The also identify their source and point to what might be member countries included in the report are reformed. Information on the methodology for each Afghanistan, Burundi, the Central African Republic, Doing Business topic can be found on the Doing Chad, the Comoros, the Democratic Republic of Business website at Congo, Côte d’Ivoire, Guinea, Guinea-Bissau, Haiti, http://www.doingbusiness.org/methodology. Liberia, Papua New Guinea, Sierra Leone, the Solomon Islands, South Sudan, Timor-Leste and Togo. Limits to what is measured The subnational studies point to differences in business regulation and its implementation —as well as The Doing Business methodology has 5 limitations that in the pace of regulatory reform—across cities in the should be considered when interpreting the data. First, same economy. For several economies subnational the collected data refer to businesses in the economy’s studies are now periodically updated to measure largest business city (which in some economies differs change over time or to expand geographic coverage from the capital) and may not be representative of to additional cities. This year that is the case for all the regulation in other parts of the economy. To address subnational studies published. this limitation, subnational Doing Business indicators were created (box 21.1). Second, the data often focus on a specific business form—generally a limited liability company (or its legal equivalent) of a specified Changes in what is measured size—and may not be representative of the regulation The methodology for 2 indicator sets—trading across on other businesses, for example, sole proprietorships. borders and paying taxes—was updated this year. For Third, transactions described in a standardized case trading across borders, documents that are required scenario refer to a specific set of issues and may not purely for purposes of preferential treatment are no represent the full set of issues a business encounters. longer included in the list of documents (for example, Fourth, the measures of time involve an element of a certificate of origin if the use is only to qualify for a judgment by the expert respondents. When sources preferential tariff rate under trade agreements). For indicate different estimates, the time indicators paying taxes, the value of fuel taxes is no longer reported in Doing Business represent the median included in the total tax rate because of the difficulty values of several responses given under the of computing these taxes in a consistent way across all assumptions of the standardized case. economies covered. The fuel tax amounts are in most cases very small, and measuring these amounts is Finally, the methodology assumes that a business has often complicated because they depend on fuel full information on what is required and does not consumption. Fuel taxes continue to be counted in the waste time when completing procedures. In practice, number of payments. completing a procedure may take longer if the business lacks information or is unable to follow up In a change involving several indicator sets, the rule promptly. Alternatively, the business may choose to establishing that each procedure must take at least 1 disregard some burdensome procedures. For both day was removed for procedures that can be fully reasons the time delays reported in Doing Business completed online in just a few hours. This change 2014 would differ from the recollection of affects the time indicator for starting a business, Doing Business 2014 Spain 109 dealing with construction permits and registering with one another, while the distance to frontier property. For procedures that can be fully completed measure benchmarks economies to the frontier in 3 online, the duration is now set at half a day rather than regulatory practice, measuring the absolute distance to a full day. the best performance on each indicator. Both measures can be used for comparisons over time. The threshold for the total tax rate introduced in 2011 When compared across years, the distance to frontier for the purpose of calculating the ranking on the ease measure shows how much the regulatory environment of paying taxes was updated. All economies with a for local entrepreneurs in each economy has changed total tax rate below the threshold (which is calculated over time in absolute terms, while the ease of doing and adjusted on a yearly basis) receive the same business ranking can show only relative change. ranking on the total tax rate indicator. The threshold is not based on any economic theory of an “optimal tax Ease of doing business rate” that minimizes distortions or maximizes efficiency The ease of doing business index ranks economies in the tax system of an economy overall. Instead, it is from 1 to 189. For each economy the ranking is mainly empirical in nature, set at the lower end of the calculated as the simple average of the percentile distribution of tax rates levied on medium-size rankings on each of the 10 topics included in the index enterprises in the manufacturing sector as observed in Doing Business 2014: starting a business, dealing through the paying taxes indicators. This reduces the with construction permits, getting electricity, bias in the indicators toward economies that do not registering property, getting credit, protecting need to levy significant taxes on companies like the investors, paying taxes, trading across borders, Doing Business standardized case study company enforcing contracts, and resolving insolvency. The because they raise public revenue in other ways—for employing workers indicators are not included in this example, through taxes on foreign companies, through year’s aggregate ease of doing business ranking. taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of Construction of the ease of doing business index the methodology). This year the threshold is 25,5%. Here is one example of how the ease of doing business index is constructed. In Denmark it takes 4 procedures, 5.5 days and 0.2% of annual income per capita in fees Data challenges and revisions to open a business. The minimum capital requirement Most laws and regulations underlying the Doing is 24% of annual income per capita. On these 4 Business data are available on the Doing Business indicators Denmark ranks in the 12th, 11th, 1st and website at http://www.doingbusiness.org. All the 79th percentiles. So on average Denmark ranks in the sample questionnaires and the details underlying the 25th percentile on the ease of starting a business. It indicators are also published on the website. Questions ranks in the 21st percentile on getting credit, 19th on the methodology and challenges to data can be percentile on paying taxes, 27th percentile on submitted through the website’s “Ask a Question” enforcing contracts, 5th percentile on resolving function at http://www.doingbusiness.org. insolvency and so on. Higher rankings indicate simpler regulation and stronger protection of property rights. Ease of doing business and distance to The simple average of Denmark’s percentile rankings frontier on all topics is 17th. When all economies are ordered Doing Business 2014 presents results for 2 aggregate by their average percentile rankings, Denmark stands measures: the aggregate ranking on the ease of doing at 5 in the aggregate ranking on the ease of doing business and the distance to frontier measure. The business. ease of doing business ranking compares economies More complex aggregation methods—such as 3 For getting electricity the rule that each procedure must take a principal components and unobserved components— minimum of 1 day still applies because in practice there are no yield a ranking nearly identical to the simple average cases in which procedures can be fully completed online in less than a day. For example, even though in some cases it is possible to apply for an electricity connection online, additional requirements mean that the process cannot be completed in less than 1 day. Doing Business 2014 Spain 110 4 used by Doing Business. Thus, Doing Business uses 58 on enforcing contracts, 116 on dealing with the simplest method: weighting all topics equally and, construction permits and 145 on getting electricity. within each topic, giving equal weight to each of the Variation in performance across the indicator sets is topic components. not at all unusual. It reflects differences in the degree If an economy has no laws or regulations covering a of priority that government authorities give to specific area—for example, insolvency—it receives a particular areas of business regulation reform and the “no practice” mark. Similarly, an economy receives a ability of different government agencies to deliver “no practice” or “not possible” mark if regulation exists tangible results in their area of responsibility. but is never used in practice or if a competing Distance to frontier measure regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the A drawback of the ease of doing business ranking is ranking on the relevant indicator. that it can measure the regulatory performance of economies only relative to the performance of others. The ease of doing business index is limited in scope. It It does not provide information on how the absolute does not account for an economy’s proximity to large quality of the regulatory environment is improving markets, the quality of its infrastructure services (other over time. Nor does it provide information on how than services related to trading across borders and large the gaps are between economies at a single getting electricity), the strength of its financial system, point in time. the security of property from theft and looting, macroeconomic conditions or the strength of The distance to frontier measure is designed to underlying institutions. address both shortcomings, complementing the ease of doing business ranking. This measure illustrates the Variability of economies’ rankings across topics distance of an economy to the “frontier,” and the Each indicator set measures a different aspect of the change in the measure over time shows the extent to business regulatory environment. The rankings of an which the economy has closed this gap. The frontier is economy can vary, sometimes significantly, across a score derived from the most efficient practice or indicator sets. The average correlation coefficient highest score achieved on each of the component between the 10 indicator sets included in the indicators in 10 Doing Business indicator sets aggregate ranking is 0.38, and the coefficients (excluding the employing workers indicators) by any between any 2 sets of indicators range from 0.18 economy. In starting a business, for example, Canada (between getting electricity and getting credit) to 0.58 and New Zealand have achieved the highest (between trading across borders and resolving performance on the number of procedures required (1) insolvency and between trading across borders and and on the time (0.5 days), Denmark and Slovenia on getting electricity). These correlations suggest that the cost (0% of income per capita) and Chile, Zambia economies rarely score universally well or universally and 99 other economies on the paid-in minimum badly on the indicators. capital requirement (0% of income per capita) (table 22.2). Consider the example of Canada. It stands at 19 in the aggregate ranking on the ease of doing business. Its Calculating the distance to frontier for each economy ranking is 2 on starting a business, 4 on protecting involves 2 main steps. First, individual indicator scores investors, and 8 on paying taxes. But its ranking is only are normalized to a common unit: except for the total tax rate, each of the 31 component indicators y is rescaled to (max − y)/(max − min), with the minimum 4 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, “Doing Business Indicators: Why Aggregate, and How to value (min) representing the frontier—the highest Do It” (World Bank, Washington, DC, 2005). Principal components performance on that indicator across all economies and unobserved components methods yield a ranking nearly since 2003 or the first year the indicator was collected. 5 identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the For the total tax rate, consistent with the calculation of pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less 5 Even though scores for the distance to frontier are calculated from importance in the context of a specific economy. 2005, data from as early as 2003 are used to define the frontier Doing Business 2014 Spain 111 the rankings, the frontier is defined as the total tax rate Economies that improved the most across 3 or at the 15th percentile of the overall distribution of more Doing Business topics in 2012/13 total tax rates for all years. Second, for each economy Doing Business 2014 uses a simple method to calculate the scores obtained for individual indicators are which economies improved the most in the ease of aggregated through simple averaging into one doing business. First, it selects the economies that in distance to frontier score, first for each topic and then 2012/13 implemented regulatory reforms making it across all topics. An economy’s distance to frontier is easier to do business in 3 or more of the 10 topics indicated on a scale from 0 to 100, where 0 represents included in this year’s ease of doing business ranking. 6 the lowest performance and 100 the frontier. Twenty-nine economies meet this criterion: Azerbaijan, The maximum (max) and minimum (min) observed Belarus, Burundi, Côte d’Ivoire, Croatia, Djibouti, values are computed for all economies included in the Gabon, Guatemala, Guinea, Italy, Kosovo, Latvia, the Doing Business sample since 2003 and for all years former Yugoslav Republic of Macedonia, Malaysia, (from 2003 to 2013). To mitigate the effects of extreme Mauritius, Mexico, Moldova, Mongolia, Morocco, outliers in the distributions of the rescaled data (very Panama, the Philippines, the Republic of Congo, few economies need 694 days to complete the Romania, the Russian Federation, Rwanda, Sri Lanka, procedures to start a business, but many need 9 days), Ukraine, Uzbekistan and the United Arab Emirates. th the maximum (max) is defined as the 95 percentile of Second, Doing Business sorts these economies on the the pooled data for all economies and all years for increase in their distance to frontier measure from the each indicator. The exceptions are the getting credit, previous year using comparable data. protecting investors and resolving insolvency Selecting the economies that implemented regulatory indicators, whose construction precludes outliers. In reforms in at least 3 topics and improved the most in addition, the cost to export and cost to import for each the distance to frontier measure is intended to year are divided by the GDP deflator, so as to take the highlight economies with ongoing, broadbased reform general price level into account when benchmarking programs. The criterion for identifying the top these absolute-cost indicators across economies with improvers was changed from last year. The different inflation trends. The base year for the deflator improvement in ease of doing business ranking is no is 2013 for all economies. longer used. The improvement in the distance to The difference between an economy’s distance to frontier measure is used instead because under this frontier score in any previous year and its score in measure economies are sorted according to their abs- 2013 illustrates the extent to which the economy has olute improvement instead of relative improvement. closed the gap to the frontier over time. And in any given year the score measures how far an economy is from the highest performance at that time. Take Colombia, which has a score of 70.5 on the distance to frontier measure for 2014. This score indicates that the economy is 29.5 percentage points away from the frontier constructed from the best performances across all economies and all years. Colombia was further from the frontier in 2009, with a score of 66.2. The difference between the scores shows an improvement over time. The distance to frontier measure can also be used for comparisons across economies in the same year, complementing the ease of doing business ranking. For example, Colombia stands at 63 this year in the ease of doing business ranking, while Peru, which is 6 Doing Business reforms making it more difficult to do business are 29.3 percentage points from the frontier, stands at 42. subtracted from the total number of those making it easier to do business. Doing Business 2014 Spain 113 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Doing Business reforms News on the Doing Business project Short summaries of DB2014 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 189 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Data http://www.doingbusiness.org/custom-query/ All the data for 189 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 10,200 specialists in 189 economies profiles who participate in Doing Business http://www.doingbusiness.org/reports/ http://www.doingbusiness.org/contributors/doing- business/ Methodology The methodologies and research papers Entrepreneurship data underlying Doing Business Data on business density for 139 economies http://www.doingbusiness.org/methodology/ http://www.doingbusiness.org/data/exploretopics/e ntrepreneurship Research Abstracts of papers on Doing Business topics and Doing Business iPhone App related policy issues Doing Business at a Glance App presents the full http://www.doingbusiness.org/research/ report, rankings and highlights http://www.doingbusiness.org/specialfeatures/ iphone Doing Business 2014 Spain 114