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Present and future relations between Spain and Venezuela: fundamental keys to understanding the investment and taxation map between the two countries

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Andersen in Spain and LEGA, Andersen Global's partner firm in Venezuela, are organising the event with experts from both firms to analyse the most relevant aspects of the main investment agreements between the two countries

What is the current state of relations between Spain and Venezuela in terms of investment opportunities? Over the last few years, there has been a development in the flow of investment between the two countries, which has been changing in terms of the relationship between issuer and recipient. More specifically, in 2019, Spain's net direct investment in Venezuela - 83% focused on the energy industry and 12% on the financial sector - suffered a large drop. This is part of a trend that has been going on for some time, but which has been aggravated by the COVID-19 crisis. Although the level of Venezuelan investment in Spain may have decreased (11 million euros compared to more than 30 million in 2018), the reality is that investment flows have been changing, with an increasing pre-eminence of investment from Venezuela to Spain.

This scenario makes it necessary to carry out a review of the economic and investment context in relation to both countries and, on this basis, Andersen and LEGA, Andersen Global's partner firm in Venezuela, organised the event "Advantages and opportunities arising from the agreements between Spain and Venezuela" to address various issues that impact on the flow and opportunities for investment such as protection systems, investment, double taxation, residence, or nationality, among others.

To this end, the event featured speakers from both firms, who provided their expertise to better understand the most relevant elements in terms of agreements between the two countries. Speakers included Íñigo Rodríguez-Sastre, Managing Partner at Andersen in Spain and head of the Arbitration area; Borja de Gabriel, Tax Law Partner at Andersen; Elena Sevila, Director of International Arbitration at Andersen; Jorge Martínez, Senior Tax Law Associate at Andersen. LEGAL was represented by José Gregorio Torrealba, Senior Partner of Public and Regulatory Law; Alejandro Gallotti, June Partner of Public and Regulatory Law; and Nathalie Rodríguez, Partner of Tax Law.

During his speech, Íñigo Rodríguez-Sastre explained that the concept of investment, in relation to the Agreement for the Promotion and Reciprocal Protection of Investments (APPRI), "must be understood broadly and, in the case of indirect investments, these should also be protected, without limitation". By way of assessment, Íñigo also explained that "the APPRI is very favourable to investment, given that the articles allow such investments to be protected in a broad manner".

Elena Sevila stressed the importance of this Agreement to be protected when making an investment, emphasising the need to meet the requirements that, according to the document, qualify the figure of the investor. Thus, she indicated that, as there are quite different cases, it is essential to start from the basis of knowing and understanding the definition of investor. Regarding this definition, José Gregorio Torrealba explained that, if certain conditions are not met, "the investor runs a very high risk of losing the investment". In this sense, various examples were given to understand how the APPRI applies to the protection of companies depending on their place of incorporation or in cases of dual nationality and the protection that arises in these cases, which was explained by Alejandro Gallotti.

The experts offered various practical examples focused on understanding the functioning of different elements that come into play in the case of investments between the two countries, such as the resolution of conflicts through arbitration, or how the political situation can affect the initiation of legal proceedings.

The instruments available since Venezuela's denunciation of the ICSID convention and precedents in this area were also discussed.

Regarding the fiscal perspective of investment, from the Venezuelan context, Nathalie Rodríguez stated, in relation to Spanish investment in Venezuela, that it is important "to know what project is going to be carried out and to resort to the option that best limits the flows, avoiding dubious assumptions that could lead to double taxation".

"Unfortunately, we are seeing that Spanish companies are making strategic adjustments in Venezuela", explained Borja de Gabriel, with impact as a result of the crisis caused by COVID-19, and Andersen and LEGA have provided solutions in terms of taxation in relation to the disinvestment of Spanish entities in the country.  

Borja de Gabriel indicated that the change of flow has led Venezuelans to invest more and more in Spain, mainly individuals, high net worth individuals and family offices. "Landing planning in Spain is fundamental and the work of experts, as is the case of Andersen, is focused on planning the arrival of the investor in an optimal manner and in accordance with the legislation" and "always prior to the acquisition of tax residency in Spain".

From the point of view of Venezuelan business groups investing in Spain, from a tax point of view, we must carry out a prior analysis of offshore and onshore income, although, concluded Borja de Gabriel, "in our experience, the majority of Venezuelan business groups that land in Spain do so under the ETVE structure".

Jorge Martínez also discussed the elements that investors must consider in order to protect their activity, the requirements they must meet, the taxes that would affect them, the length of time they must stay in the country, who is affected by the obligation to pay taxes in Spain, and how dual nationality affects them. In his opinion, since the first management carried out in Spain, "it is necessary to monitor the situation so as not to find situations that could reduce the assets of Venezuelan investors".

Finally, the speakers reviewed some of the fundamental problems that investors from the country of origin may face when they arrive in the country of destination, emphasising the need to be aware of all the details that investments entail, both commercially and in terms of taxation, so that they can be foreseen beforehand in order to be protected and to be able to carry out their activity safely.

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