The reconfiguration of global supply chains initiated by the COVID-19 pandemic, accelerated by the war in Ukraine, and reinforced by geopolitical tensions between the United States and China is generating an industrial investment cycle in Europe unprecedented since the 1980s. Spain positions itself as one of the most attractive destinations of this cycle, thanks to a combination of structural factors, fiscal incentives, and a decisive commitment to strategic sectors including electric vehicles, semiconductors, and renewable energy.
The Nearshoring Context: Why Europe and Why Now
Nearshoring — relocating production close to the consumption market — responds to a logic that has changed significantly over the past five years. During the 1990s and 2000s, offshoring to Asia was driven exclusively by labour cost differentials. In 2024, the factors driving relocation to Europe are more complex:
Supply chain resilience. Lead times for components from Asia moved from four to eight weeks in normal conditions to more than twelve months during disruption episodes. Supply chain risk management has become a strategic factor in sourcing decisions for large OEM manufacturers.
Industrial policy of the major blocs. The European Chips Act (Regulation EU 2023/1781) with €43 billion in funding, the US Inflation Reduction Act, and China’s “Made in China 2025” policies are creating pressures to localise production within each bloc. Companies supplying European clients face growing incentives — from both public policy and client procurement policy — to manufacture in Europe.
Transport costs and carbon footprint. Maritime freight costs multiplied tenfold during post-pandemic disruption episodes. Though freight rates have partially reverted, the Carbon Border Adjustment Mechanism (CBAM) will progressively increase the cost of high-carbon imports, favouring local production.
Spain as an Industrial Investment Destination: Competitive Factors
The key indicators positioning Spain as an attractive destination for European industrial investment are:
Labour cost and productivity. Spain’s minimum wage stands at €1,134 per month in 2024, compared to €2,571 in Germany or €1,946 in France. Manufacturing labour costs per hour in Spain are approximately 40% lower than in Germany, with labour productivity that has converged significantly towards the European average over the past decade.
Transport infrastructure. Spain has the most extensive high-speed rail network in Europe (3,700 km in service), four of the twenty leading European container ports by volume (Algeciras, Valencia, Barcelona, and Las Palmas), and access to the Mediterranean Corridor and Atlantic Corridor of the Trans-European Transport Network (TEN-T).
Renewable energy and energy competitiveness. Spain generated more than 50% of its electricity from renewable sources in 2023, with projections to reach 74% by 2030. Electricity generation costs, though affected by wholesale market volatility, are structurally lower than in Northern Europe due to solar resource. For electricity-intensive industries — aluminium smelting, battery manufacturing, green hydrogen production — this is a determining factor.
Fiscal incentives for investment. The Corporate Income Tax Act includes specific deductions for R&D investment (Article 35 LIS) and cinematographic production (Article 36), as well as an employment creation deduction. The Special Economic Zones of the Canary Islands (ZEC) offer a 4% corporate tax rate for companies establishing and creating employment in the archipelago.
Sectors with the Greatest Growth Potential in Spain
Electric Vehicles and Mobility
Spain is Europe’s second-largest vehicle manufacturer and the tenth globally. The major manufacturers present in Spain — SEAT/Cupra (Martorell), Stellantis (Zaragoza and Vigo), Ford (Valencia), and Volkswagen’s gigafactory project in Sagunto — are investing massively in the electric vehicle transition. Volkswagen’s decision to build in Sagunto (Valencia) one of its six European battery gigafactories, with planned investment of €7 billion and up to 3,000 direct jobs, is the clearest indicator of Spain’s positioning in this value chain.
Semiconductors and Microelectronics
The European Chips Act sets the objective of doubling Europe’s share of global semiconductor production to 20% by 2030. In Spain, the National Microelectronics Centre (CNM-CSIC) in Barcelona and OSAT (Assembly, Test, and Packaging) projects are attracting investment from Asian and North American companies seeking a European base.
Aeronautics and Defence
Spain is Europe’s fourth-largest aeronautics producer, with mature industrial clusters in Seville (Airbus), Madrid (Indra, GMV, ITP Aero), and the Basque Country (ITP Aero). NATO allies’ increased defence spending — Spain has committed to reaching 2% of GDP in defence by 2029 — is generating sustained demand for weapons systems, armoured vehicles, drones, and cybersecurity equipment.
Pharmaceuticals and Medical Devices
The pandemic demonstrated the fragility of dependence on Asian supply chains for medicines and medical devices. The EU Pharma Vision strategy drives relocation of Active Pharmaceutical Ingredient (API) production to Europe. Spain, with established capabilities in Catalonia, Madrid, and the Valencian Community, is attracting relocation investment in this segment.
Tax Framework for Foreign Investors in Spain
Foreign companies investing in Spain through a Spanish legal entity have access to the general corporate income tax incentives, plus specific incentives applicable depending on the autonomous community where the investment is located. Key points are:
Corporate Income Tax rate. The general rate is 25%. Newly created companies apply 15% in the first two tax years with positive taxable income. SMEs with turnover below €1 million apply 23%.
R&D tax credits. The R&D tax credit under Article 35 LIS (25% of expenditure, 42% of the excess over the two-year average) is applicable to research activities carried out in Spain, regardless of whether the parent company is abroad.
Double taxation treaties. Spain has double taxation treaties with more than ninety countries. The correct choice of corporate structure — Spanish company with a shareholder in the country of origin — can minimise withholding tax on dividends, interest, and royalties.
Foreign Securities Holding Entity regime (ETVE). ETVEs allow multinational groups to manage participations in foreign companies from Spain with exemption on dividends and capital gains from those participations (Article 21 LIS), provided substantive activity requirements in Spain are met.
Establishment Process: Practical Steps
A foreign manufacturing company wishing to establish operations in Spain must complete the following steps:
- Choice of legal form (SL or SA) and incorporation before a notary.
- Tax registration with the AEAT (Form 036) and obtaining the NIF.
- Registration in the Foreign Investments Register of the Ministry of Economy (mandatory for investments exceeding €500,000 or from certain countries).
- Municipal activity licences and sector-specific licences (if the activity is regulated).
- Social Security registration and enrolment of the first employees.
- Application for ISO certifications (9001, 14001, IATF 16949 for the automotive sector) that are required for supplier qualification by many industrial clients.
The total time from investment decision to start of production ranges between twelve and twenty-four months for mid-size industrial plants, depending primarily on industrial land availability and environmental permit timelines.
At BMC, our operations team guides foreign manufacturers through the establishment process, tax planning, and ongoing business management in Spain. Learn about our business services.
