Overview

Free Zones (Zonas Francas in Spanish) as a legal concept have existed in Spain for over 150 years. The last couple of decades, however, have seen an unprecedented surge in new areas taking on this form, as municipalities and regional governments recognise them as major instruments for development. Today there are six Free Zones in Spain and 15 Free Deposits (Depósitos Francos). These Free Deposits act as import and export terminals exempt of taxation but where no industrial activity takes place.

By far the oldest and most influential Free Zone in the country is located in Barcelona. It was established in 1918 and is partly credited for the enormous economic development of the region in the 20th century, as it hosts a myriad of companies involved in the automotive, logistics and pharmaceutical sectors, including Nissan, SEAT, Bayer or DB Schenker. While technically the Free Zone of Gran Canaria had been in place since 1856, following a royal decree, Spain’s entry into the European common market in 1986 suspended the Free Zone status of the area.

In fact, as it happens all across the European common market, with the collapse of tax barriers within the European Union, most Free Zones lost some of its ability to attract investment, as they no longer provide fiscal advantages for exports and imports within the Union. The exceptions to this rule include the Azores and Madeira Free Zones, the Canary Islands and the port of Hamburg.

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The Gran Canaria Free Zone, which today concentrates a number of players in the shipping trade, wouldn’t be reinstated until 2000. In continental Spain, Cádiz Free Zone was established in 1933, today focusing on engineering services and chemical production among other industries. The Free Zone in Vigo has been operating since 1947, with a major focus today on information technologies.

At the dawn of the 21st century there were three Free Zones operating in Spain. Following the reinstatement of the Gran Canaria Free Zone, another one was created in Tenerife, also in the Canary Islands, turned to logistics and goods distribution to African and American markets, the archipelago’s geographical position off the west coast of Africa making it ideal for trade across the Atlantic. Tenerife was selected to host, in 2017, the 20st congress of the Association of Free Zones of the Americas.

Finally, in April 2016, the Free Deposit of Santander was granted Free Zone status, accessing a large area around the port for the establishment of new businesses. In 2015, the representatives of the Free Zones and Free Deposits came together to sign an agreement to follow a unified strategy to attract foreign investment into the country, which marked the first coordinated effort to promote Spanish Free zones internationally as a whole.

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In a parallel move, the city of Madrid, established, in 2012, the country’s only Urban Cultural Free Zone, in a bid to attract young professionals working in creative and cultural sectors and to boost Madrid’s profile as a hub for technological and creative industries. It is commonly not counted for purpose of the other Free Zones, focused on industrial development. Hence, today the Free Zone count in Spain remains at 6. That will not be for long, however. In early 2017 it was announced that the city of Seville will host, after many years of insistence, Spain’s 7th Free Zone, the only fluvial one. This has created issues with the city of Cádiz as analysts project a potential cannibalisation of the market due to the two Free Zones’ proximity. Alicante has been pushing for the creation of one in its area of influence as well, as these cities see Free Zones as major instruments for economic development and employment creation, in a country where unemployment rates remain at historic highs. Today, Free Zones in Spain cover an area of over 1200 square kilometres, a figure likely to grow considerably in the years to come.

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