TYPES OF GUARANTEES
Below, we outline the main surety bonds offered by Get Involved.
Renewable energies
Their function is to provide guarantees to the Administration for the reservation of connection capacity. They are essential for requesting access to a connection point on the grid, as part of the process of developing a renewable energy plant:
- Connection Point or Grid Access Guarantees for Wind, PV, or Batteries.
- Guarantees for Hybridizations with Wind, PV, or Batteries.
- Guarantees of compliance with EPC Contracts (between private parties).
- Guarantees for the execution of common infrastructures (AIE-Developers).
- Other types of guarantees: PPA guarantees, deferral or installment payment of ICIO (construction tax), guaranteeing land leases for the construction of parks, etc
Between private parties
These guarantees ensure compliance with contractual obligations between companies. Their function is to increase security in commercial transactions and contract compliance. This area includes EPC (Engineering, Procurement, and Construction) contract performance guarantees, which are very common in the renewable energy sector; rental guarantees to back up the tenant’s obligations; delivery deadline performance guarantees; and other types of guarantees that ensure the fulfillment of commercial commitments between companies.
Tax deferral
These are submitted to the Tax Agency to guarantee the timely payment of taxes, such as the Tax on Construction, Installations, and Works (ICIO), Corporate Income Tax (IS), or Value Added Tax (VAT). They provide assurance to the Tax Agency that taxes will be paid as stipulated, allowing taxpayers to manage their tax obligations more flexibly.
Judicial guarantees
These guarantees allow for the suspension of enforcement proceedings and enable appeals against unfavorable rulings. They remain in effect until a judicial ruling is issued that brings the proceedings to an end. They provide protection to the appellant while the case is being resolved in court, ensuring that no irreversible effects occur while the legal dispute is ongoing.
Other guarantees
Final guarantees are required by the public sector for all tenders, as stipulated by law in the tender specifications. Companies are therefore legally obliged to provide a guarantee equivalent to a percentage of the contract value. The term of the insurance contract shall coincide, at least, with the term of the guaranteed obligation.
Within this category, we can find the following special subgroups:
- Concessions: These guarantees are long-term, with periods that can extend to 20, 30, 40, 50 years, or more.
- Urbanization: These are guarantees required by local authorities for projects in the “urbanization” phase. These guarantees are linked to obtaining a building permit.
- Advance payment: This type of guarantee is used when the successful bidder for a project requests an advance payment from the Administration on the budget awarded for materials. In this case, the surety bond guarantees that the materials supplied to the contractor will be used in the execution of the contract as stipulated therein, as well as the correct application of the advance payment to the works in question.
These guarantees are intended to ensure that the company maintains its bid for the tender for a specified period. These are short-term guarantees, typically valid for around 3-4 months. They are canceled in two main situations: when the successful bidder must submit the final guarantee or when the work or contract is not awarded to them. Their purpose is to give the tendering entity (usually public bodies, although there are also private tenders) confidence that the company will maintain its bid during the tender process.
The purpose of these bonds is to ensure that, at the end of the period of activity of a mining or quarrying operation, the natural environment is restored to its original state. The public administration requires guarantees to ensure the rehabilitation of the natural environment that may be affected by industrial activity, and therefore requires environmental restoration or protection bonds.
The Customs Authority requires the provision of a guarantee corresponding to the amount of import or export duties and other taxes. In certain transactions, goods enter the country of destination but are then re-exported after a period of time, and the importer prefers not to pay the taxes in advance. In these cases, a customs bond is requested to replace the payment of import or export duties.
This bond assures customs of the payment of outstanding taxes in the event that the goods do not leave the country for any reason. This practice is accepted by customs authorities in many countries as an alternative to immediate payment of taxes at the time of import or export.
Guarantees in this context imply the liability of TEAs for possible debts arising from compensation, wages, and Social Security contributions that may arise as a result of their activity as Temporary Employment Agencies. These guarantees are a crucial component in ensuring compliance with the labor and social obligations associated with temporary employment.
The deposit guarantee protects home buyers’ advance payments for the purchase of their homes in the event that the developer fails to complete the construction or meet the agreed delivery deadlines.
This guarantee is an essential requirement when developing a housing project, as it offers security and protection to buyers against possible breaches by the developer. In this way, buyers can rest assured that their investments will be protected in the event of any eventuality during the construction and delivery process.
