How to set up a company in Spain as a foreigner: costs, steps and taxes
Setting up a business in Spain can be a highly lucrative venture for foreign entrepreneurs and expats. With its robust economy, strategic location, and vibrant markets, Spain offers numerous opportunities for establishing a thriving business. However, navigating through the intricacies of local regulations, tax requirements, and official procedures can often present a daunting challenge. This guide aims to provide a comprehensive walkthrough of the various steps involved in starting a company in Spain, easing the process for those unfamiliar with the local business environment. Whether you’re an entrepreneur taking your first steps or an experienced business person looking to expand, this guide is designed to navigate you through the complexities and offer you a clear path to successful business establishment in Spain.
Why set up a business in Spain?
Spain presents an attractive opportunity for foreign investors who want to start a company, with its business-friendly culture, diverse business options, and favorable geographical location. As the gateway to Europe for businesses from the United States, Central and South America, and Asia, Spain holds a pivotal global position.
Coupled with a strong economy and numerous growing sectors, the country offers a fertile ground for businesses to thrive. Additionally, Spain has the highest number of double-taxation avoidance agreements with other countries in Europe, making it an appealing destination for international entrepreneurs. The relative ease of navigating its bureaucracy compared to other European nations is another considerable advantage. However, many investors find themselves puzzled by the necessary steps to establish their company in Spain. This guide aims to unravel this process, providing a clear, step-by-step guide to successfully starting a business in Spain.
Who can start a business in Spain?
As a foreigner, anyone, regardless of their nationality, can set up a business in Spain. The country makes no distinction between EU and non-EU citizens when it comes to launching a business. Spain is enthusiastically seeking to attract foreign talent, thus making it a very attractive destination for foreign nationals looking to expand their business operations.
The lack of minimum investment requirements and the fewer formalities make starting a business in Spain an attractive proposition, more so than buying a spanish business. However, while there aren’t any specific financial requirements, it’s essential to have adequate funds to support your business operations.
What are the other requirements for opening a business in Spain for EU and non-EU citizens?
Requirements for EU citizens
Individuals who are fiscally resident in Europe and intending to establish a company in Spain or be appointed as a director must obtain a Número de Identificación Extranjero (NIE). This foreign identification number is issued by the Spanish Police. It serves as the Spanish tax code and is required whenever a foreigner signs a public document or interacts with the public administration.
If a partner in a Spanish company is a corporation based in another EU country, the legal representative of that corporation must obtain a NIE. Furthermore, the foreign corporation must secure a Número de Identificación Fiscal (NIF). This tax identification number starts with the letter “N” to signify that it has been assigned to a foreign company not established in Spain.
Requirements for non-EU citizens
Non-EU citizens face the same requirements as EU citizens for starting a business in Spain. They must obtain a Número de Identificación Extranjero (NIE) and a Número de Identificación Fiscal (NIF) if the shareholder is a foreign corporation.
It is important to note that incorporating a new company and obtaining work authorization are two separate processes. Non-EU citizens can incorporate a new company, but to legally work in Spain, they must obtain the appropriate work permit.
Non-EU citizens may be shareholders or even directors of a company. They can receive dividends from the company, but they cannot draw any salary unless they possess a valid work permit in the European Union.
Required documents for foreigners and expats to start a business and work in Spain include:
- A valid passport: This is required for identification purposes and to prove your nationality.
- A Número de Identificación Extranjero (NIE): This is the Spanish tax identification number for foreigners, necessary whenever a foreigner signs a public document or interacts with the public administration.
- A Número de Identificación Fiscal (NIF): If the shareholder is a foreign corporation, they must obtain this Spanish tax identification number.
- Proof of sufficient financial resources: Depending on the business type, you might need to demonstrate sufficient funds to cover your investment and operational costs.
- Business plan: A detailed plan outlining your business objectives, strategies, market research, and financial projections.
- Application for a work permit: If you intend to work in your business, you must apply for a work permit.
- Certificate of no criminal record: Issued by the authorities in your home country, this may be required depending on the nature of your business.
- Any required professional qualifications or accreditations: Some types of businesses require specific qualifications or accreditations.
Legal forms of business entities in Spain
When registering a company in Spain there is the possibility to choose between different legal structures, that determine the organizational and operational characteristics. These structures vary in terms of legal requirements, liability, and taxation. When it comes to incorporating a business, there are several options available, each with its own set of advantages and considerations.
On the one hand, incorporated businesses provide limited liability protection, while on the other hand, unincorporated businesses offer simplicity and flexibility. Here is a list of the main legal structures in Spain:
- Self-employed workers or autonomos in Spain
- Sole traders in Spain
- Partnerships in Spain
- Limited companies in Spain (SL)
- Stock corporations in Spain
- Branch office in Spain
- Subsidiaries in Spain
- Business cooperation in Spain
- Offshore company in Spain
- Non-profit company in Spain
Each structure has its own unique features and requirements, making it essential for entrepreneurs and businesses to carefully consider their specific needs and goals when choosing the most appropriate legal form for their venture.
Self-employed workers or autónomos in Spain
For those considering becoming self-employed, Spain offers the “autónomo” status. Becoming an autónomo, essentially a self-employed worker, can be a simpler and more flexible approach to starting a business in Spain, especially for solo entrepreneurs.
Autónomos are responsible for their own business dealings, and they directly reap what they sow without the need to establish a formal business entity. This status can be suitable for freelancers, independent contractors, or professionals who offer services directly to clients.
While the process of registering as an autónomo is simpler compared to establishing a limited company, it comes with its own set of obligations. These include paying social security contributions, filing income tax returns, and potentially charging VAT depending on the nature of your services.
The autónomo status offers a direct and straightforward way to start a business, particularly for those who want to maintain full control and flexibility over their work. However, it also involves personal liability, meaning that if the business faces financial difficulties, your personal assets may be at risk.
Sole traders in Spain
In Spain, a Sole Trader, similar to an autónomo, is an individual who operates their own business. Being a Sole Trader is one of the easiest ways to get started in business, as it requires fewer formalities than forming a company. Some advantages of this business structure include direct control over the business, low setup costs, and a simple taxation process.
However, one crucial point to remember is that a Sole Trader has unlimited liability. This means that in the event of business debts, your personal assets may be at risk. Therefore, if you’re considering becoming a Sole Trader, it’s essential to understand the financial risks involved and consider suitable insurance coverage to protect your personal assets.
Partnerships in Spain
Partnerships in Spain can take several forms, with the most common being the Civil Partnership (Sociedad Civil) and the General Partnership (Sociedad Regular Colectiva). In these types of entities, two or more people agree to share the profits and losses of a joint business venture.
A partnership allows for shared responsibility and potentially, a wider range of skills and resources. It can be an excellent choice for small to medium-sized businesses and professional services. However, partners in a general partnership have unlimited liability for the business’s debts, meaning their personal assets could be at risk if the business fails. Therefore, a comprehensive partnership agreement outlining roles, responsibilities, and dispute resolution methods is essential.
Limited companies in Spain (SL)
One of the most common types of business entities in Spain is the Limited Liability Company or Sociedad de Responsabilidad Limitada (S.L.). This business structure is appealing to many entrepreneurs due to its liability protection. In an S.L., the owners’ personal assets are typically protected from the company’s debts.
To form a spanish S.L., you’ll need a minimum share capital of €3,000. This type of company can be established by one or more individuals or legal entities, who do not necessarily need to reside in Spain. The company’s ownership is divided into shares, which cannot be publicly traded. This form of business structure is suitable for small to medium-sized enterprises (SMEs), and it’s one of the preferred forms for foreign investors due to its flexibility and limited liability.
Stock corporations in Spain
Another type of business structure in Spain is the Stock Corporation, known as Sociedad Anónima (S.A.). This type of business structure is designed for larger scale operations and thus requires a substantial initial capital investment. The minimum share capital required to form an S.A. is €60,000, of which at least 25% must be fully paid at the time of formation.
An S.A.’s ownership is divided into shares that can be freely transferred and can also be publicly traded on the stock exchange, making it an attractive option for larger companies seeking to attract investment through public equity markets.
The liability of the shareholders in a Sociedad Anónima (S.A.) is also limited to the capital contributed, providing a level of security to those investing in the business. This type of company is often chosen for large business enterprises due to its ability to raise capital easily through the issuance and trading of shares.
Branch office in Spain
A branch office, or “sucursal” in Spanish, is an option for foreign companies looking to extend their operations into Spain. However, establishing a branch office comes with its own set of unique requirements and challenges.
One of the primary requirements for establishing a branch office in Spain is having a fiscal representative in the country. This representative will be responsible for managing the branch’s dealings with the Spanish tax authorities and other official entities.
Despite the appeal of a branch office being an extension of the parent company, it does come with complications in terms of management and cost. The deductibility of expenses for a branch office differs from that of a Limited Company, which can potentially complicate financial management.
Consequently, before deciding to set up a branch office in Spain, it is highly recommended to thoroughly analyze the situation with a professional expert. This will ensure that the decision made aligns with the company’s goals and takes into account the financial and legal implications of such a move.
Subsidiaries in Spain
Setting up a subsidiary in Spain is often considered one of the best ways for foreign investors to start a business in the country. Unlike a branch office, a subsidiary operates as a separate legal entity from the parent company, offering the benefit of limited liability.
A subsidiary has the capacity to tailor its operations and strategies to the local market, offering a level of flexibility that can be advantageous for navigating Spain’s business landscape. It also enjoys more independence in its daily operations, while still receiving strategic direction from the parent company.
However, establishing a subsidiary in Spain requires careful planning and decision-making. Remember that every business is unique, and while a subsidiary may be the preferred choice for many, it is essential to assess your specific business needs, objectives, and risk tolerance before deciding on the right business structure in Spain.
Business cooperation in Spain
In Spain, apart from traditional business structures, two common forms of business cooperation are Joint Ventures and Interest Groupings.
- Joint Venture: A Joint Venture (JV) is a business agreement where two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a JV, each participant is responsible for profits, losses, and costs associated with it. However, the venture is its own entity, separate from the participants’ other business interests.
- Interest Grouping: Also known as Economic Interest Grouping (EIG), these are collaborations created by companies in the same industry who wish to cooperate in a specific area of their businesses while maintaining their individual legal statuses. These alliances are flexible and designed to improve the operational efficiency of each member. They can involve activities like joint research, marketing, or distribution of products.
These forms of business cooperation allow companies to share resources, minimize risks, and increase their competitive advantages. However, they require careful planning, clear communication, and thorough contract drafting to ensure all parties understand their rights, responsibilities, and the scope of the cooperation.
Offshore company in Spain
Offshore companies in Spain, as they are commonly understood, are not permitted. Spain has stringent regulatory requirements that make the operation of what is typically understood as an “offshore company” (that is, a business entity incorporated in a jurisdiction different from where its main operations are based, often with the intent to enjoy more favorable tax conditions) difficult.
When considering doing business in Spain with a company incorporated in a so-called “offshore jurisdiction“, it is important to note that there can be serious complications. These include regulatory scrutiny, potential public perception issues, and problems with banking relationships due to international “know your customer” (KYC) and anti-money laundering (AML) requirements.
However, it’s important to highlight that there are alternative structures within Spain’s legal framework which allow for a certain degree of privacy without appearing in the Public Registry. These require careful planning and advice from experienced legal and tax advisors to ensure compliance with all local laws and regulations. Potential business owners interested in this approach should seek out comprehensive advice to make sure their operations in Spain are compliant, efficient, and effective.
Non-profit company in Spain
Non-profit organizations, or NPOs, also play a significant role in the Spanish business landscape. Spain allows the establishment of various types of non-profit organizations, including associations, foundations, and cooperatives. These organizations are primarily regulated by the Associations Law, Foundations Law, and the Cooperatives Law, respectively.
NPOs typically have tax advantages in Spain, provided they meet certain requirements, such as pursuing activities of general interest. Their income must be used primarily for their corporate purpose and cannot be distributed to their members or founders. Furthermore, they must operate in a transparent manner and comply with specific accounting and reporting obligations.
Associations can be created by any group of individuals or corporations who collectively decide to pursue a non-profit purpose. Foundations, on the other hand, are created by one or more persons who dedicate a portion of their assets to a non-profit purpose.
Cooperatives in Spain can engage in economic activities, but they follow a special democratic governance structure, and their primary purpose is to serve the needs of their members rather than generating profits. They also enjoy specific tax advantages. Establishing a non-profit organization in Spain can be a suitable option for those wanting to create social value and contribute positively to the community while taking advantage of the various benefits provided to these types of entities under Spanish law.
Finding the right business idea
Finding the right business idea is a critical step before setting up a company, in Spain as in any other country. It requires thorough research, market analysis, and a deep understanding of consumer needs. The right business idea should align with your personal skills and interests and have a potential market to tap into.
Spain, with its dynamic and diverse economy, provides a fertile ground for a variety of businesses. While traditional sectors such as tourism, agriculture, and manufacturing continue to thrive, there are emerging sectors showing significant growth and offering exciting opportunities for entrepreneurs.
Here are some sectors in Spain currently witnessing expansion:
- Technology and Digital Services: As in most parts of the world, the technology sector in Spain is booming. There are ample opportunities in software development, e-commerce, digital marketing, cybersecurity, and more.
- Renewable Energy: Spain is one of the leaders in renewable energy, particularly in solar power. The government’s commitment to sustainability and clean energy presents numerous opportunities in this sector.
- Healthcare and Biotechnology: Spain’s strong healthcare system and focus on research and development have made it a hotbed for biotechnology and healthcare startups.
- Agri-Tech: Spain’s robust agriculture sector is increasingly being influenced by technology. Businesses that can offer innovative solutions to enhance productivity and sustainability in agriculture have significant potential.
- Real Estate: After recovering from the financial crisis, the real estate sector in Spain has been steadily growing. This includes both residential and commercial real estate, as well as property management services.
- Tourism and Hospitality: Despite the impact of the pandemic, the tourism and hospitality sector in Spain remains a major part of the economy. Innovative and unique business ideas catering to tourists can still find a thriving market.
Remember, the key to finding the right business idea is not just about identifying a growth sector, but also finding a niche within that sector where your particular skills and offerings can stand out.
How to obtain a Business Visa in Spain
A business visa in Spain is designed for individuals who intend to engage in business activities in the country.
There are two primary types of business visas: the entrepreneur visa and the self-employed worker visa.
This visa is intended for individuals who plan to undertake an entrepreneurial project that will be developed in Spain and is deemed to be of interest for the Spanish economy.
To apply for an Entrepreneur Visa:
- You must have a viable business plan, which includes an outline of the project, its feasibility, market analysis, and potential job creation among others.
- You must have sufficient economic resources to support yourself while living in Spain and funding the business project.
- You should not have a criminal record, and you must be free of any diseases as stipulated in the International Health Regulations.
- This visa, and the associated residency permit, allows you to live and work in Spain for one year.
Self-Employed Worker Visa
This visa is for individuals who intend to practice a profession or trade on their own. You’ll need to demonstrate that you have the necessary qualifications and licensing, where appropriate, for the profession or trade in question. You’ll also need to show that you have the financial resources to support yourself and finance your business activity.
Both visas are granted under the Organic Law 4/2000 of 11 January, on Rights and Freedoms of Foreigners in Spain and their Social Integration, the Royal Decree 557/2011 of 20 April, approving the Regulation of Organic Law 4/2000 on the Rights and Freedoms of Foreigners in Spain and their Social Integration, following its amendment by Organic Law 2/2009, and Act 14/2013 of 27 September, on Support for Entrepreneurs and their Internationalization.
Remember to always consult with a legal expert or a consulate/embassy official to understand the specific requirements and procedures as they apply to your personal situation.
The steps to start a business in Spain as a foreigner
Starting a business in Spain as a foreigner is a process that, fundamentally, is no different than for a Spanish citizen. It involves a series of steps that ensure you establish a legal and operational entity. This list below provides an overview of these steps:
- Obtain a Foreigner’s Identification Number (NIE).
- Decide on the legal form of your business (e.g., sole trader, limited company).
- Register your company name.
- Write a business plan.
- Open a bank account for your business and deposit required initial capital.
- Notarize your company’s constitution.
- Register for the Spanish Tax Agency (Agencia Tributaria).
- Register for the Social Security System.
- Obtain any necessary licenses or permits for your specific business.
Each of these steps carries its own set of requirements and processes which we’ll explore in detail in the following paragraphs. Keep in mind that while the steps are essentially the same for both locals and foreigners, non-EU/EEA/Swiss citizens will also need to secure the appropriate visa or permit to live and work in Spain.
Are you interested in starting a business in Spain? Lawants can assist you
Obtaining the NIE number
The NIE (Número de Identificación de Extranjero) is a Foreigner’s Identification Number assigned by the Spanish authorities to any non-Spanish resident for legal activities in Spain. This number is mandatory for all foreigners with financial, professional, or social affairs in Spain, irrespective of whether they are a resident or non-resident in Spain.
Here is a simplified process of obtaining your NIE:
- Application: You can apply for an NIE number at a Spanish embassy or consulate in your home country, or, if you are already in Spain, at a local police station that has a Foreigners’ Department (Oficina de Extranjeros).
- Documentation: Along with the completed application form (EX-15), you’ll need to provide your passport (original and copy), two passport-sized photographs, and evidence supporting your reason for needing an NIE number, which could be a purchase contract for a property, a job contract, etc.
- Fee Payment: There’s a small fee that must be paid at a Spanish bank using the 790 NIE form. After payment, the bank will stamp the form, which you need to present as proof of payment.
- Collection of NIE: Depending on the office, your NIE number may be issued on the spot, or you may have to return to collect it at a later date.
Please note: the process can vary from region to region and based on your personal circumstances. Hence, it’s always recommended to check the specific requirements with the Spanish consulate or embassy in your home country before starting the process.
Registering your company name
Choosing the right name for your company is not just a branding exercise, but it’s also a vital legal step in the process of setting up a business in Spain. The name of your company must be unique and not be too generic, common, or similar to an already established company.
Follow the steps below to register your company name in Spain:
- Create a List of Names: Before starting the registration process, prepare a list of up to five potential company names. This is important because the Mercantile Registry (Registro Mercantil) will check the availability of the names in the order you list them.
- Request for Name Verification: You need to submit your list to the Central Mercantile Registry (Registro Mercantil Central or RMC) for verification. This can be done in person, by mail, or online. The RMC will check if any of your proposed names coincide with or are too similar to existing companies.
- Certificate of No-name Coincidence: If one of your proposed names is available and accepted, the RMC will issue a Certificate of No-name Coincidence (Certificación Negativa de la Denominación Social). This certificate confirms that your chosen name doesn’t coincide with any existing company names in Spain.
- Registration: The certificate is valid for three months and should be included in the documents when you formally establish your company.
- Reservation of the Name: You can also choose to reserve the name for up to 2 years by paying a small fee. This might be beneficial if you’re not ready to establish your company immediately.
Remember that it’s essential to carefully consider the names you propose to ensure they meet the legal requirements and reflect your business’s nature and mission.
Opening a business bank account in Spain
Opening a business bank account in Spain is an important step in setting up a business, and it involves several stages. Here are the key steps:
- Choose a Bank: When starting a business in Spain, the choice of bank is important. Our firm has excellent relationships with Banco Sabadell and Banco Santander, two of the largest and most trusted banks in Spain. Working with these banks allows us to expedite the account opening process and ensure that your documentation is managed efficiently.
- Prepare Required Documents: Once you have chosen a bank, the next step is to gather the necessary documents. These usually include:
- Certificate of no-name coincidence from the Central Mercantile Registry (Certificado Negativo del Registro Mercantil Central), which confirms your company name is unique.
- NIE (Foreigner Identification Number) for all company directors and shareholders.
- Proof of address, like a utility bill or lease agreement.
- Identification documents (passport or ID card).
- A business plan or a brief description of the business, including the expected annual turnover.
- Visit the Bank: Once all the documents are prepared, you will need to visit the bank branch to open your account. We recommend scheduling an appointment in advance to ensure a smooth process. Our firm can assist you in this stage due to our established relationship with Banco Sabadell and Banco Santander.
- Initial Deposit: Depending on the bank and the type of account, you might be asked to make an initial deposit. The amount varies but it could range from a few hundred to several thousand euros.
- Account Activation: After your documents have been verified and the initial deposit made, the bank will activate your account. You will then receive your account number, online banking details, and other relevant information.
By working with us and our partner banks, Banco Sabadell and Banco Santander, we can help ensure a streamlined and efficient process to open your business bank account in Spain.
Establishing the shareholders
Establishing the shareholders is a crucial step in setting up a business in Spain. This is when you determine who the owners of the company are and their respective shares. It’s also the point where you set out the framework for how decisions will be made and disputes resolved.
Here’s a step-by-step guide to establishing shareholders:
- Identify Shareholders: First, identify who will be the shareholders of the company. Shareholders can be individuals or other companies. In addition to their names, you’ll also need their contact information and their NIE numbers (Foreigner Identification Number) if they are foreigners.
- Determine Share Allocation: Next, decide on the allocation of shares. This will determine the ownership percentage of each shareholder. The allocation should reflect each shareholder’s contribution to the company, whether in terms of cash, assets, or effort.
- Prepare a Shareholders Agreement: Once you’ve identified the shareholders and their share allocation, it’s a good idea to prepare a shareholders’ agreement. This is a contract between the shareholders that outlines their rights and responsibilities, as well as how the company will be managed. A well-drafted shareholders agreement can help prevent disputes and ensure the smooth running of the business.
- Formalize Shareholders in the Company Statutes: Finally, the details of the shareholders and their respective share allocations must be formalized in the company’s statutes. These are legal documents that form part of the company’s constitution and must be registered with the Mercantile Registry.
Remember that establishing shareholders is not a one-time process. As the company grows and evolves, new shareholders may be added, or the allocation of shares may change. Therefore, it’s important to regularly review and update your shareholders’ agreement and company statutes as necessary.
Deed of incorporation
The Deed of Incorporation is a critical document for starting a business in Spain. This legal document declares the intention of the shareholders to establish a company and includes information such as the company’s name, location, purpose, amount of capital, and details about the shareholders and directors.
Here’s a brief guide on how to prepare and register the Deed of Incorporation:
- Preparation: The preparation of the Deed of Incorporation requires accurate and complete information about the company and its shareholders. Make sure that the company’s purpose is clearly stated and that the share capital is clearly divided among the shareholders.
- Documents Required: Essential documents include the company’s certificate of no-name coincidence from the Mercantile Registry, proof of the deposit of share capital in a business bank account, and the shareholder agreement, if applicable.
- Notarization: After the deed is prepared, it must be notarized by a Spanish notary. Notarization gives the document legal validity. The notary ensures that all the parties understand the agreement and that the document complies with Spanish law.
- Registering with Local Tax Authority: Following notarization, the Deed of Incorporation needs to be registered with the local tax authority. This is done by presenting the notarized Deed of Incorporation, along with a copy of the tax identification number (NIE for foreigners), to the local tax office. A form known as Form 600 needs to be filled out and submitted.
- Registration with the Mercantile Registry: Finally, the notarized Deed of Incorporation should be submitted to the Mercantile Registry in the province where the company is located. Once the Mercantile Registry approves, the company is officially incorporated.
Always consider seeking advice from a professional such as a lawyer or tax consultant to ensure all steps are properly handled. This process involves legal and fiscal responsibilities that, if overlooked, can lead to complications in the future. LaWants can assist you to prepare and register the Deed of Incorporation.
Obtaining your tax ID number (CIF)
The CIF, or “Código de Identificación Fiscal”, is the tax identification number in Spain for businesses. It’s the equivalent of the NIE, but for companies. It’s crucial for paying taxes, invoicing, and other administrative tasks in Spain. Here’s how you can obtain your CIF:
- Preparation: You’ll need a copy of the Deed of Incorporation (escritura de constitución) of your company, which should have been notarized and registered with the Mercantile Registry. In addition, you’ll need to prepare a document stating the company’s address and business purpose.
- Submit Application: You’ll have to fill out and submit the Form 036 to the Spanish Tax Agency (Agencia Tributaria). This form can be obtained from the agency’s website or office. The form requires information such as the company’s name, address, business purpose, and the details of the legal representative.
- Proof of Identity: The legal representative of the company must present their NIE number (if a foreigner) or DNI (if a Spanish citizen).
Once you’ve submitted these documents and the application form, the Spanish Tax Agency will issue the CIF for your company. This process is generally completed quickly, and you can start using your CIF for business operations immediately after receiving it.
Registering with social security
Registration with Social Security in Spain is crucial for any business, as it provides benefits and coverage to employees. Here’s a brief guide on how to do this:
- Gather Required Documentation: You’ll need your CIF (Company’s Tax ID), the notarized Deed of Incorporation, and your personal NIE (if you’re a foreigner) or DNI (if you’re a Spanish citizen).
- Fill Out the Application Form: The form TA.6 is the one you need to complete to register a company with the Spanish Social Security system. This form can be found on the website of the Spanish Social Security (Seguridad Social). It will ask for details about the company, including its name, address, and type of business, as well as information about the legal representative.
- Submission: Submit the filled application form along with the necessary documents at the nearest Social Security office.
- Obtain the Código de Cuenta de Cotización: After processing your application, the Social Security office will provide you with a Código de Cuenta de Cotización (CCC), an account code. This CCC is unique for your company and will be used to affiliate and register employees to the Social Security system.
Once this process is complete, your company will be registered with the Spanish Social Security system, which is necessary for hiring employees and providing them with benefits and coverage.
How much does it cost to start a business in Spain?
The costs associated with starting a business in Spain can vary greatly depending on the type of business, the specific services needed, and the professionals involved in the process. However, some general costs to consider include:
- Company Formation: Depending on the type of business entity, formation costs can range from a few hundred to several thousand Euros. This includes notary fees, mercantile registry fees, and a mandatory minimum share capital for certain types of companies (e.g., €3,000 for a Sociedad Limitada).
- Legal and Professional Fees: Working with lawyers, accountants, and business consultants can be crucial for navigating Spanish business regulations and the local market. Costs for these services can vary significantly based on the complexity of your business and the level of ongoing support needed.
- Business Premises: The cost of renting or buying business premises depends on the location and size of the property.
- Licenses and Permits: Depending on the nature of your business, you may need specific licenses or permits, the costs of which can vary.
- Employee Costs: If you plan to hire employees, you will need to budget for wages, social security contributions, and other potential costs like recruitment and training.
- Taxation: Businesses in Spain are subject to various taxes, including corporation tax, VAT, and local taxes.
Costs of starting a sole trader in Spain
Starting a business as a sole trader in Spain is not particularly expensive, but it is crucial to have professional guidance from a firm of lawyers and accountants to avoid any issues with the Spanish Tax Agency (Agencia Tributaria), especially in the beginning and for the first few months. Here are the basic costs:
- Registration Fee: Although there’s no official fee for registering as a sole trader (autónomo), you may need to pay for professional assistance during the registration process. This cost can vary depending on the service provider.
- Social Security Contributions: Sole traders are required to make monthly Social Security contributions. The minimum base rate for 2023 is around €283.30 per month, although new sole traders are eligible for a reduced rate of around €60 per month for the first 12 months under the flat rate scheme (tarifa plana).
- Income Tax (IRPF): Sole traders are subject to the Personal Income Tax. They are required to pay this quarterly, and the rate varies depending on the profit earned.
- IVA (VAT): If your business activities are subject to VAT, you will need to charge your clients VAT and declare it quarterly.
- Professional Assistance: As noted above, having professional guidance is crucial for navigating the legal, accounting, and tax landscape in Spain. The cost of this assistance varies depending on the service provider.
Remember, the actual costs may vary depending on your business activities, location, and personal circumstances.
Costs of starting a limited company in Spain
Setting up a limited company, Sociedad Limitada (S.L.), in Spain, involves several types of costs. Here is a general breakdown:
- Minimum Share Capital: A limited company requires a minimum share capital of €3,000. This amount must be deposited in a bank account specifically opened for the company.
- Notary Fees: The company’s deed of incorporation must be notarized, which can cost between €600 and €800 depending on the complexity of the statutes.
- Registration Fees: Registering the company with the Mercantile Registry costs approximately €200 to €400.
- Legal and Professional Fees: The costs here vary greatly as they depend on the complexity of the company formation and the identity of the shareholders. If the shareholders are foreign companies, legalized documents and certified translations might be needed. These costs can be minimized by working with a team like Lawants, who aim to optimize costs and provide the best possible service.
- Administrative Fees: There are small additional costs for obtaining a tax identification number (CIF), registering for VAT, and other administrative procedures.
Remember, these are just the initial setup costs. Running a company will also incur ongoing costs such as taxes, accounting, payroll, and potential regulatory fees depending on the nature of your business.
Administrating a business in Spain
The administration of a business in Spain is a significant responsibility that requires maintaining proper account records and complying with government regulations.
Every company must keep a detailed record of their financial transactions and hold onto these records for a minimum of six years. This includes all receipts, invoices, payroll records, and any other documents related to the business’s income and expenses. These records are crucial as they form the basis for the company’s annual accounts, tax returns, and other reports.
Businesses in Spain are subject to scrutiny from various government entities, including the Tax Agency (Agencia Tributaria), Social Security, and the Mercantile Registry. These institutions periodically review businesses for compliance with tax obligations, employment laws, and company law requirements. Therefore, it is crucial to ensure that all administrative tasks are carried out accurately and on time.
Interestingly, it’s not necessary for the company’s administrator to be physically present in Spain for the proper management of the company. However, the Spanish Tax Agency requires a local administrator for the granting of the VIES (Registro Operadores Intracomunitarios), which allows for tax-free intra-community operations.
Taxation for businesses in Spain
Understanding the spanish taxation system is crucial for any business operating in Spain. Here are some key points:
- Social Security: All businesses need to register with the Social Security General Treasury. The company is responsible for paying social security contributions on behalf of its employees. The amount depends on the type of employment contract and the worker’s professional category.
- Value Added Tax (VAT): In most cases, businesses must charge VAT on goods and services they sell or provide. The standard rate is currently 21%, but reduced rates of 10% and 4% apply to certain goods and services. It’s essential to submit VAT returns quarterly and make any necessary payments.
- Corporate Tax: Spanish-resident companies are subject to Corporate Income Tax (CIT) on their worldwide income. As of my knowledge cut-off in September 2021, the standard CIT rate is 25%, but different rates may apply in certain situations.
- Tax Breaks: Various tax breaks and incentives are available depending on the type of business, location, and specific activities. These can include deductions for research and development, hiring certain types of employees, and investing in fixed assets.
- Tax Filing: Spanish companies are required to file an annual corporate tax return, even if they have not carried out any activities or generated income during the tax year. It’s also necessary to file informational returns regarding the company’s operations and transactions.
It’s important to note that this overview is general, and specific situations may involve additional taxes or obligations. Given the complexities of Spanish tax law, it’s recommended to consult with one of our tax professional consultants to ensure all tax obligations are met.
Business insurance is a critical part of managing risk for any company operating in Spain. Its purpose is to protect the business and its assets from various risks such as property damage, legal liabilities, and employee-related risks.
Who needs it? Every business, regardless of its size or industry, can benefit from some form of business insurance. Specific requirements can depend on the nature of your business, the industry you operate in, and whether or not you have employees.
There are different types of Insurance Policies:
- Liability Insurance: This covers legal costs and payouts if your business is involved in a lawsuit. This is crucial if your company interacts with customers or clients regularly.
- Property Insurance: This covers damage to business property from events like fire, theft, or natural disasters. It’s essential if you own physical assets like buildings, equipment, or inventory.
- Workers’ Compensation Insurance: This covers medical costs and a portion of lost wages if an employee gets injured or sick from work-related activities. This is mandatory if you have employees in Spain.
- Professional Indemnity Insurance: This covers your business if a client claims that your professional advice caused them financial loss.
- Product Liability Insurance: This covers your business if a product you sell causes harm to a customer.
Remember, the specific types and level of insurance required can vary greatly depending on the nature of your business.
Employing staff for your company in Spain
Employing staff in Spain involves familiarizing yourself with specific employment regulations to ensure compliance. This includes understanding the minimum wage, fundamental employment rights, and provisions around termination of employment:
- Employment Regulations: Spanish labor law covers a wide range of protections for employees, including maximum working hours, paid leave, and job security.
- Minimum Wage: The government sets the minimum wage in Spain annually, with all employers obliged to pay at least this amount to their employees.
- Employee Rights: Among the fundamental rights of employees in Spain are the right to a safe work environment, non-discrimination at work, and privacy rights. They are also entitled to paid annual leave and maternity/paternity leave.
- Termination of Employment: In Spain, an employer can terminate an employee’s contract at any time, even without a just cause. However, in such a case, a severance pay is due to the employee, equivalent to 33 days of salary per year worked, with a cap defined by the law.
Bear in mind that this is just a brief overview. Spanish employment law is comprehensive, and it’s vital for employers to stay updated with changes.
How to cover the costs of starting a business in Spain
Starting a business in Spain, like anywhere else, involves incurring a variety of costs. However, there are multiple ways available to fund your business startup in Spain. Some common methods of funding include personal savings, loans from financial institutions, angel investors, venture capital, crowdfunding, and government grants. Let’s take a brief look at each of these funding methods:
- Personal Savings: This is the most straightforward method. It involves using your own personal funds to finance your business. It gives you full control over your business but also places all the financial risk on you.
- Loans from Financial Institutions: This includes loans from banks or other lending institutions. You’ll typically need to provide a business plan and demonstrate the potential profitability of your business to secure such a loan.
- Angel Investors: These are individuals who provide capital for a business startup, usually in exchange for convertible debt or ownership equity.
- Venture Capital: Venture capitalists are firms or funds that invest in companies with high growth potential. In return, they typically demand equity in the company.
- Crowdfunding: This involves raising small amounts of money from a large number of people, usually via the internet. It’s a popular option for many startup businesses.
- Government Grants: Various local and national government bodies offer grants to promote entrepreneurship and stimulate the economy. These often have strict criteria and require a detailed application.
Each of these methods has its own pros and cons, and the best option will depend on your specific circumstances, the nature of your business, and your personal preference.
A bank loan is a sum of money lent by a financial institution to an individual or a business, which must be paid back with interest over a predetermined period of time. Banks in Spain offer different types of loans including term loans, lines of credit, or overdraft services.
Bank loans are most suitable when you have a clear business plan and a solid revenue projection, as banks typically base their decisions on these factors. This form of financing can be particularly useful for established businesses looking to expand, or for start-ups with a strong business plan and market potential.
One of the primary advantages of a bank loan is the ability to spread the cost of large purchases over time, which helps to maintain cash flow. Furthermore, if the loan is used for business purposes, the interest paid on the loan is often tax-deductible.
However, it’s important to remember that securing a loan from a bank requires careful planning. You will need to demonstrate that your business is capable of repaying the loan, and failure to do so could result in significant financial consequences. You will likely need to provide collateral, or a personal guarantee, which can be at risk if repayments are not made
Credit company loan
A credit company loan is a form of financing provided by non-banking financial institutions or private lending companies. These entities, unlike traditional banks, may provide more flexible loan options or cater to business owners who might not qualify for traditional bank loans.
These loans can be suitable for businesses in a variety of situations. For instance, businesses with less than stellar credit scores, those that are newly established, or those lacking collateral might find it easier to secure a credit company loan.
Moreover, these companies may provide funding more quickly than traditional banks, which can be beneficial for businesses in need of immediate funding.
Credit company loans come in various forms, including business lines of credit, merchant cash advances, and invoice financing. Each type of loan has its own set of terms and conditions, and it’s crucial to fully understand these before entering into an agreement.
While credit company loans can provide much-needed capital, they often come with higher interest rates compared to bank loans due to the increased risk the lender is taking on. Therefore, they are typically most suitable for businesses that have been turned down by banks and have an urgent need for funding.
Investors refer to individuals, companies, or entities that allocate capital with the expectation of receiving a return on their investment. This return typically comes in the form of profits, dividends, or increased value over time. The main types of investors relevant to businesses include angel investors, venture capitalists, and private equity firms.
- Angel Investors: These are typically affluent individuals who provide capital for a business start-up, usually in exchange for convertible debt or ownership equity. Angel investors can be a suitable source of funding for early-stage businesses or start-ups that may not yet qualify for traditional bank loans or larger scale venture capital funding.
- Venture Capitalists (VCs): Venture capital firms invest in start-ups and small businesses that are believed to have long-term growth potential. VCs often take a hands-on approach, sometimes acquiring seats on the board of the companies they invest in. This form of investment is most suitable for businesses that have a proven business model and are poised for significant growth.
- Private Equity Firms: These firms invest in mature businesses, often taking significant or total control of the company with the goal of improving its performance and later selling it for a profit. This type of investment is more relevant for established businesses seeking a significant capital influx for expansion or restructuring.
Investor funding can provide substantial amounts of capital for growth and expansion. However, it usually involves giving up some degree of control over the business. Therefore, it’s most suitable for entrepreneurs who are open to external input and are willing to share ownership and decision-making authority in their business.
Shareholders, also referred to as stockholders, are individuals or institutions that legally own shares of stock in a public or private corporation. Shareholders are important for businesses as they provide capital that can be used to grow and expand the business. In return, shareholders gain a claim on a part of the company’s assets and profits, proportional to the number of shares they own.
There are two main types of shareholders:
- Common Shareholders: These shareholders own common shares in the company, giving them the right to vote at shareholders’ meetings and to receive dividends, which are portions of the company’s profits distributed to shareholders.
- Preferred Shareholders: Preferred shareholders have a higher claim on dividends than common shareholders. They receive dividends before common shareholders and have a fixed dividend rate. However, preferred shareholders typically do not have voting rights in the company.
Attracting shareholders can be an effective way to raise capital, especially for businesses that are ready to go public or already are. This funding strategy is suitable for companies that have a strong business plan and the potential for profitable growth, which would attract shareholders looking for a return on their investment.
However, obtaining funding through shareholders means sharing a portion of the company’s profits and sometimes relinquishing some control over the company, as common shareholders usually have voting rights on corporate matters. Therefore, this funding option is most suitable for those comfortable with sharing decision-making authority and profit.
What are the risks of starting a business in Spain?
When considering starting a business in Spain, it is essential to be aware of potential risks and challenges.
One of the primary risks is not finding a proficient law firm. It is important to note that for historical and cultural reasons, the quality of professional services in Spain can sometimes be subpar. Foreign entrepreneurs, in particular, need specialized attention which not all firms can provide. As a foreign client, your profile is unique and requires an understanding of international business that some local professionals may not possess.
Furthermore, it is essential to be cautious about engaging with “gestorias,” or administrative agencies. While these agencies can handle certain tasks, they often lack the comprehensive legal and business expertise a professional law firm can offer. This lack of comprehensive service can potentially lead to unnecessary challenges and complications in setting up and running your business.
We recommend asking potential legal professionals about their team composition, their experience, the technological tools they use, and the type of clients they typically serve. This information will provide a clearer picture of their ability to cater to your specific needs as a foreign client. While the business environment in Spain can be highly advantageous and lucrative, it is not without its challenges. Engaging with the right professional services can significantly mitigate these risks, helping to ensure a smooth transition and successful business operations in Spain.
Pros and cons of starting a business in Spain
So, should you set up a company in Spain? We believe every business should have an office in Spain, for its many advantages, but of course there are some cons. Starting a business in Spain offers the advantage of a well-diversified economy, access to the European Union market, and a relatively skilled labor force. The country also boasts a good quality of life, which can attract international talent. However, entrepreneurs may face challenges such as bureaucratic red tape, high tax rates, and rigid labor laws that make hiring and firing complicated. Additionally, Spain has been historically susceptible to economic volatility, which could impact the stability of a new business.
Legal advice for starting a business in Spain
When it comes to starting a business in Spain, one cannot overstate the importance of competent legal counsel. This is where Lawants comes in. Our firm offers comprehensive services to guide you through each step of the business establishment process.
With our deep understanding of both local and international business landscapes, we’re well-equipped to assist foreign entrepreneurs and companies navigate the complexities of Spanish business law. Our team of experienced professionals can offer tailored advice and efficient solutions to meet your unique needs.
In addition to company formation, we also provide services related to tax planning, labor law, and property law, to name a few. Our goal is to provide you with the confidence and support you need to launch and grow your business successfully in Spain.
Working with Lawants means having a trusted partner who understands the intricacies of your business. This understanding, coupled with our legal expertise, allows us to offer high-quality services that will help you mitigate risks and maximize opportunities. When you choose Lawants, you’re choosing a firm that’s as committed to your success as you are.