Guidelines for Setting Up a Business in Spain
Published by Hector Lopez
Opening a new business in a foreign country can be a nerve-wracking proposition. However, getting your head around the key regulations and implications of setting up shop can help give you a head start and boost your chances of success.
Who can start a business in Spain?
Starting a business in Spain doesn’t always need to be an arduous process. Depending on the type of company you are setting up, however, you might find the journey somewhat bureaucratic and long-winded.
EU citizens setting up as sole traders or partnerships can jump through the required hoops relatively quickly. It’s a different matter, though, for people from outside of the EU; they will require a work permit to move to Spain and set up a business.
With a range of different business structures available, setting up a limited company can be both time consuming and expensive. This is largely due to the Spanish government invoking minimum financial requirements for those looking to incorporate in Spain.
Legal structures for businesses in Spain
Self-employed workers in Spain
Self-employed workers in Spain are commonly known as autonomos, and must register their business with the Spanish tax authority and Spanish social security department. Most autonomos have to present quarterly VAT (IVA) returns, as well as an annual income tax return (I.R.P.F.). Other declarations are frequently applicable on a quarterly and annual basis, depending on your circumstances.
Sole traders and partnerships in Spain
The cheapest way of setting up a business in Spain is by forming an unincorporated company. You can do this as a sole trader (empresa individual) or partnership (sociedad civil). With these arrangements, there are no minimum investment requirements and you won’t need to go through many of the formalities required when setting up a limited company.
As a business owner, you will be responsible for your own personal tax return. There is no legal distinction between your business assets and your personal assets. Therefore, if your business gets into debt, you are personally liable. Sole traders and partnerships are more suitable for smaller businesses that won’t have a large annual turnover or employ many staff. If you are starting up a business in Spain alone, you can also choose to set up as a freelance professional (profesionales autonomos).
If a few people are setting up as a partnership and want to limit the amount of personal liability and give the business a more formal structure, they can set up as a limited partnership (sociedad comanditaria) instead of a general one.
Limited companies in Spain
Several types of limited company structure exist in Spain. The most common form, however, is the sociedad limitada or S.L. Incorporation is important in protecting the owner from personal liability in the event of bankruptcy, but this kind of structure does involve a number of additional tax, accounting, and mercantile obligations. An SL has to present an annual corporation tax return and statutory accounts. The owner will have to file their VAT returns (IVA), and several other periodic declarations are usually applicable.
How to start a business in Spain
If you want to set up a limited company in Spain, there is a defined path to follow. We will go into more detail shortly, but the process works like this:
Ensure you have a foreigner’s tax identification number (NIE)
Register the company name with the Mercantile Registry (Registro Mercantil Central or RMC)
Get a company tax identification number (CIF)
Open a business bank account
Sign the deed of incorporation
Register the company
Register for social security
How to Obtain a Business Visa in Spain
Non-EU citizens moving to Spain to start a business will need a valid work permit to do so. To get a work permit, you will need to apply to the Spanish embassy in your home country. First of all, you will need to provide evidence that you have enough capital to invest in your business and support yourself while living in Spain. You may also be required to submit a business plan and proof of your skills and experience. The Spanish government can ask you to provide evidence on how your company could create jobs for workers in Spain. Work permits must be renewed every year, but after five years you can instead apply for resident status in Spain. This removes the need to get a work permit in the future.
Licenses and permits
Before setting up a business in Spain, all resident and non-resident foreigners with financial affairs in Spain must have a foreigner’s tax identification number (NIE). The NIE is essential for any fiscal transactions in Spain, such as incorporating a company. If you are a Spanish national, you will have a NIF rather than a NIE number. Applications for a NIE can be made at a processing office for foreign citizens (Oficina de Extranjeros) at a national Spanish police station (comisaría).
Registering your business in Spain
The first step in setting up a limited company is to obtain a certificate to verify that the company name you want to use is not already taken. This is called a no-name coincidence certificate and is available from The Mercantile Registry (RMC).
Setting up a business bank account in Spain
After you have obtained a tax code and the certificate of no-name coincidence for a limited business, you will need to open a business account with a Spanish bank and make a deposit of €3,000. This is the minimum share capital allowed when setting up a limited company. Evidence of payment can be obtained in the form of a bank certificate which will need to be provided to a notary or lawyer showing the act of incorporation of the company.
Deed of incorporation
You will now need to apply for the deed of incorporation to establish your company. This is the official document that states the key details of the company (name, address, details of directors, board members, shareholders, etc.). You can arrange a local notary appointment to sign the deed of incorporation. This step lasts about one to three days depending on the notary. You must supply the notary with original documents and photocopies of:
Tax form 036
Your certificate from the Mercantile Registry
Evidence of having cash in your bank account
Registering the deed of incorporation
With the original deed of incorporation obtained from the notary, you should then go to the Local Government Tax Authority to register it. The deed will be stamped certifying this fact. This step should not take longer than two hours. Do not forget to take with you your original documentation and photocopy of the deed and your NIE. You will then need to take the stamped deed to the RMC where it will be registered in the Spanish Register of limited companies. It should take around 15 days for the deed to be registered and original documents returned. Finally, you will need to return to the tax office to obtain the permanent Corporate Tax Identification Number (CIF) after the completion of the incorporation process. Newly incorporated companies must use the 036 form used to request a tax identification number; to describe their business activity, and disclose other business details. Do not forget to take along the original and photocopy of the deed and NIE.
Tax and Social Security Considerations
As mentioned above, your company will need a tax number. To obtain this, you will need to complete the tax form 036; this can be done online or by hard copy, delivered to your local tax office. You can find information about the form, along with form downloads and links to completing online, at the Spanish Tax Agency (Agencia Tributaria). If you make the application in person at your local tax office, bring the original and a photocopy of your NIE (numero identificacion extranjero). To register for social security when starting a business in Spain, you will need to take along your deed of incorporation, NIE, CIF, and form TA 0521 (which can be obtained from your local social security office). Details of local social security offices in Spain can be found on the social security website.
Foreign companies opening up a branch or subsidiary in Spain
If you are running your own company at home, but are looking to set up a branch or subsidiary, doing this can be simpler than starting from scratch with a new company. When processing your application, you must provide a series of documents, including the following:
A copy of the main company’s certificate of incorporation and certificate of good standing
Notarized power of attorney
Spanish tax identification number (NIE)
A member of staff at the Spanish branch to be a resident in Spain, who will agree to be liable for any company debts and tax payments.
While additional branches and subsidiaries don’t need to file accounts on the business register, they must pay income tax and submit quarterly VAT returns through their NIE number. Some banks and business advisory companies will offer special packages to help you set up the particulars of opening a new branch in Spain.
Starting up a non-profit company in Spain
Non-profit companies in Spain will fall into two categories: foundations and associations. Traditional charities which accept donations from the public will generally fall into the foundation category. Associations, on the other hand, are usually run more informally by groups of people who have a common interest. It is free to set up an association, but you will need capital of at least €30,000 to do this. With a foundation, anyone can donate to the cause (they don’t need to be a member) and committee members can be paid for their work, as with a normal business. Foundations that turnover more than €2.4m or have more than 50 employees need to undergo an external audit annually.
Business banking in Spain
Business bank accounts are provided by all of the biggest lenders in Spain. The good news is that it is possible to get a bespoke account depending on the specific needs of your business. Banks such as BBVA, Bankia, Santander, and La Caixa all provide business accounts. The majority of these lenders also offer specific products for self-employed people and larger companies, respectively. To open an account, you will generally need to provide proof of your company’s registration, a registered address, and (for larger companies) at least two signatories. Business accounts vary in cost, and in lieu of a fee, some will require minimum deposits.
Taxation for businesses in Spain
How your business is taxed in Spain depends on the type of enterprise you are running. Sole traders will pay tax on a quarterly basis at the standard rate of income tax; they will need to fill out a tax return at the end of each financial year. Partnerships work similarly, with each partner being held responsible for paying their own income tax. For limited companies, the process is significantly different. Limited companies pay corporation tax, which is levied on worldwide profit. Tax breaks are available for new companies. For the first two years, limited companies pay 15% tax on the first €300,000 of profit, and 20% tax on profits above this threshold. After this period, you will be taxed at the general rate of 25%.
Business Insurance in Spain
The level of business insurance you will need to take out varies significantly depending on the size of your company, whether you employ staff, and the nature and value of the assets the company owns. As an owner of a limited company, you will need to take out a personnel insurance policy to protect your employees in the event of accidents or sickness. As with all insurance schemes, the levels of cover and costs vary, so it is best to take advice from an expert broker. Public liability insurance is vital if you are running a business. This will cover you against any claims by third parties regarding injuries, accidents, or damage of property that is incurred on your watch, or as a result of negligence from within your company. Finally, you will also need buildings and contents insurance. This will protect you against any damage to your offices or loss of stock; as well as covering theft of stock owned by your company.
Employment in Spain is highly regulated, so you will need to ensure that you meet the rules before expanding your team. Employees in Spain generally work a 40 hour week and have their salaries paid in 14 payments per year (one payment each month then an extra one in July and December). Employees are also entitled to 30 calendar days vacation per year.