COMPANY ESTABLISHMENT IN SPAIN

Spain is the stable economic hub of Europe. In most developed countries, foreigners are not easily allowed to enter the economical world of the country. But Spain welcomes all investors worldwide with its dynamic economical structure, which is ideal for entrepreneurs.

 

Does Spain Allow Foreigners to Start a Business?

Yes, foreigners are allowed to establish a business in Spain. The country of Spain is considered among the ideal places to start and grow with its unique features ideal for foreigners, both for EU and non-EU country citizens.

The main cities of Spain, Madrid, and Barcelona, host thousands of foreigners who have created their dream businesses in the magnificent country. By being an attractive point, Spain not only draws the attention of entrepreneurs, but the country is also a network hub. If you are a freelancer or a start-up entrepreneur, Spain is ideal for both situations.

 

Advantages of Starting a Business in Spain as a Foreigner

Traditional Infrastructure Idealized with Innovative Solutions

Spain already has the required infrastructure facilities for traditional business needs. Spain is home to two of the busiest airports in Europe, three of the most important container ports in Europe, one of the world’s most extensive high-speed rail networks, largest highway and freeway network in Europe.

Transportation and other infrastructure are useful in all kinds of business, but especially for traditional. Fortunately, Spain also has solutions for newer needs. The country has a skilled work power. So, when you need workers in this country, you will have more than enough qualified.

Exciting Potential Above the Limits

The steadily developing economy of Spain is also vibrant and dynamic. With these aspects, Spain becomes one of the best to open a company and have the next page in your life, with the title of a new start in your dream country.

While combining art, technology, and innovation, Spain has the required foundation for a powerful start.

Beneficial Incentives Better Than Nearly Everywhere

Spain has advantageous initial incentive opportunities for investors. Starting from tax cuts to zero to low capital requirements make Spain one of the ideal countries for opening a business.

 

  

 

How to Open a Business in Spain as a Foreigner?

The process of starting a business in Spain as a foreigner varies in some situations. If you are an EU country citizen, you are only required to apply for an NIE number to get a tax ID and register your address at the local town hall for having empadronamiento.

Although the Spanish government has made some regulations to make the rules easier and shorter wait times, the process can still be a little bit complicated for foreigners coming from abroad.

Foreigners that citizens of non-EU countries or citizens of other EU countries can open a business in Spain. But they have to be legal residents of the country.

If you are a foreigner willing to start your own business in Spain after moving there, you will first need to get one of the two visas.

 

Type of Businesses to Open in Spain

The type of businesses are categorized into two by their structure; Unincorporated businesses and incorporated businesses. Unincorporated businesses include; freelancers, sole traders, and partnerships. The incorporated businesses include limited companies and stock corporations.

Firstly, if you are thinking about which business structure to choose, we have prepared general details of the business structures.

Incorporated Businesses;

• Ideal if you are planning to enlarge your business and hire many employees. It is also ideal for branch establishment in Spain.
• While opening a company in Spain, you will need an initial investment.
• The beginning will be more complex with more paperwork and an expensive start.
• You will need to have a business lawyer. Your business will need to have an approved business proposal with a financial plan.
• In addition to the tax deductions as same in unincorporated businesses, the incorporated business with large research and development investments may benefit from the tax reduction.
• You will be liable for the total investment of the company. You won’t be personally responsible for the debts of the company.
• You will pay corporate tax at a fixed rate. It would be more profitable if your company gets a high turnover, as this tax rate does not increase with turnover.

Next, we will look deeper into some of the most preferred types of companies in Spain.

 

  

 

How to Set Up a Sole Trader Business in Spain?

Sole trader businesses are ideal for those who want to work freelance with the capability of hiring employees. This business model also has the advantage of starting without difficulties and only needs simple level accounting.

To become a sole trader in Spain, you must follow the steps below:

1. You must get a foreign tax identification number (NIE).
2. You must register with the tax authorities (Agència Tributària).
3. Then you must register for social security in RETA within 30 days of tax registration. RETA is a special regime for self-employed.
4. You must get a local bank account.
5. At last, you must get any required licenses.

While no minimum investment amount is required for setting up a company as a sole trader, you will be personally liable for any debts of your company.

Each business type has its own tax regulations. The tax regulations for sole traders in Spain are;

• Every quarter, you have to pay progressive personal income tax (IRPF)
• You have to file annual tax returns
• You have to pay a withholding tax
• You have to declare your VAT taxes quarterly, at 21%
• You have to pay tax-deductible social security contributions that depend on your earnings. New freelancers may get tax discounts for the first 2 years.

In addition to these, you must take note that sole trader (Empresa individual) and freelancer (autónomo) are not the same. Although they both get the same visa, which is the self-employed work visa, there are differences. These are;

• While sole trader is both freelancer and administrator of their company, freelancers are only required to register as autónomo. Freelancers don’t need to start a business.
• While sole traders have to fill out a document called “Modelo 036” for a work permit, freelancers have to fill out one of the documents called “Modelo 036” or “Modelo 037”.
• While sole traders can hire employees, freelancers can’t.
• While customers of the freelancers pay part of the tax to the government on behalf of the freelancers, this does not apply to the customers of the sole traders.

 

How to Form a Limited Company in Spain?

Setting up a limited liability company (sociedad limitida) in Spain is preferred by investors who have money to invest while expecting to earn more and not being personally liable for debts.

To start a partnership business in Spain, you must follow the steps below:

1. You must get a foreign tax identification number (NIE).
2. You must Register the company name at Mercantile Registry (Registro Mercantil Centra).
3. You must register your company name at the Mercantile Registry with the extension of Sociedad Limitida.
4. You must get the tax identification number (CIF) of your company from the Spanish Tax Agency (Agència Tributària).
5. You must get a bank account.
6. You must register your company with the Spanish Register of Limited Companies.
7. Lastly, you must register your company for social security (seguridad social).

While forming a limited company, the required initial investment amount is only 3.000 €. In addition to this, you will be not personally liable for the debts of the company. If things go wrong and your company goes to bankruptcy, you will be lost only the invested amount.

The tax regulations for the sociedad limitida in Spain are;

• You must pay corporate tax (impuesto de sociedades) on the company’s profit.
• The corporate tax rate will be 25%. The new companies have the advantage of paying %15 on the first 300.000 € and %20 on the rest for 2 years.
• You must pay VAT.

 

  

 

What is the Cost of Establishing a Company in Spain?

The company formation cost in Spain is relatively lower than in most other European countries. Below, you may find the costs for the most popular company types in Spain among foreigners.

Approximate Cost of Becoming Sole Trader in Spain:

• 250 € per month for monthly social security payments
• 400 – 1000 € for opening license
• 40 – 200 € for getting a company name certificate at Mercantile Registry
• 60 – 200 € for notary fees
• %29.9 contributions annually for Employer Payroll Contributions
• 300 € – higher for drafting a partnership agreement if you have a partner

Approximate Cost of Forming Limited Company in Spain:

• Minimum 3.000 € for initial capital. This can be spent after the company is registered
• 400 – 1000 € for an opening license

• 250 € plus for getting a company name certificate at Mercantile Registry
• 200 € plus for lawyers
• 60 – 400 € for notary fees
• %29.9 contributions annually for Employer Payroll Contributions

Things to Know While Forming a Company in Spain As a Foreigner

There are some tips and things to keep in mind before the first step. This information will make your company formation process in Spain easier.

NIE Number (Número de Identificación de Extranjero)

It is a tax identification number that you will need during all your financial transactions and processes in Spain.

CIF Number (Certificado de Identificacion Fiscal)

It will be a tax ID and VAT number of your company. You will get CIF by submitting a form called “Modelo 036” in person or on the website from Agència Tributària.

Registering the Company Name at Mercantile Registry

While registering your company name, you will send a list of 3 potential names for your company. By this, you will check if they are registered and unique, and you may reserve it if available. This name should include the type of the company. After submitting the application, you will have your company name certificate within 3 days.

Opening a Company Bank Account

Using your company name and the company’s tax code, you need to open a bank account. For limited companies, you must also deposit the initial investment amount, which is a minimum of 3000 €. Then you will get a certificate that proves your investment from the bank.

Signing the Incorporation Deed

To officially set up your business, you have to get a signed incorporation deed from your local notary. This incorporation deed will include all necessary information, such as the company name, address, and, if available, the details of the shareholders.

To get the incorporation deed, you must submit the original and copies of the following documents;

• Your Modelo 036 document
• Your NIE Number
• Your Company Name Certificate that you got from Mercantile Registry
• Your Bank Certificate that proves your investment.

Registering a Limited Company to the Spanish Register of Limited Companies

First, you have to get your incorporation deed stamped by the Agència Tributària. Then, you have to go to Mercantile Registry with your stamped deed and original documents to register your company.

The whole process will take about 2 weeks. After getting officially registered, you have to go back to Agència Tributària to get your CIF number by showing your deed and NIE.

Registering for Social Security

For limited companies, as an owner, you will be responsible for making social security contributions both for your company and employees. You must prepare the following documents to register your company with the social security office:

• Your incorporation deed
• Your NIE number
• Your passport
• Your CIF
• TA 0521 form

Company registration in Spain is as advantageous as it can be complex. Even though the Spanish government makes required regulations for offering more comfortable and easier processes, it can be still hard and time-consuming without experience.