- Why should I choose Spain for my business?
- How to register: the main steps
- Business structures for starting a business
- Minimum eligibility criteria
- Taxes and business in Spain
Business registration in Spain is increasingly attracting foreigners. Some of them want to develop their idea from scratch, and some are thinking about scaling or relocating a business from another state. On the one hand, today you can do this in a couple of clicks. But on the other hand, it's not as easy as it sounds. In this article we tell you what to look out for when opening a company in Spain.
Why should I choose Spain for my business?
The choice of company jurisdiction depends primarily on how profitable it will be to do business in the country and what the advantages are for the entrepreneur there. In this regard, Spain is particularly eye-catching - we suggest considering its main advantages in launching your business.
Geographic location. The Kingdom of Spain is a state with a convenient location in terms of foreign trade - between Europe and Africa. It is also a bridge between Europe and Latin America. For the businessman who plans to work with these regions, the Spanish territories are the ideal place. By registering a company in Spain, the owner will be able to engage in commercial activities without obstacles and in the territory of the EU. Also, if your products have already been imported into one of the EU countries, they can be transported for sale in any other European country without additional paperwork.
Developed infrastructure. Spain - is a developed European country. It is distinguished by innovative technologies, good medical care, high-quality social support, and a high level of security. In such a market, it is easier not only to find potential clients, but also to implement a business plan.
Business loans. Spanish laws allow money to be pledged to non-residents. However, banks generally have higher requirements for foreigners. If you decide to apply for a loan to then invest in a business, you will need to convince the lenders. You will need strong evidence that the business plan is relevant and profitable. In Europe you can open a company, even if you do not have enough money to fully implement the project, because it is possible to get a soft loan at one of the banks in the EU. What banks pay attention to when lending, you can learn from our article.
Obtaining a residence permit. By registering a business, you can get a chance for a residence permit thanks to the entrepreneur's visa. Its holders can be foreigners, as well as their family members who plan to open a business in Spain and invest in the economy of the country. For this business project must be of economic interest to the state. An entrepreneur applying for a residence permit, you need not just open a promising company, and to prove its contribution to the Spanish economy and the social component of the project.
Tax breaks. The Spanish fiscal system can be frightening for the new businessman. It is not easy to understand for a foreigner accustomed to a different tax model in his country: there are questions about when and how much to pay, and all communication has to be done in Spanish. But despite these difficulties, the entrepreneur has tax benefits that he can apply to its activities to reduce payments. For example, new companies can get an exemption for the first two years of operation. Foreign businesses operate with a special taxation scheme, which also provides a VAT refund. Read more about the fiscal system in the article on our website.
How to register: the main steps
An entrepreneur who is starting a business must understand what the procedure itself is. It takes from one week to one month and consists of several conditional stages:
- Choosing the type of company. It is the entrepreneur who decides whether to choose an LLC or a JSC. We will consider types of business structures further in the article.
- Registration of the name in the Commercial Registry. You will receive a certificate proving that there is no other legal entity with the same name.
- Opening of a bank account. You will need to deposit the share capital, and then get a certificate of bank account.
- Registration of the company constitution. You can go to a business office (PAE), but then you will not be able to change this document. Instead of PAE you can go to a notary - it is more expensive and time consuming, but in this case you can finalize the articles of association.
- Getting a CIF is a fiscal identification number of the company. Commercial transactions (including tax payments) are made only with CIF.
If you are a non-resident founder, you need to get a NIE. Individuals need to fill out a form with the police, legal entities need to start a branch or representative office.
- Business registration with the IRS. The entrepreneur needs to notify the IRS to start their business and pay the tax.
- Licensing. If you start a business that requires a license (for example, a catering establishment or a veterinary clinic), you need to contact the local authorities.
- Visiting the social insurance fund. At this stage, you need to register with the fund, if the organization will have employees.
Opening a business can be difficult for a foreigner - you need to understand the legal nuances of the new country, to understand what package of documents is required for each agency and how to build a business so that it becomes profitable. All this is complicated by the fact that the businessman may not know the Spanish language in which he will have to communicate with government agencies.
We recommend contacting specialists who provide assistance both in starting a business from scratch and in scaling a company to Spain. Laduchi Consult experts help you to transfer your existing business, adapt it to the Spanish market or implement your project from scratch. We will also help you to choose the right jurisdiction to open a business and optimize your tax burden. Read more about our services here.
Business structures for starting a business
There are several models of doing business: from individual entrepreneurship, "self-employment" (Autónomo) to a branch of a foreign firm (Apertura de una sucursal). We suggest paying attention to the most basic ones.
Joint stock company or JSC (Sociedad Anónima – SA). These are large companies with equity capital, which can be traded on the stock exchange. They require at least one founder and a minimum capital of 60,000 euros. The company must also be registered at the Commercial Registry.
Limited Liability Company or LLC (Sociedad de Responsabilidad Limitada — SL or SRL). This is the most common type of business structure. It is usually intended for small, medium-sized, family businesses. SL can be established with a minimum capital of 3,000 euros with at least one founder. The future of the company is in the hands of the shareholders, it is they who make the main decisions. This type of company has more flexible rules and requirements than SA. If the founders of Sociedad Limitada are one person, this model is called a sole proprietorship - Sociedad Limitada Unipersonal.
Branch (Apertura de una sucursal). It is a branch of an organization that is registered in another state. From the legal point of view, a branch will be a subsidiary in relation to the parent company. We should add that a branch is not a legal entity, and there is no minimum authorized capital in this case.
What business structure to choose, it is up to the entrepreneur to decide, taking into account the goals and needs of the organization, as well as the budget and plans for the future. To understand what is optimal in your case, we recommend reading our article.
Minimum eligibility criteria
If you are going to open a business, you have to understand that it has to meet certain requirements. Let's talk about the minimum criteria, without which you cannot enter the Spanish market.
Residency. Even a foreigner can start and own a Spanish company. But the key manager must be a resident or a citizen of the country.
Legal address. The registered organization must have a Spanish legal address.
Business compliance with the law. The business must comply with Spanish regulations and must not violate the rights of other entrepreneurs and citizens in general.
Availability of necessary documents. When opening a company, it is necessary to have the appropriate documents and permits, including the NIE (Número de Identificación de Extranjero), a bank account, articles of organization, tax number - we talked about this above.
Sufficiency of financial resources. Starting and maintaining a business requires sufficient capital. Initially, the owner of the company will need to contribute a certain amount, which, as we explained in the previous section, depends on the legal form. The minimum contribution is 3,000 euros, but today the business registration law allows the creation of companies without the physical investment of capital, but under the personal responsibility of the founders. This does not apply to Sociedad Anónima, in which case the company must have a capital of 60,000 euros. Of this amount, 25% must be paid at the time of registration.
Lack of legislative obstacles for the entrepreneur. If the foreign entrepreneur has a criminal record or problems with the migration authorities, this can be an obstacle to the procedure.
Number of shareholders and directors. For example, limited liability companies have several types of management bodies:
- a single administrator, who fully manages the organization
- several equal directors, who can make independent decisions
- two or more joint administrators, who manage the company, according to its articles of association
- board of directors, a group of at least three persons who are responsible for key strategic decisions
We talked in more detail about the governing bodies of an LLC in this article.
In general, to start a business, you need to comply with the laws of the country, have the necessary documents and permits, have sufficient financial resources and be able to compete.
Today it is possible to open a company remotely, without the client's presence in the country itself. We will gather the full package of documents for registration and running a business for you and check it from the legal point of view.
Taxes and business in Spain
In the Spanish Kingdom there are several types of taxes that are levied on businesses. If you are considering registering a company in this country, familiarize yourself with the main ones.
Value Added Tax (IVA) — A general sales tax that is levied on products and services provided by a business. IVA rates can range from 4% to 21%, and in some cases are zero, depending on the product or service. For example, zero rates apply to public health services, education, insurance, and social assistance. A reduced rate of 10 percent applies to certain categories, including food, books, hotels, and transportation services. The 4% rate applies to, for example, medicines, children's products, newspapers and magazines. The rate is also affected by the region where the company is registered, as local authorities set their own tax rates.
Corporate Income Tax (Impuesto sobre Sociedades) — income tax. The amount of tax is 25%, but also depends on a number of factors: the business entity, the region in which it is registered. For example, for new businesses in the first two years of SL this tax will be 15% on the first 300 thousand euros. Therefore, the rate is subject to change.
Personal Income Tax (Impuesto sobre la Renta de las Personas Fisicas). The tax is levied on individuals who receive income in Spain. These may be employees, entrepreneurs or other natural persons. In the case of employees, the tax is withheld from their wages. If an individual receives income from a business activity, they pay tax on their income independently, based on their own tax base. Business associates cannot pay personal income tax on behalf of other individuals. The amount of this tax differs markedly from region to region, this can be seen in the graph:
Property tax (Impuesto sobre Bienes Inmuebles) — Tax on the ownership of real estate. If it is worth more than 700,000 €, you have to pay more luxury tax.
This is not an exhaustive list, but as you can see, the rates and types of taxes depend on many features, so the final amount of payments is calculated individually.
Opening a foreign business is a process that a foreigner may find difficult. You have to take into account the tax nuances and understand how the organizational and legal system of another country works. Diving into this question on your own, without knowing the details, will take a lot of time, and most importantly, will not guarantee a successful result. To avoid mistakes, it is worth turning to experts who have complete information. The experts at Laduchi Consult understand clients at a mental level and work with them at all stages - from drawing up a business plan to launching the product on the Spanish market.
Please note that all materials contained on this site have been prepared for informational purposes only. This data does not constitute or replace professional financial, legal or tax advice. The information is general in nature and does not take into account your personal circumstances. Always seek professional advice from officially licensed professionals: financial advisors, accountants and lawyers.