For expats, starting a business in Spain can open up lots of opportunities. Learn what kind of business structure is right for you and how to get started.
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.
This helpful guide, provided by expert immigration attorneys Balcells International Lawyers Group, covers everything you need to know about starting a business in Spain. This includes information on business culture, the main types of business, and the most important insurance and taxation considerations.
The guide includes advice on:
- Business culture in Spain
- Who can start a business in Spain?
- Legal structures for businesses in Spain
- How to start a business in Spain as an expat
- Foreign companies opening up a branch or subsidiary in Spain
- Starting up a non-profit company in Spain
- Administrating your business in Spain
- Business banking in Spain
- Taxation for businesses in Spain
- Business insurances in Spain
- Employing staff when starting a business in Spain
- Useful resources
Balcells International Lawyers Group
Balcells Group provides legal advice to individuals, companies, investors, immigration agencies and other intermediary agents. They have over 40 years of professional experience, and have built their firm based on the integration of several generations of lawyers that offer a balanced vision based on experience and modernity.
Business culture in Spain
Spanish business culture may differ considerably from that in your home country. A more laid-back approach, for example, can result in deadlines overrunning and meetings stretching late into the evening. That said, perception of Spain as having an old-fashioned or twee business culture aren’t completely accurate.
One example of this is siestas, which don’t really exist anymore in Spanish business; although long lunches still do. In addition, some companies are moving away from an outdated hierarchical decision-making culture. The Spanish government is also pressing forward with a decree to cut a gender pay gap of around 14%.
While it might take some time to adjust to business practices in Spain, there is no need to be put off. The 2018 World Bank Ease Of Doing Business Survey placed Spain 28th out of 190 countries, meaning it’s considerably easier to do business here than in the majority of its neighboring nations.
You can find out more in our full guide on business culture in Spain.
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 expats 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
The rules and considerations around starting a business in Spain vary depending on the scope of your plans. The main types of business structure are as follows.
Self-employed workers in Spain
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. Find out more in our full guide on how to set up as a freelancer or as self-employed in Spain.
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 as an expat
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).
You can find out how to apply for an NIE with our full guide to the Spanish NIE number.
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). You can do this by yourself through the RMC website. This step takes about three days before you receive the answer from the RMC by courier.
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. If you don’t have a Spanish bank account, find out how to open a bank account in Spain.
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. You can find the nearest one in your area at www.notariado.org. 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
- Your NIE
- 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.
Administrating your business in Spain
Businesses must keep records of their accounts and order books, which can be requested for scrutiny by government bodies such as the tax authority.
Companies must also keep a book of minutes containing details of measures agreed at Annual General Meetings (AGMs). Companies must have their mandatory book of accounts certified and stamped by the local office of the Mercantile Registry before they begin to use them.
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. You can find out more about banking in Spain in our full guide to opening a bank account in Spain.
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%.
VAT for limited companies in Spain
While some businesses are exempt from VAT, the vast majority need to pay this. Unlike in some other countries, there is no threshold when VAT kicks in; rather, it is applicable on all profits. VAT is generally charged at 21%, although companies in some industries can pay a lower level of either 4% or 10%.
Social security for companies in Spain
Sole traders and partnerships in Spain need to contribute social security at a charge of around €265 per month, plus a further contribution if they are employing staff.
Limited companies will need to register for social security payments and make contributions at 29.9% of their employees’ salaries. They will also have the responsibility of deducing the required social security contributions from their employees’ salaries each month.
Business insurances 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.
Employing staff when starting a business in Spain
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. The minimum wage in Spain is currently €900 a month, based on 14 payments a year.
To find out more about Spanish employment rules and rights, check out our guides to working in Spain.