Spain offers an attractive business environment, a skilled and bilingual workforce and multiple opportunities for companies in key business sectors like manufacturing, automotive, life sciences, the chemical sector, telecommunications or tourism. Foreign investors from EU countries have the benefits of simplercompany incorporation procedures in Spain, while foreign enterprises from countries outside the EU are required to fulfill additional requirements.
Types of companies in Spain
- sole proprietorship,
- stock corporation,
- limited liability company,
- branch office,
- worker-owned company,
Minimum share capital for LTD Company
Minimum number of shareholders for Limited Company
Time frame for the incorporation (approx.)
Corporate tax rate
- 25% standard rate;
- 15% for newly created companies
Dividend tax rate
- 19% for natural persons,
- 5% for companies
- 21% standard rate;
- 10% for foodstuffs, water, pharmaceutical products, social housing, bars, cafes and other catering units, etc.,
- 4% for certain foodstuffs and pharmaceuticals, books, newspapers, construction work, etc.,
- 0% for intra-community and international transportation, taxation of gold coins
Number of double taxation treaties (approx.)
Do you supply a registered address?
Local director required
Shelf company available
Is accounting/annual return required?
Any tax exemptions available?
- lower corporate tax for newly founded companies,
- tax exemption of up to 95% on foreign dividends and capital gains
Tax incentives for opening a business in Spain
- for various types of business activities, such as the performing arts and the film industry,
- tax credits based on the place where the company operates (such as Mellila and Ceuta).
- a special corporate tax regime applies in the Canary Islands.
Nevertheless, Spain welcomes and treats all foreign investors as local ones. Our team of Spanish lawyers can assist foreign businessmen with legal advice on the investment regulations available here and can offer step-to-step information on the procedures necessary to complete when opening a local company.
Reasons to open a business in Spain
Spain is one of the top recipients of foreign direct investments in the EU. With several sectors such as tourism, renewable energy and research developing at a fast rate and with a pro-business legislation, Spain promises to become one of the most developed industries in the EU.
Among the best reasons to open a business in Spain, many foreign enterprises have mentioned flexibility and the adaptability of the Government. The list below summarizes some of the key types of investment aid available to foreigners interested in setting up a company in Spain are:
tax benefits - the R&D tax credit amounting to 25% of the total R&D expenditure incurred during the year as well as special tax credits for creative and artistic fields (cinema production, music, artistic performances);
Free Zones - cities ports with preferential conditions for doing business (the Free Zone of Barcelona is the most notable one in Spain);
employment aid - tax credits are also available for the employment of special needs individuals and young workers;
privileged investment sectors - investments in the telecommunications industry, as well as the renewable energy industry, tend to be privileged and can benefit from special investment aid.
An important consideration for foreign investors is that they have complete freedom of establishment for companies in Spain. Full foreign ownership is permitted permitted and our team of Spanish lawyers can provide an in-depth presentation on the types of documents foreign investors must provide upon the registration of a local business.
OurSpanish lawyers can provide you with more information about the current programs developed be the government. Investors can also request for legal advice on the tax advantages Spanish companies can benefit from. Our lawyers can offer assistance on the tax minimization procedures that can be employed here, but also on the procedures for registering for VAT purposes and applying for an EORI number in Spain.
We invite you to watch a short video on opening a Spanish business:
What types of entities can one register in Spain?
As presented above, foreign businessmen can register any of the legal entities that are prescribed under the country’s national legislation. Some of the most common ways to open a business in Spain is by registering a limited liability company (usually preferred by businessmen who want to open a small or medium-sized company) or a public limited company (a type of business form that is addressed to large companies). Foreign businessmen can also set up the following:
sole trader – the simplest way to establish a business in Spain, which is addressed only to natural persons who want to start a business in their own name;
the branch office – used by foreign companies to expand on the local market (the branch is a structure legally dependent to its parent company);
the subsidiary – a similar structure with the branch office, with the distinction that the subsidiary is considered a separate legal entity;
the partnership – it can be set up by minimum two investors, who will be considered partners;
new enterprise limited company – introduced in 2003, it represents a simplified form of the limited liability company.
What are the advantages of a new enterprise limited company in Spain?
The new enterprise limited company in Spain (Sociedad Limitada Nueva Empresa – SLNE) was established in 2003 with the purpose of encouraging the registration of new small and medium-sized businesses in this country. Although it has the characteristics of a limited liability company, there are several substantial differences from the Spanish limited liability company.
For example, this business form has to be registered with a minimum capital of EUR 3,000, but it can’t have a capital above the sum of EUR 120,000. In the case of a traditional limited liability company, its shareholders can be both natural persons and legal entities. However, in a Spanish SLNE, the company’s shareholders must all be natural persons, and their number can’t be above five.
While in a regular limited liability company, the company’s name can be freely chosen, in the case of a SLNE it is legally required to add the name of one of the founders. The abbreviation “SLNE” must also be included in the official trading name. Our team of Spanish lawyerscan further advise on other characteristics of this business structure, besides the ones presented below:
it is a suitable vehicle especially addressed to small and medium-sized companies in Spain;
it can be formed by a single shareholder, who can be a foreigner;
the company can be formed with 100% foreign ownership and its founders will enjoy limited liability against the company’s debts;
the Spanish SLNE can have a single manager and the appointed person can also be the company’s founder;
it benefits from a fast registration procedure, the online registration being completed in a single day.
The main steps for setting up a business in Spain
Once the foreign investor has chosen the type of entity they will set up in Spain, the next step will be deciding the company’s name and preparing the incorporation documents. First, they must verify the authenticity of the company’s trade name with the Spanish Commercial Register, which may take up to 2 days. The certificate issued by this entity is valid for three months; that means the registration must be done within this period of time. Certificates can only be renewed once.
After this procedure is done, the founders of the company should open a bank account where they will deposit the share capital and obtain a proof from the bank. The documents necessary for the registration must be notarized and then submitted to the local Trade Register in the town where the company will have the registered address.
The main procedures for company formation in Spain
Secondly, you have to open a bank account and deposit the minimum share capital for the incorporation. The bank will issue the statement with the deposited amounts which will be used for the registration of the company. The share capital can be also deposited by a notary in the company’s bank account. Thirdly, for the registration of the new company, a public deed of incorporation must be drafted. This document contains:
the names of the shareholders and the number of shares each shareholder owns;
a fiscal identification number for each shareholder and the payments made by the shareholders;
the company bylaws (representing the statutory documents of the company);
the name of the administrator and any other required information.
You also have to submit a form and receive the tax identification number, pay the required taxes, legalize the company books. For certain economic activities, you may need special licenses or permits that can be obtained by a law firm in Spain, if you don’t want to go in front of the Spanish authorities and handle the entire procedure.
Conditions for doing business in Spain
All companies in Spain must comply with the Company Law and the Commercial Law, including the relevant provisions of the Competition Law and other laws. The incorporation of a company, its dissolution, mergers and acquisitions and other aspects are regulated by law and must be observed by foreign investors.
Investors must choose from one of the main forms of business entities, most commonly between the limited liability company and the public limited company. Foreign corporations can also open a branch in Spain. Spanish companies are subject to the accounting and filing requirements as well as auditing for some types of companies (when a set of special conditions are met, companies may skip the annual account auditing).
In terms of business taxation, companies must pay the corporate income tax, the value added tax, stamp duty, real property tax and other local or municipal taxes. One of our lawyers in Spain can give you complete details about the laws governing business taxation.
Hiring employees in Spain
After the incorporation, the Trade Register will issue a registration certificate and the incorporation will be published in the official gazette of the Trade Register and the company can begin its economic activity and hire employees. All the employees must be registered with the local entities that are in charge with the social security, employment, and fiscal issues.
Simplified company incorporation in Spain
Foreign investors who want to open a business in Spaincan give the power of attorney to a local Spanish lawyer who will handle the entire procedure of incorporation. Foreigners don’t have to go in person to Spain and wait for the incorporation. Local authorities offer various sets of incentives in order to encourage foreign investments.
Assistance in opening a company, offered by Spanish lawyers
The company formation procedure in Spain can be quite complicated for foreign investors due to all the steps it requires. With a vast experience, ourattorneys in Spain can assist you with the preparation of the incorporation documents and can help you file them with the Companies Registration Office.
We can also help you file for the appropriate business licenses andspecial permits, in case you need any. Our Spanish lawyers can provide with legal advice with respect to the employment legislation in case you want to hire personnel and can also assist you with the registration with the local social insurance authorities. Companies involved in import-export activities can request information on how to apply for EORI in Spain, which refers to an identification number required at the level of the EU for trading entities.
How can foreign businesses expand in Spain?
In the case of a foreign company expanding on the local market, there is always the possibility of starting a business here through a subsidiary or a branch office. When deciding to expand through a branch office or a subsidiary in Spain, the parent company should take into consideration aspects such as its responsibility towards the Spanish office, the minimum share capital required, the initial costs associated with the new investment, the tax requirements and tax benefits and numerous others, which can be detailed by our law firm in Spain.
However, the main aspect that makes the difference between the two structures refers to the level of responsibility the parent company has towards the newly founded office. In the case of a branch office, the parent company is fully responsible and fully liable for any debts, which is not the situation of a Spanish subsidiary as it represents a separate legal entity, with its own rights and obligations.
What are the formalities for registering a Spanish branch?
If the foreign company decided to set up a branch office in Spain, a set of legal formalities will need to be concluded. The branch office is generally selected for registration due to the fact that the foreign company will benefit from lower costs associated with its registration – for example, the Spanish branch does not require any capital. Some of the main registration formalities are presented below:
provide a copy of the parent company’s articles of association and memorandum;
provide a copy of the parent company’s certificate of incorporation and its certificate of good standing;
appoint a person who will have the quality of branch office representative;
obtain a tax identification number and apply for a trading name.
Whenopening a company in Spainas a branch office, the company’s representatives have to prepare a set of documents that will be presented in front of a public notary, who will notarize them. Such documents can refer to the identity of the applicant, the identity of the parent company (such documents generally have to be translated into Spanish and notarized) and information concerning its existence, as well as documents that confirm the decision of the parent company’s board to establish a branch in this country.
The procedure may also include additional documents, such as the declaration of foreign investments, a document that can also be necessary when setting up a subsidiary in Spain. This declaration is issued by the Register of Foreign Investment of the Directorate-General for International Trade and Investments, which operates under the Spanish Ministry of Industry. Our law firm in Spain can assist investors with more information concerning this document.
The steps of purchasing a company in Spain
The process of buying a company in Spain is mainly represented by the contract drafted for the selling-buying operation; after this, the next step is to transfer the company from the previous owner to the new one. The transfer can be performed at same time with the signing of the contract or after that, within a period that is mutually agreed.
When a foreign investor decides to buy an existing company, he or she must pay special attention to the assets and liabilities of the company. In this case, it is recommended to perform the due diligence procedure that can be handled by our team of Spanish attorneys.
Although it is not compulsory to perform this action, it is highly recommended to do so before buying a company in Spain, especially if the foreign investor isn’t familiar with the Spanish legislation.
After the due diligence procedureis completed, the investor will receive a report on any debts the company may have. The lawyers can also establish if the former owner of the company fulfilled his obligations related to tax payments, intellectual property issues and many other aspects.
As a general rule, most of the ready-made companies in Spain are incorporated as limited liability companies, as this business form represents the most common type of company registered here. Furthermore, this type of legal entity can be set up as:
•public limited company – the general public is allowed to purchase shares in the company;
•private limited company – it is established by a number of investors, who have the right over the company’s shares.
It is important to know that a shelf company in Spain already contains the following:
•an incorporation certificate;
•value added tax number.
How to find out information about a Spanish company
The entrepreneurs who need more details about a Spanish company may go to the local office of the Trade Register and ask for detailed information. An alternative way of getting information is by using the database of the European Business Register. You don’t have to travel in order to access this database because the information is available online. For companies registered in Spain, you may get in touch with Colegio de Registradores de la Propriedad y Mercantiles de Espana.
Why invest in Spain?
Spain provides a set of competitive advantages which can make it a great business destination. It represents one of the most developed economies of Europe and one of the leading markets at a global level as well. Spain also benefits from one of the most positive projections regarding the growth of the economy for the current year (2019). The International Monetary Fund (IMF) ranked Spain as the second most developed economy at a global level for 2019, after the United States of America. Other relevant data on the Spanish economy are presented below:
at a global level, Spain is the 13th largest economy, while at a European level, it stands out as the 5th economy;
in 2018, it ranked as the 11th largest global exporter of commercial services;
at the level of the same year, it was the 17th most important exporter of merchandise;
Spain it is also the leading destination for international tourists (1st rank at a European level);
on a global level, it represents the 2nd country on tourism matters, accounting for a total of 82 million foreign tourists;
when referring to the country’s foreign direct investments levels, Spain stands out as the 13th largest economy.
The business registration procedure can take as long as several weeks as it is related to the type of company. If the registration application is filed online the incorporation is simpler and it will last less. For details about the business incorporation process, you may contact our law firm in Spain. OurSpanish lawyers can also assist you in choosing the right type of business structure.
Meet us in Madrid
Federico Richardson is a lawyer experienced in dealing with international clients interested in doing business in Spain especially in corporate and real estate sectors. He is a graduate of the University of Navarra, took part in various businesses and now he coordinates the engagements at Lexidy Law Boutique SLP. Contact us for details
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