DOING BUSINESS IN SPAIN IN 2018
Since 2003, Healy Consultants Group PLC has been efficiently and effectively assisting our Clients with i) Spain business registration ii) business licensing iii) corporate bank account opening services in Spain and abroad iv) visa options and staff recruitment strategies and v) workspace rental solutions in Spain.
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Advantages and disadvantages
Advantages of Spain company registration
- Registering a company in Spain can be completed within a minimum capital of only €3,000 and appointment of a director, who is not require to live in Spain or the European Union. The registration process takes one month and can be completed without travelling to Spain;
- A Spanish resident company will enjoy access to multiple consumer markets, including:
- Spain is the 5th largest market in the European Union. By starting a business in Spain, our Clients will be able to market their goods/services to a market of 47 million people;
- Spain’s strategic location provides Spanish businesses the advantage of access to 700 million potential customers across the EU and North Africa. Furthermore, Spanish businesses find it easy to do business with South American countries due to their common language;
- Spain is the 2nd largest tourism market in Europe and the 5th largest in world. Consequently, Spanish businesses will have access to 58 million foreign tourists annually.
- Companies formed in Spain enjoy the following Government incentives:
- Companies investing in employee training programs can receive at least a 75% rebate on their social security contributions for employees enrolled in such programs;
- Since 2010, newly registered companies will benefit from incentives including i) a financial subsidy to reduce the interest on bank loans by 3% ii) one time grant covering 50% of total labour costs for hiring professionals and iii) subsidy worth €4,808 for every new permanent job created;
- Firms investing in approved R&D projects will receive complete funding from the Government for up to the six following years;
- Government loans are cheaply available at the EURIBOR rate to new IT SMEs which will cover 100% of the initial investment value.
- A Spanish trading company enjoys several tax benefits including:
- All imports/exports from a Spain made within the European Union will be legally exempt from custom duties;
- Spanish Free Zones offer resident companies incentives including i) reduced corporate tax rate of 4% ii) reduced VAT rate of 7% iii) transfer tax exemption and iv) stamp duty exemption;
- Spanish companies do not require an annual statutory audit if i) the total assets on the balance sheet are less than €2.8m ii) annual revenue is less than €5.7m and iii) less than 50 people are employed for two consecutive years;
- Companies with annual revenue less than €20 million are allowed to carry forward their operating losses for 18 years;
- The Spanish Government has concluded 88 double taxation treaties with countries like Australia, China, Canada, Singapore and the United States of America to reduce withholding taxes on payments abroad.
- Our Clients prefer Spain to register a holding company in Europe because:
- Capital gains and dividends received from global subsidiaries will be fully tax exempt, provided the shares i) have been held for one year and ii) represent either 5% of the subsidiary’s share capital or more than €6 million and iii) the distributing company is not incorporated in a tax haven;
- A Spanish holding company pays the standard rate of corporate tax on income but does not pay withholding tax on dividends and interest distributed to a non-resident shareholder;
- Setting up a Spanish holding company is easy, provided that all shareholders are not residing in tax-haven countries and the majority of directors are tax residents in Spain;
- Spain’s EU membership means no withholding taxes on dividend payments to other EU countries;
- By sharing similar corporate law, the Spanish holding company is an ideal vehicle for investments into and from Latin America.
Disadvantages of Spain company registration
- Business environnment can be difficult for start-ups doing business in Spain because:
- Spain still suffers the effects of the 2008 recession, consequently consumer demand is relatively low;
- Taxation in Spain is high with i) corporate tax rate of 25% ii) VAT rate of 21% iii) a branch office remittance tax of 21% iv) the employer’s social security contribution is 24% and v) personal tax rate between 19% and 27%;
- Only 30% the population speaks English and all business documents are written in Spanish. Consequently, foreigners might find it difficult to communicate with Spanish firms and employees;
- Employee unions are strong in Spain and cause frequent strikes, thereby impacting company productivity. Furthermore, staff productivity can also be an issue because Spanish people will take a break during the day for traditional siesta;
- It is difficult to hire full-time employees in Spain because the labor laws interfere with simple employer-employee relationship. A resident company cannot easily dismiss poor performing employees;
- Hiring non-EU workers can be a challenge in Spain as entrepreneurs will be required to prove that EU nationals were not denied the work opportunity.
Best uses for a Spanish company
- Forming a company in Spain is a good option for Clients willing to engage in manufacturing and services authorities. The country offers the right mix of good infrastructure, skilled employees at lower operational costs than other Western European countries;
- Spain is also a major food and beverage producer and can be an interesting location for doing such business in Europe.
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- Time to incorporate: Four weeks
- Cost to set up: €12,689
- Minimum capital: €3,000
- Physical office required: No
- Shareholders: 1
- Directors: 1
- Company secretary: No
- Resident director: No
- Corporate tax rate: 25%
- Corporate tax base: Worldwide
- Shelf companies: No
- Main company type: Sociedad Limitada
Frequently asked questions
Will details of my Spanish business be available for public viewing?Yes. In order to start a Spanish company, an entrepreneur must enter the business details in the public register.
Will there be restrictions in ownership if foreigners register a Spanish company?No. In most sectors, foreigners are allowed to own 100% of the Spanish company.
Will I be required to get a full audit if I setup a small business in Spain?An annual audit is mandatory for a PLC. An LLC can apply for exemptions under certain conditions i.e. for two consecutive years, i) the assets must be less than €2.8m ii) annual revenue is less than €5.7m and iii) less than 50 people are employed.
What are the tax implications for a business setup in Spain?Starting a business in Spain requires entrepreneurs to pay corporate tax at 25%.
Useful links for Spain
Government and public authority websites:
- Central Bank of Spain
- Spain Tax Authority
- Spain Stock Exchange
- Barcelona airport
- Spain hotels
- Spain Law Services
- PWC- Taxation of International Assignees
- KPMG – Country profile
- Deloitte – 2013 Banking Industry Outlook
- Doing Business In Spain
- Business Policies in Spain
- Taxation of Non-Residents in Spain
- Entrepreneur’s Guide for Spanish Market
- Spain Policies for a Sustainable Recovery