DOING BUSINESS IN SPAIN IN 2023
Since 2003, Healy Consultants Group 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.
|Compare different Spain entities||Tax Resident LLC||Fast Business Solution||Small limited company||PLC||Branch office||Representative office|
|Also known as||SL||SL||SLNE||Sociedad Anónima||Sucursal||Oficina de representacion|
|Best use of company?||All products/ svcs||Close Client deal now||Small enterprise business||Stock ex. listing||Specific projects||Marketing/ research|
|How soon can you invoice Clients/sign sales contracts?||1 month||1 week||2 months||2 months||2 months||2 months|
|How soon can you hire staff?||1 month||1 week||1 month||1 month||2 months||2 months|
|How soon can you sign lease agreement?||1 week||1 week||1 week||1 week||1 week||1 week|
|How long to supply corporate bank account numbers?||2 months||2 weeks||2 months||2 months||2 months||2 months|
|How long to supply company registration / tax numbers?||1 month||1 week||2 months||2 months||2 months||2 months|
|Corporate tax rate on annual profits (%)?||25||25||25||25||25||None|
|Value added tax %||11||11||11||11||11||None|
|Limited liability entity?||Yes||Yes||Yes||Yes||No||No|
|Government grants available?||Yes||Yes||Yes||Yes||Yes||No|
|EEA director/partner/ legal rep. required?||No||No||No||No||Yes||Yes|
|Foreign director needs personal tax no.?||Yes||Yes||Yes||Yes||Yes||none|
|Minimum paid up share capital? (EUR)||3,000||3,000||3,000||€60,000||none||none|
|Corporate bank account location?||Banco Santander||BBVA||Sadabell||Caixa||Bankinter||Banco Santander|
|Can secure trade finance?||Yes||Yes||Yes||Yes||Yes||No|
|VAT payable on sales to local customers?||Yes||Yes||Yes||Yes||Yes||No|
|Average total business set up engagement costs? (EUR)||€7,519||€7,950||€7,519||€8,519||€8,519||€8,519|
|Average total engagement period?||2 months||2 months||2 months||2 months||2 months||2 months|
|Average total business set up engagement costs?||€14,789||€19,900||€14,789||€15,989||€15,889||€13,239|
Spain business setup summary
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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:
- For the first two years, Spanish companies are taxed at a reduced rate of 15%. Thereafter, the corporate tax rate is 25%;
- 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 neutral jurisdiction;
- 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 holding company in Spain is easy, provided that all shareholders are not residing in tax-neutral jurisdictions 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.
- Spain has an abundant reserve of natural resources, making it an attractive destination for manufacturing and other allied industries:
- The country is resource-rich in minerals like kaolin, sepiolite, gypsum, uranium, zinc, copper, iron ore and coal;
- Spain has one of the most diverse mining industries in the entire Europe, producing most of the industrial minerals;
- The economy is the 7th largest producer of gypsum, 6th largest producer of fluorspar and 8th largest producer of cement in the whole world.
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 labour 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;
- The Spanish government has been constantly increasing the minimum wages for its workers every year. Currently, the minimum wages for workers in Spain is €736 per month. Therefore, it can be expensive for the employers of start-ups to hire new employees in Spain, in comparison to the other southern European countries.
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. Moreover, Spain has an excellent maritime connection that enables smooth navigation of the shipments to and from the country;
- Spain is also a major food and beverage producer and can be an interesting location for doing such business in Europe;
- Spain proves to be an excellent platform for automobile businesses that aim to further expand into the emerging consumer markets of Europe, Africa, Middle East and Latin America. This is because Spain is i) one of the leading exporters of cars, trucks and other vehicles to its fellow nations; ii) the leading Eco-Electromobility market in the EU and iii) the 2nd largest car manufacturer in Europe and the 8th largest worldwide.
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Useful links for Spain
Government and public authority websites:
- Doing Business – Spain Economy Profile
- Deloitte – 2019 Spain Tax highlights
- Spain – Market entry strategy