Table of contents
- Options for obtaining business visa
- Entrepreneur visa
- Golden visa
- Digital nomad visa
- How to set up a business in spain as an expat
- Self-employed or sole trader business
- Costs of starting a self-employed business in spain
- Limited liability company in spain
- Steps to set-up a limited company in spain
- What is the cost of setting up a limited company in spain?
- How long does the process take to start business in spain?
- Accounting costs to maintain a limited company in spain
- What is the most tax efficient way for a company to run in spain?
- Buying a business in spain
- Would we be better to register the company in gibraltar and have bank accounts in gibraltar?
- Could the company name be the name of the registered sole-trader?
- Can a foreign company open a branch office or subsidiary in spain
- Initial steps
- Tax registration
- Legal liability
- Licenses and permits
- Employing staff when starting a business in spain
Unless moving to Spain from the UK for retirement, under a non-lucrative visa, an English-speaker will need to have a plan on how to earn an income. Due to language difficulties - barring an internal company transfer - English-speakers would not have many good options of finding a traditional job in Spain.
Of course, Brexit has complicated matters further still for British citizens and, together with other non-EU citizens, the only real option is setting-up their own business in Spain.(*Note, buying property in Spain of a value over €500,000 can also give a right to live and work in Spain).
Before we get into the details of starting a business in Spain, we should therefore take a look at the legal options for doing so, assuming that the person is a non-EU citizen.
1. Options for obtaining business visa
There are a number of legal routes available - some quite recent - to non-EU citizens who wish to live and carry on a business in Spain.
2. Entrepreneur visa
Law 14 of 2013 is the legislation that sets-out the rules that govern the issuing of the Entrepreneur Visa.
This is a relatively difficult visa to obtain, since the legislation requires the business to be truly innovative as well as aligned with the interests of Spain. In effect, this means that the business must create employment in Spain. It must also involve a high level of technology and enhance the socio-economic development of Spain. This rules out standard businesses such as in catering, transport or retail.
Amongst other requirements for the Entrepreneur Visa is the necessity to prepare and submit a detailed business plan to support the application.
It is wise to seek legal assistance from a business lawyer with experience in making such applications, in order to obtain a successful outcome, since the business plan needs to follow a specific format and include the benefits sought by the Spanish government in such applications.
3. Golden visa
The same legislation provides the possibility for foreign investors to obtain a residence permit with right to work in Spain - including running their own business - upon investment in a property in Spain.
A so-called Golden Visa in Spain consists of the purchase of property in Spain for a minimum of €500,000 (not including any mortgage) per visa applied for. Therefore, if a couple intended to both work in their own business in Spain, the investment should be €1,000,000.
Other investment options exist to obtain a work permit in Spain, however these are rather more expensive, so most applicants opt for the property purchase as they also need somewhere to live while in Spain.
4. Digital nomad visa
A more recent development has been the possibility of obtaining a work permit as a digital nomad, including a type of self-employed worker visa.
This new Spain digital nomad visa aims to take advantage of the exodus of employees and self-employed following from traditional offices following the pandemic, and who, with the benefit of modern communication technologies, are able to provide their services from anywhere in the world.
The logic is that, if such workers are registered with the Spanish tax agency and social security systems, then Spain can benefit from increased numbers of taxpayers. This also allows the Spanish government to benefit fiscally from a phenomenon that already, in effect, exists.
5. How to set up a business in spain as an expat
Once the issue regarding legal rights to live and work in Spain have been dealt with, the next step is to determine which of the various business structures possible in Spain would be the most appropriate for your business.
Effectively these are largely the same as in other countries, and boils down to choosing whether you prefer to trade a a sole trader, or with the structure of a limited liability company.
Each of these has its own benefits, and the choice will depend on the nature of your business and the level of expenses you are able to manage.
6. Self-employed or sole trader business
In Spain, a self-employed worker is known as an 'autonomo'. We deal in depth in another article about the differences between sole trader and the limited liability company in Spain.
In summary, setting-up as a sole trader is faster and cheaper than setting-up a limited company.
The registration process involves obtaining a Spanish tax identification number from the local tax office as well as registered with the Social security system for a tax id code. The latter is necessary in order to benefit from access to the national health system and public pension, though this may depend on the type of visa required to work in Spain, if any.
Sole traders in Spain pay income tax annually, being the difference between your profits less any deductible expenses. You would also be required to make VAT returns each quarter with an annual summary as well.
There are other filing requirements relating to your tax payments and these are generally best managed by an accountant on your behalf, to ensure compliance and avoid fines.
7. Costs of starting a self-employed business in spain
One of the main attractions of this type of business structure is the reduced cost. You are likely to pay a few hundred Euros to get set up and then pay monthly fees of between €60 - €100 for bookkeeping service to manage your tax reporting and payment requirements - a reduced cost since you are being taxed as a natural person.
You will also need to make monthly social security payments that are rather higher than in the UK, for example. In Spain it is not possible to reduce liability to make these national insurance payments and the long-term monthly payments will be approximately €350 per month.
While this is appropriate for many types of business in Spain, it is of course the least adaptable of the business structures available and if you need the ability to have a more complex business in Spain, then you will probably be more interested in setting-up a limited liability company.
8. Limited liability company in spain
As the name suggests, one of the main benefits of choosing a limited liability company business structure is that you are not liable, via your personal assets for any company debts or liabilities of the business.
As alluded to earlier, it is also more flexible supporting more complex business structures, involving multiple directors/owners as well as holding companies in other jurisdictions.
With this greater flexibility comes greater cost - both in terms of the initial investment as well as the ongoing fiscal reporting obligations that you have as the director of a Spanish company.
9. Steps to set-up a limited company in spain
In order to set-up a limited company in Spain, you will need to ensure that the following are carried-out:
- Draw-up a notarial contract according to the business objectives of the company
- Draft the Articles of Association including all necessary elements
- Ensure compliance with the requirements of the Commercial Companies Code
- Obtain company tax and identification numbers
- Obtain any business licences requires to carry-out the business activity of the company
- Register any employees of the company with the social security system, obtain a tax identification number for each employee
- Open a bank account in Spain to manage income and disbursements of the company, including tax payments
10. What is the cost of setting up a limited company in spain?
There's no fixed cost. It would depend on several factors (such as: initial share capital, number of partners, extension of the incorporation deeds, …).
The costs for setting-up a limited company in Spain (3,000 euros initial share capital, with 1-4 shareholders usually are:
3,000 € (initial minimum share capital). This is not actually a cost per se. You have to deposit this amount in a Spanish bank account and once the company is registered, you are free to use this amount to invest in assets on behalf of the company.
setting-up cost: 1,500 € – 2,000 € (including notary fees, register the public deed at the mercantile register – company´s name reservation and certification, registration with the tax authorities and the social security system, lawyer's fees …).
11. How long does the process take to start business in spain?
A new company incorporation usually takes 4-6 weeks, once the shareholders obtains a tax identification number - known as the Spanish NIE number. In order to become a shareholder, every partner will need a tax identification number in Spain.
12. Accounting costs to maintain a limited company in spain
A monthly fee will normally be charged by an accountant to carry-out the following tasks:
- Maintenance of legally required records
- Quarterly IVA returns
- Annual Corporate Tax Returns
- File Accounts - Annual Return (Abbreviated accounts, balance sheet, profit and loss statement, annual report)
The monthly fee will often vary depending on the number of transactions that are invoiced by the business.
13. What is the most tax efficient way for a company to run in spain?
The answer to this question would depend on a number of different factors, however, because of level of Spanish corporate tax, the lower the profit generated by the business, the less tax efficient it is to run it as a limited company, and the more likely you are to benefit from taxation as a sole-trader or self-employed.
With a larger profit, a limited company would be preferred, since a combination of corporate tax and dividends would lead to a lower tax return than under income tax.
It is also worth taking into account that the Spanish tax authorities are now permitting new limited companies to pay corporate tax at a lower rate for the first 2 years (15% vs 25%) as an incentive to new companies to start trading in Spain.
This may affect your analysis of which business structure you prefer to do business in Spain.
14. Buying a business in spain
Quite often, it can seem an attractive proposition to buy an existing company in Spain rather than starting a new business from scratch. However, it is worth pointing out that this route to starting a business is littered with risk.
If you buy an existing business in Spain, you will be taking on any existing liabilities that the company may have. This could include pending legislation for any quantity of potential business misdemeanors involving competing businesses, former clients and/or existing or former employee.
While it may be the correct option when dealing with very specific businesses from which the new business would benefit enormously, it is unlikely to be the recommended option in most situations, given the potential for liability.
It is standard that, if buying what is known in Spain as the ‘traspaso’, which is a payment akin to ‘good-will’ in English, that any licences required to operator the business, are included in the purchase price.
15. Would we be better to register the company in gibraltar and have bank accounts in gibraltar?
Most likely the taxation would be lower, but from a commercial perspective there are negative aspects to setting-up a business in Gibraltar (companies and customers in Spain are usually wary of companies from Gibraltar, because Spanish rules and warranties do not apply.)
Also, as a resident of Spain, you will be liable for personal taxation in Spain on worldwide income which will mean that any income derived from the profits of the company will be subject to Spanish income tax anyway and you will also most likely need to hire two sets of professionals to manage your fiscal responsibilities, thus increasing your cost base.
16. Could the company name be the name of the registered sole-trader?
Yes. you can use either of the following as the company name:
- name of one of the shareholders.
- invented or figurative name
Obviously the company name may not already be registered by another entity.
17. Can a foreign company open a branch office or subsidiary in spain
It is quite common that an individual who already has their own company in another country wishes to continue operations after moving to live in Spain. Also common is for foreign companies to seek a local base in Spain for their Spanish business expansion. Both would have the option of setting-up a branch office in Spain.
Bear in mind however that if a parent company in another country is considering opening a subsidiary company in Spain, for example a commercial office to manage their sales operations, this will mean that the branch profits will be subject to taxation as a non-resident company and any applicable double taxation treaty. This may or may not align with the business owner's objectives.
As a non-resident company, the branch need not have a minimum share capital of 3000 € as does a Spanish limited company.
18. Initial steps
In order to set-up a branch it is firstly necessary to expressly agree, in the country of origin of the company, according to the rules established by that country, to create a Spanish branch.
In the document that creates the Spanish branch, it is necessary to specify who will be the officers - Managing Director, board of directors - as well as a legal representative in Spain. This latter individual must be resident in Spain.
Later, the Spanish branch of the company is created via the issuing of the corresponding public deeds of incorporation before a Spanish public notary.
To begin with, before the notary, the Spanish legal representative of the company should be present and the legal representative should have, among other documentation, the deeds of incorporation of the parent company, in order that they may be transferred to the Spanish branch, the agreement to create the Spanish branch and the agreement to appoint the Spanish legal representative.
It should be noted that all of the documentation should be translated by an Official translator, and legalised with the Apostille from the relevant Spanish Consulate or Embassy.
19. Tax registration
The Spanish branch, once incorporated must obtain a CIF (Fiscal Identification Number) in Spain and should be inscribed in the Mercantile Registry.
In addition it is necessary to open a bank account in Spain in the name of the Spanish branch and register with the Spanish tax authorities. Registration with the Spanish tax authority is a requirement for any legal entity before it may begin trading in Spain.
At the same time, it is necessary to register locally for the Economic Activity Tax, at least 10 days before beginning economic activity, though it should be stressed that for tax purposes the branch will be considered as non resident.
The fiscal rules that apply to the Spanish branch will depend on the Double Taxation Agreements applicable in the specific circumstances, and if there are none, Company Tax shall apply.
Among other duties the Branch must keep it’s own accounts and the parent company must submit the annual accounts to the Spanish mercantile registry.
20. Legal liability
Legally, it is necessary to highlight that, regarding branches of foreign based companies, they do not have their own ‘legal personality’, that is to say, that they are not a company distinct from the original parent company, even though they be inscribed in the mercantile registry with their own registered number.
Accordingly, the founding company is legally responsible for the actions and obligations that may be derived from the activity of the branch, that basically means that the liability of the parent company is unlimited.
21. Licenses and permits
Depending on the business idea that you wish to develop in Spain, it is possible that you will need to obtain some type of licence or permit to carry on the business. The range of business activities that require a licence is vast, and includes everyday businesses such as bars and restaurants, transportation (of people) to specialist holiday activities such as snorkeling and diving.
If the activity requires premises, then the premises may need to be inspected by a qualified architect who can recommend any changes that need to be made in order for the premises to satisfy local business regulations.
Of course, not every business in Spain will require a licence, but it is something to bear in mind when considering start-up costs.
22. Employing staff when starting a business in spain
If you are planning on employing staff at your new business, you will need to take into account the rather complex process of hiring and employment contracts in Spain.
While this is an entire field of law, it is worth pointing out that it is important to to take extra care that if you are hiring a foreign citizen, that they are a legal resident of Spain, and have a work permit that entitles them to work legally in Spain.
It is quite common for foreign owners of companies in Spain to seek foreign citizens to work there, since the nature of the work can quite often involve dealing with other foreign residents or tourists in Spain.
Suffice it to say that the Spanish authorities are very capable of issuing swingling fines for any contravention of employment laws in Spain.