Starting a Business in Spain
Many foreigners that have come to Spain to start a business have previously found it to be a very frustrating country in which to do business in and form a company. The bureaucracy associated with forming a company in Spain can be staggering and used to involve the completion of numerous documents and procedures. In an attempt to encourage self employment and company formation in Spain the government recently introduced within each province throughout the country an information desk dedicated for businesses where all documents can be obtained and where the presentation of these can be made.
Forming a company in Spain can nevertheless be very frustrating for non Spanish speakers as all documents are of course in Spanish and you must be able to understand them. For this reason it is always recommended for foreigners setting up a company in Spain to employ the services of a licensed professional who specialises in administrative tax affairs and company formation in Spain, these professionals are known as a gestor who work in gestorias.
You should make sure that you have enough working capital to last you at least a year without taking any money out of a business in Spain and until the business itself takes off. Hiring staff in Spain is a big step and they enjoy extensive rights. It is expensive to take on full time employees, in addition to their salary you must pay approximately 30 percent in social security payments, give them two extra months salary and grant them 30 days paid holiday as well as 14 paid public holidays each year.
Many of the companies in Spain established by foreigners are dedicated to leisure, catering property investment or development industries to name but a few. An SL (Sociedad Limitada) is the most common and simplest form of limited company in Spain, it does not have any public shares and the capital is divided among it’s shareholders. The minimum capital required to set up an SL company in Spain is just over three thousand euros.
If the particular type of business in Spain requires premises such as a workshop, office or shop then you must obtain an opening licence by law from the local council. The cost of this licence can vary considerably depending on the size of the premises you are conducting your business from, premises over 300 square metres will require a full application and project plan to be submitted to the local authorities with all the necessary corresponding documentation. This type of licence is usually done by a local industrial technician who specialises in this area.
It is not unusual to have to wait around six months for the opening licence to be issued although many business actually operate without a licence and may continue to do so for many years, these businesses are increasingly being closed down by the local authorities. If you plan to serve alcohol or food then you will be required to obtain a health licence and undergo sanitary and technical inspections, employees will also need to obtain a food handling certificate.
Companies in Spain are assigned a fiscal identification number which is what is used for all tax purposes. All limited companies in Spain must file corporate tax returns which must be submitted to the provincial head quarters in the province where the company is registered. Various tax returns must be made in addition to corporation tax such as personal income tax, income tax of sole proprietors and value added tax. Corporation tax in Spain is currently 25 percent although the government plan to reduce this further to encourage productivity. Surcharges and interest are levied for late payment of tax in Spain and large fines are imposed for any tax infringements. Having said this, if you overpay your tax you are able to claim a refund when you submit your annual tax declaration.