Sun, sangrias, and SMEs – these are the cornerstones of modern Spain. This Iberian nation has established itself as an international business powerhouse, welcoming entrepreneurial individuals that will bolster the local economy by creating small businesses that employ local talent.
If you have a great business idea and are looking for a broad trading market, Viva España!
Does Spain welcome overseas businesses?
Spain welcomes foreign business, as anybody can open a new company under the same conditions as a local. As long as your paperwork is in order, you will be invited to open an SME.
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In fact, you’ll be encouraged to do so – Spain operates a business structure known as a Sociedad Limitada Nueva Empresa (SLNE) or a New Enterprise Limited Company, at a preferential tax rate with minimal paperwork.
What industries are most popular in Spain?
The most prominent industries in the Spanish national economy are:
- Tourism
- Energy and electricity
- Pharmaceuticals
- Automobile manufacture
- Agriculture
Do not sleep on the potential of IT and business services, though – the Spanish authorities are keen to bolster the digital economy in the nation.
Is it easy to set up a business in Spain?
It’s getting easier, as the Spanish authorities are working on ways to streamline the process and reduce some of the red tape involved in starting a new venture. However, there is still a great deal of red tape to cut through.
The process is as follows.
How to set up a business in Spain
- Register yourself as a Spanish resident
You will not be able to start the process until you have a Tarjeta de Residencia (residence card) or Tarjeta de Identidad de Extranjero, or TIE (foreign identity card)
- Decide on your preferred business structure
See the section of this guide about Spanish business entity types
- Apply for a Número de Identificación de Extranjero (Foreigner Identity Number, or NIE)
Do this through your local Spanish police station or the Spanish Consulate in London
- Think up three or four possible names and file them with the Registro Mercantil
One of these names will be approved, or you’ll be asked for three more
- Get your company name notarised
Get help from a local business agent if needed
- Using your NIE, open a local business bank account in Spain
You’ll need to deposit a minimum share capital of €3,000 at this stage – more if you’re opening a public company
- Apply for a Número de Afiliación de la Seguridad Social (Social Security Number)
Do this through the Tesorería de la Seguridad Social
- Apply for a Certificado de Identificación Fiscal (Tax ID Number)
Get this from the Agencia Tributaria (Spanish tax office)
- Return to the Tesorería de la Seguridad Social
And register to make social security payments for your employees
That’s it – you’re now ready to start trading in Spain.
Can I run a business in Spain while living overseas?
You do not need to remain in Spain to operate your business once it is up and running, but you will need to be a resident to start the company. If this is not possible, your best option is to open a branch of your existing company and appoint a Spanish local as a director.
Cultural considerations when running a business in Spain
Running a business in Spain means embracing the local culture. Things to consider when trading in Spain include:
- Meetings are often a little chaotic, involving a lot of personal chit-chat before getting down to brass tacks, but you’ll still need to observe hierarchy and formality. Address potential partners as Señor or Señorita until invited to use given names.
- Do not try to schedule meetings during August. This month is often reserved for family holidays, and many associates will be unavailable.
- Business relationships in Spain are built on trust and personal interaction. Do not be closed off if a potential business partner tries to get to know you personally – that’s par for the course in Spain.
- More and more women are taking on management positions in Spain, but it’s still common for women to have their appearance commented upon by colleagues and trading partners. You do not need to like this but be prepared for it.
What business structures are supported in Spain?
The four most popular business structures for a new venture in Spain are as follows.
| Type of Spanish business entity | What is it? |
|---|---|
| Empresario Individual or Autonomo | A sole trader that pays income tax rather than corporation tax and can hire up to five local employees through the Foreign Non-Resident Employment Structure without registering a business. |
| Sociedad de Responsabilidad Limitada (SRL) | A Limited Liability Company that keeps your business’s finances and legal affairs separate from your own records. This is the most popular business structure in Spain. |
| Sociedad Limitada Nueva Empresa (SLNE) | A simplified version of an SRL designed to encourage the creation of SMEs. This business can be up and running within 48 hours, but you’ll still need a minimum share capital of €3,000. |
| Sociedad Anónima (SA) | A public company that is floated on the international stock exchange. Only recommended for very large business interests, an SA is expensive to set up and requires a lot of paperwork. |
Alternatively, you can open a branch of an international business by registering with the Central Mercantile Register. You will not need to pay any set capital to open an extension of a British company.
Taxation in Spain
If you want to do business in Spain, you must understand the taxation rules and regulations that will impact your bottom line.
What is the corporate tax rate in Spain?
For the first two years of trading and turning a profit, the corporate tax rate in Spain is 15%. After this, the standard rate of 25% becomes payable. The UK and Spain have a double taxation treaty, so you will not be charged twice for the same profits.
What are the employee income tax brackets in Spain?
All employees in Spain must pay income tax on their salary. Income tax brackets in Spain break down as follows.
| Annual salary | Income tax rate |
|---|---|
| €5,999 or lower | 19% |
| €6,000 – €49,999 | 21% |
| €50,000 – €199,999 | 23% |
| €200,000 or higher | 26% |
Income taxes must be withheld from a monthly payroll, along with a contribution of 4.7% of salary to the Tresorería General de la Seguridad Social (social security fund.)
How are taxes paid in Spain?
The financial year in Spain mirrors the calendar year – January 1st to December 31st. Taxes should be filed with the Agencia Tributaria and paid after May 2nd of the following year, no later than June 30th.
Payroll and hiring Employees in Spain
Hiring the right talent can make or break a company. Ensure your Spanish business interests are staffed by the best possible talent.
Does Spain welcome overseas talent?
While Spain welcomes overseas entrepreneurs and business owners with open arms, importing talent to fill any vacancies within your business will be trickier. As with many nations, the Spanish authorities prioritise employment opportunities for locals, and it can take up to a year for an employee to be awarded a visa.
If you are desperate for Spanish representation, you could position an employee in the country on a digital nomad visa. This will allow somebody to live in Spain for up to five years, paying a reduced income rate of 15%. The catch is that 80% or more of this employee’s income must come from outside Spain, so wages must come from a non-domestic payroll.
Who needs a visa or work permit to work in Spain?
If an aspiring employee does not have a passport from an EU or EEA country or Switzerland, a work permit and visa will be required to work in Spain.
Any overseas national wishing to spend between three and six months in Spain also needs a Tarjeta de Residencia. Anybody planning to stay longer than six months requires a Tarjeta de Identidad de Extranjero.
What employee benefits are compulsory in Spain?
Benefits packages are comprehensive and generous in Spain. As a business owner, the following perks will be mandatory.
- No less than 22 working days of paid holiday, plus public holidays. Spain observes nine national public holidays, with some regions celebrating more
- Pagas extraordinarias (extra pay) twice a year. Spanish employees will receive an extra month’s salary in the summer and at the end of the year
- Overtime, paid at 150% of the standard hourly rate, for any employee that exceeds 40 hours of work in a single week
- 23.6% of monthly salary paid to the Tesoreria General de la Seguridad Social (national social security fund)
- 16 weeks of paid maternity leave
- Sickness pay at 60% of a salary after four days of illness (the first three days are unpaid) for up to 20 days. If the employee was injured at work, this increases to 75%
- In the event of termination, 20 days of severance pay for every year of service
- Medical insurance
Employment law considerations in Spain
Spanish law dictates that all employees in the country must earn a minimum wage of €1,000 per month. This has increased over the years and will likely do so again in the future, so factor this into any plans to employ the local labour force.
The Estatuto de los Trabajadores, or Worker’s Statute, protects the rights of employees in Spain. It is challenging to terminate employment in Spain without a compelling reason, especially with unions being so popular, so think hard about your recruitment and remain in contact with a local employment law expert.
Cultural considerations when hiring employees in Spain
If you wish to run a business in Spain that relies upon the local labour force, ensure you understand some of the nuances you will encounter. These include:
- The idea of an afternoon siesta and a long working day is outdated. Most employees prefer to start and finish work early, taking a shorter lunch.
- Although Spanish employees may not take long lunches or naps, the coffee break is a sacred part of business culture in Spain. Allow your employees to catch their breath and catch up for 15 minutes periodically.
- Spanish nationals are typically proud of their heritage, especially those from the Catalan region. Avoid making jokes or stereotypes about the Spanish nation.
- It’s quite common for Spanish employees to be more tactile than you are used to. Try to avoid shying away from physical interaction, lest you cause offence!
- Expect your employees to be risk-averse and avoid making decisions without express permission. While newer generations are a little more self-motivated, a fear of overstepping boundaries in the workplace is common in Spain.
FAQs about setting up a business in Spain
Still have questions or are seeking a swift answer to a basic query? Here are some of the most frequently asked questions about establishing a business in Spain.
Expect to wait around three months before you can start trading in Spain, as setting up a company can be pretty laborious. The exception is an SLNE, which can be set up in a matter of days.
The three most popular business structures in Spain are Sociedad de Responsabilidad Limitada (SRL), a Limited Liability Company; Sociedad Limitada Nueva Empresa (SLNE), a New Enterprise Limited Company that acts as a simplified version of an SRL, or Sociedad Anónima (SA), a public traded company.
If you prefer to operate as an empresario individual (sole trader) in Spain, you can use the FNRE to employ up to five local employees. Working under the FNRE also means you will not pay corporate taxes, but trading restrictions will also be placed on you.
Estatuto de los Trabajadores is Spanish for Worker’s Statute. The ET is a formal confirmation of Spanish employment law and employee rights. You will draw up a Convenios Colectivos, or Collective Agreement with your employees and/or their trade union.
The RMC approves or denies applications for a trading name and holds information about a business akin to the UK’s own Companies House.
Employers must pay 23.6% of an employee’s salary into a social security fund with the Tresorería General de la Seguridad Social monthly. Employees contribute a further 4.7%, to be withheld from a monthly payroll wage.
Smaller companies with 25 employees or fewer can assign a three-month probationary period. A business that’s any larger will find probation capped at two months.
As social security payments in Spain are so high, expect to pay more than one-and-a-half times your employee’s salary in expenses over a year.
An SL can be set up with a share capital of €3,000 (around £2,600.) An SA needs €60,000 (£52,000.)
Yes, you’ll need a local business bank account to trade in Spain.
Most Spanish businesses operate a traditional 40-hour working week, Monday to Friday.
Given the generosity of the Spanish social security system, most benefits are mandatory. Enhanced insurance and retirement packages will always be welcome, though.
No, Spain does not recognise “at will” termination and employee rights are well protected by law. You must abide by strict regulations if you wish to terminate an employment contract.
Spanish employees are entitled to a minimum of 22 paid holiday days, at least 10 of which must be taken in one single block.
Yes, you’ll need to set up the branch with the Central Mercantile Register. This can be done online or in person by a Spanish representative for your business.
If you are operating as a sole trader with less than five employees, you can run payroll through the FNRE. If you set up an SRL, consider partnering with a payroll agency.
If you wish to move to Spain to run your business, you can apply for an entrepreneur visa or work visa (the latter only applies if you will be acting as an employee of a Spanish company.) If you invest at least €500,000 in property in Spain you can apply for a golden visa, or if you can prove that you are independently wealthy enough to support yourself and any dependents without working, you can apply for a non-lucrative residence visa.