Set up a Company and Run Bussiness in Spain
The Spanish territory is the ideal landscape for foreigners from all around the world to start their own company. Ideal infrastructures, worldwide talent, and an entrepreneurial ecosystem makes cities like Málaga the best choice when deciding where to start.
We can solve out all your doubts. So get ready to learn the step by step process on how to set up your company in Spain as an expat.
Table of Contents:
1 Why should you open your company in Spain and not anywhere else?
2 Who can start a business in Spain?
3 Which type of company should you choose? How to do business
3.1.2 Sole trader vs “autonomo” (self-employed)
3.2 Limited liability company (SL)
4 How to set up a company in Spain as an expat
5 The 8 steps to starting your business as a foreigner
5.3 Getting your NIF (tax ID code)
5.4 Establishing the Shareholders of the Company
Why should you open your company in Spain and not anywhere else?
During the last years Spain has become a real business European center. Málaga is an important entrepreneurial hub that attract all the elements that can make a business successful.
In that sense, the main benefits of starting your company in the Spanish territory are the following ones:
- As too many successful start-ups are being born in Spain, this is attracting foreign talent and investment.
- The country has good logistics and infrastructures that can help your business project succeed.
- The country offers a big and diverse enough market to enable different types of business ideas to stick.
- Growing a company is a complete adventure. And Spain, thanks to its people, food, culture, and weather makes it the perfect place to enjoy that journey.
Who can start a business in Spain?
No matter if you are a foreigner or a local citizen of Spain, everybody is allowed to start your business in the country.
The actual legal constitution steps of the business are the following no matter if you are a foreigner or not. What’s different is the need to become a legal resident in the country, which creates an extra prior step you will need to realize.
Let’s examine the two possible cases:
- If you are from any country from the European Union, the procedure is straightforward. You just need to get your NIE and EU registry certificate, and then you can simply move to the constitution part.
- Nevertheless, if you are a non-EU citizen; you will need to get your working visa to start your business in the country. But you do not need a working visa to create a Company and even to become Director of the Company.
Which type of company should you choose? How to do business
Before starting the process of constituting a company, we must decide which will be its type. But we are not talking about the business model or specific project. We are talking about its legal structure.
In Spain, there are different company structures, which are defined by the Real Decreto Legislativo 1/2010, de 2 de julio, por el que se aprueba el texto refundido de la Ley de Sociedades de Capital.
Each of them has its own characteristics, and understanding their different purposes is crucial. We are just going to briefly talk about the main ones:
The four different business structures in Spain are the following ones:
1. Sole Trader
Probably the best option for small companies, as the legal process for its creation is really simple. One of its main advantages is that it does not require any type of initial investment.
Nevertheless, being a sole trader (“empresa individual”), has an important disadvantage: there is no distinction between the company’s assets and your personal assets. Hence, you are fully liable for any possible debt the company has.
For whom is this structure? For painters, web designers,… For those individuals whose activity does not require a company for its undertaking, as the work freelancers do.
Sole trader taxes and Social Cost
In terms of taxes, as a sole trader, you will pay income tax (IRPF). That implies that you will annually be in charge of your tax returns.
You will pay every month the AUTONOMOUS COST. Around 280 €. In Andalucía depending of how old are you could pay just 50€ during 24 month.
An example: Woman, 34 years old.
12 months: 60,00 €
6 months: 141,00 €
18 months: 198,00 €
This woman will get benefits during 36 months
As your activities are regulated under the income tax regime, it is possible that you end up paying an unnecessary amount of taxes by using this legal structure. And that will happen if your incomes are higher than € 50.000 per year.
So in case you are expecting to earn above that, our advice is to go for a limited liability company.
2. Limited liability company (SL)
This is, without any doubt, the most popular firm structure in the Spanish territory. Why? Because of its flexibility and easiness in the registration process, just demanding € 3.000 for the constitution process as a minimum capital investment.
If you foresee that you are going to get incomes over 60.000€, directly constitute a company instead of establishing yourself as a self-employed worker.
One of its main advantages is that your liability is limited to the capital investment made. So if you just invested € 3.000, that is the maximum amount it can be requested from you in case of indebtedness.
In this case you won’t pay income tax, but corporate tax (“impuesto de sociedades”), which is equal to 25% on your profits. Just 15% during the first two years with profits.
Filing your VAT returns is also required. Nevertheless, there are several exemptions that you can benefit from which can reduce the taxable amount considerably.
Depending of the kind of your business or if you are invoicing to EU Companies you need to filling others Tax Form just for info.
3. Stock corporation
A stock corporation or “sociedad anónima” is the legal structure reserved for big companies who trade with stocks. It is characterized by a much more rigid structure, and € 60.000 are needed for its constitution.
Its main advantage is that you can get external financing as the company’s shares can be bought at the stock market.
Nevertheless, we would suggest you first start with an SL and then move to a stock corporation once you decide to go for an IPO.
4. Branch office
But what happens if you already have your own company in any other country and would like to expand in Spain?
In those cases opening a branch in Spain is the right path. It will offer you the possibility to expand to a new market while harnessing the power of your brand and systems.
If you want to set up a branch of your company, you will need to present a notarized power of attorney and a copy of the company’s public deed of incorporation. In case the business law of your country requires it, you also need to present a certificate of good standing.
In this specific case, if you are the one opening and running the branch in the Spanish territory, you must be a resident in the country or have as representative an Spanish Tax Resident.
How to set up a company in Spain as an expat – 8 steps to starting your business as a foreigner
In order to start your business in the Spanish territory, you will need to go through the next steps:
- Get your NIE number
- Defining the names of the company and checking its validity: certificate of uniqueness. 5 Company names.
- Getting your CIF or tax ID number
- Opening a bank account to be used by the company
- Establish the shareholders and creating the shareholder agreement
- Going to the notary and signing the public deed of incorporation
- Registering the company with the tax authorities
- Registering the company in the social security
Get the NIE Number
The first thing to do as a foreigner is to get your NIE number. That is the identification number that will allow you to open a bank account, be tax identified, etc. The NIE is the most important thing in order to freely operate in Spain.
Getting the NIE is a really simple process. The amount of time in which you can obtain it will depend on whether if you are an EU citizen or not: it takes 3 to 5 working days to obtain the NIE number for EU citizens; and the time period for non-EU ones will vary depending on the corresponding Immigration Office.
There are two possibilities to get this number:
- Do it from your country of origin, at the Spanish consulate
- Doing it while in Spain. For that, getting an appointment in any police office is required.
Names of the Company
Once you have your NIE number you need to obtain what’s called a certificate of uniqueness. This document states that the name of your company is free to be used and is now under your possession. How to get it?
You need to make a list of 5 names you would like to give to your company. They must be sent to the Corporate Register of Spain (Registro Mercantil Central) in order to check their availability.
If available, they will accept one of the five, depending on the preferences you set beforehand when submitting them. This process can take up to 48 hours.
This will be the official name of the company, which will appear on your invoices and other documents.
You can always change the name
Getting your NIF (Tax ID code or VAT number)
You need your company to be identified with the tax authorities. That is why you need to request the company’s NIF. So, basically:
- First of all, you need to download the corresponding application form on the tax agency’s website
- Then, you fill that form out
- You cannot get an appointment with your local tax agency office to present it, along with your NIE. It has to be getting online
The Shareholders of the Company
At this point, you need to decide how many and who will be the shareholders of the company. Besides, determining who the director of the company will be is a required step.
In that sense, there are two different types of directors.
- First of all, we find the corporate director.
- It doesn’t need to have a salary or a work permit, and once a year he needs to sign the annual accounting of the company. Having this type of director implies that you will also need to have one worker under your structure, as the Spanish legislation requires.
- But what many companies actually do is to have one director with corporate and working functions altogether, so the need to have an employee is eliminated.
Once that is decided, you just need to create the shareholder agreement, defining each shareholder and the share percentage each has. This is one of the most crucial steps of the process; as you need to foresee any future possibilities in order to avoid problems later on. That is why we hugely recommend relying on a business lawyer.
Going to the notary to sign the public deed
With all the previously mentioned documents (NIE number, the bank certificate and the certificate from the Registro Mercantil), you now need to go to the notary to sign the public deed of incorporation. There, you will establish who the investors/shareholders and the administrator are.
Furthermore, you will need to introduce an address.
Also, you will need to clearly define which is the activity of the company. Our advice here is to be as open as possible: introducing all the activities related to what you are going to do. That is a crucial step. Why? Because it will avoid the need of going again to the notary in the future if you expand your business or pivot the core activity.
Then, the notary will register the company in the Company Registry. This process can take up to 2 weeks.
If you rely on us for the whole process of opening a business in the Spanish territory, we will coordinate and represent you in the notary, getting all the required appointments with the different legal institutions that appear among all the steps.
And, finally, the last step: Registration in the Employee System.
Bear in mind that if you are registering as a sole trader there’s a specific regime that applies, called RETA. During your appointment, you’ll need to present the 036 or 037 form, your NIE, passport and IRPF form.
Registering with social security