Set Up Business in Spain
Spain Expansion Guide
Global Upside helps companies set up, hire, and operate in Spain. Set up a legal entity quickly and easily with our solutions for branch, subsidiary, and rep office. Looking for an alternative to permanent establishment? Hire and pay employees in Spain without a legal entity by using our PEO & employer of record services. Once your business is set up, our teams can support with recruitment and staffing, human resources, employee benefits, payroll, accounting, and tax.
Capital City
Madrid
Currency
Euro (€)
Language
Spanish
Government
Constitutional Monarchy
Country Overview
Spain has a population of 47 million people and is the 4th largest country in Europe in terms of the area coverage. Spain was listed as the world’s 16th largest importer and 12th largest exporter in 2012, and has continually emerged as a high-income economy. “The Economist” states that Spain ranks among the top ten countries in terms of quality of life.
- Spain is the world’s largest producer of olive oil and the world’s third-largest producer of wine. The nation is also one of the largest producers of strawberries and oranges in the world.
- Spain primarily exports motor cars, petroleum products other than crude, vehicle parts, and medicaments.
- The main imports are mineral waxes, mineral oils, and products of their distillation, mineral fuels, and bituminous substances.
Options for setting up a legal entity in Spain include:
Limited Liability Company (Sociedad de Responsabilidad Limitada/SL)
Many small and mid-sized companies in Spain utilize limited liability company (Sociedad de Responsabilidad Limitada/SL) structures. The capital required to incorporate an LLC is €3,005.06. Setup also requires at least one shareholder (with a maximum of 50 shareholders).
Public Limited Company (Sociedad Anonima/ SA)
A public limited company (Sociedad Anonima/ SA) is a form of establishment where the capital required is €60,101, 25% of which must be paid prior to incorporation. There is no limit on the number of shareholders that can be involved, however, mandatory audits must be completed annually.
New Enterprise Limited Company (Sociedad Limitada Nueva Empresa/SLNE)
A new enterprise limited company (Sociedad Limitada Nueva Empresa/SLNE) is an altered version of the SL which became available in April 2003. SLNE incorporation processes are more simple than those for SL structures. The maximum number of stakeholders for SLNE is 5 and the minimum capital required is the same as an SL (€3,005.06). The maximum capital requirement is €120,202.
Sole Trader (Empresario Individual)
A sole trader (Empresario Individual) is a type of setup designed for individuals intent on establishing a small business. This is the simplest form of legal business setup. The capital requirement for this structure is low, but the business owner is liable for all obligations. There is no minimum investment required.
Partnership (Sociedad Civil)
A partnership (Sociedad Civil) is a form of an official business arrangement that requires a minimum of two partners. Capital requirements must be paid equally by the partners. All profits, work, and liabilities must be shared amongst the partners.
Co-Ownership (Comunidad de Bienes/CB)
Co-ownership (Comunidad de Bienes/CB) is similar to a partnership. There must be a minimum of two people to establish this structure. The liability for each partner is unlimited and there is no fixed minimum capital requirement. An official agreement of partnership (Contrato de constitución) must be made between partners in order to complete the establishment of this entity structure.
It takes at least four weeks to establish a legal entity set up in Spain.
Employment contracts in Spain can be written or verbal, but verbal contracts are unusual. For the employment agreement to be valid, the employment bonds must be sent to the Public State Employment Service within 10 days of commencing the contract. According to the Spanish employment laws, the following information is required on all employment contracts:
- Name and address of the employer and company
- Professional classification
- Working hours and schedule
- Start date and date of termination (if applicable)
- Remuneration and frequency of payment
- Holidays
- Collective Bargaining Agreement (if applicable)
There are 14 public holidays per year. Eight holidays are observed countrywide:
- Jan. 1: New Year’s Day
- Good Friday
- May 1: International Workers’ Day
- Aug. 15: Feast of the Assumption
- Oct. 12: Spanish National Day
- Nov. 1: All Saints’ Day
- Dec. 6: Spanish Constitution Day
- Dec. 25: Christmas Day
In most cases, the payroll frequency is monthly. However, the specific payroll frequency for an employee depends on the employment bond or the collective bargaining agreement (CBA). Regardless of payment frequency, all employers must provide a payslip to employees with relevant payment details each time they are paid.
All accounting standards in Spain must adhere to the International Financial Reporting Standards (IFRS).
Corporate Tax
The standard tax rate in Spain is 25%. For earnings of less than €200,000, there is a reduced income tax rate of 16.5%.
Value Added Tax (VAT)
The standard VAT rate here is 21% and there are reduced rates of 10% on food items, medical devices, etc. and a ‘super-reduced’ rate of 4%.
The Data Protection Directive’s domestic applications have been replaced by the General Data Protection Regulation (GDPR). This regulation mandates increased transparency for how employee data is used and provides additional protection of employee data.
Anti-Bribery & Anti-Corruption Law
The recent anti-bribery and anti-corruption laws in Spain demonstrate the adoption of the SCC, Spanish Criminal Code.
Bribery for Public Officials
For Individuals:
- Imprisonment for a minimum of 3 to 6 years
- Daily fine of €2 to €400 for 1-2 years
- 7 to 12 year ban from their profession
For Businesses (under sections 424 and 425):
- Suspension of the entity’s activities for a minimum of 5 years
- Daily fine of €30 to €5,000 for 6 months to 5 years
- Disintegration of the establishment
Bribery for Private Officials or Entities
For Individuals:
- Imprisonment for 6 months to 4 years
- Monetary fine equating to 3 times the value of the bribe
For Businesses:
- Official publication of the misdeed
- Daily fine of €30 to €5,000 for 6 months to 5 years
- Disintegration of the establishment
