Why do many entrepreneurs choose to start their business in Spain as a foreigner? The answer lies in Spain’s dynamic economy, strategic location, and vibrant culture. Boasting the fourth-largest economy in the Eurozone, Spain offers a fertile ground for business growth and innovation. Its diverse market provides ample opportunities across various sectors, from tourism and real estate to technology and renewable energy. Additionally, Spain attracts international investors due to its advanced infrastructure, highly qualified workforce, and advantageous government incentives. Spain offers firms access to a wide range of customers due to its strategic location as a gateway to Europe, Africa, and Latin America. This blog post will guide you through the essential steps and considerations for starting a business in Spain as a foreigner, ensuring you leverage the country’s unique advantages to establish a thriving enterprise.
Why establish a business in Spain as a foreign expat?
The compelling reasons to establish a business in Spain as a foreign expat includes:
- Strategic Location and Market Access: Due to its advantageous geographic position, Spain is a great place to launch an international business since it has access to markets in Latin America, the Middle East, North Africa, and Europe.
- Business-Friendly Culture: Spain is a well-liked location for business establishment since it has a laid-back business culture and is eager to draw in international talent and capital.
- Infrastructure and Connectivity: Spain boasts an impressive infrastructure, including the most extensive high-speed rail network globally, facilitating business operations and connectivity.
- Economic Opportunities: Spain is the 11th largest supplier of commercial services worldwide and has the fifth largest economy in the EU, making it an ideal place for businesses to expand and gain access to a growing client base.
- Legal Requirements: Both EU and non-EU nationals can open a business in Spain; the process for EU nationals is relatively simple, while non-EU nationals would need to take further measures, such as securing work permits and visas.
- Business Structure Options: Spain offers various types of commercial entities to choose from, such as self-employed, sole trader, partnership, and limited liability company, catering to different business needs and preferences.
- Tax Benefits and Low Capital Requirements: Entrepreneurs in Spain can benefit from tax cuts, low initial capital requirements, and the opportunity to set their own rates, potentially earning more than the average salary.
Requirements to start a business in Spain
As an EU-citizen
Individuals who are fiscally resident in Europe and plan to establish a company or become a director in Spain must obtain a Número de Identificación Extranjero (NIE) from the Spanish Police. This number functions as the Spanish tax code and is necessary for signing public documents or dealing with public administration.
If a partner in a Spanish company is a corporation from another EU country, the corporation’s legal representative must also obtain a NIE. Additionally, the foreign corporation must secure a Número de Identificación Fiscal (NIF), which starts with “N” to indicate it is assigned to a foreign company not established in Spain.
As an EU-non citizen
Non-EU citizens must meet the same requirements as EU citizens to start a business in Spain, including obtaining a Número de Identificación Extranjero (NIE) and a Número de Identificación Fiscal (NIF) if the shareholder is a foreign corporation. Incorporating a company and obtaining work authorization are distinct processes. Non-EU citizens can form a company and serve as shareholders or directors, and they can receive dividends. However, they cannot draw a salary unless they have a valid EU work permit.
Documents required to register a business in Spain as a foreigner
- Valid Passport
- NIE (Número de Identidad de Extranjero)
- Form TA 0521
- CIF (Certificado de Identificación Fiscal)
- No-Name-Coincidence Certificate
- Proof of sufficient financial resources
- Any required professional qualifications or accreditations
- Public Deed
- Business plan
- Application for a work permit
- Certificate of no criminal record
Types of Business Entities to Form a Business in Spain
- Sole Trader or Sole Proprietor (Empresario Individual or Autónomo): This is the simplest method to start a business in Spain, with no initial financial commitment necessary. However, because there is no legal distinction between private and company assets, it entails infinite debt liabilities.
- Jointly Owned Company (Comunidad de Bienes or C.B.): This sort of structure is appropriate for enterprises with numerous owners, as everyone is individually liable for the company’s debts.
- Partnership (Sociedad Civil): A partnership is a commercial structure in which two or more persons or entities collaborate to do business. Partners are individually liable for the company’s debt.
- Limited Liability Company (Sociedad de Responsabilidad Limitada or S.L.): This is the most frequent type of business entity in Spain, combining convenience of establishment with legal protection for business owners. The minimum capital requirement is €3,005.06, which must be completely subscribed and paid for at the time of establishment.
- Public Limited Company (Sociedad Anónima or S.A.): This is the most frequent type of business entity in Spain, combining convenience of establishment with legal protection for business owners. The minimum capital requirement is €3,005.06, which must be completely subscribed and paid for at the time of establishment.
- Cooperative: A cooperative is a business entity where the share capital is owned by the workers. This type of entity is suitable for businesses where the workers are also the owners.
- Branch Office (Sucursal): A branch office is a type of business structure that allows a foreign company to establish a presence in Spain without incorporating a new legal entity. The parent company is liable for the branch’s obligations and debts.
How to start a business in Spain as a foreigner?
The following steps to start a business in Spain as a foreigner includes:
- Obtain a Foreigner’s Identification Number (NIE): This tax identification number is essential for any fiscal transactions in Spain, such as incorporating a company.
- Choose a Business Entity: Spain offers various types of business entities, including sole proprietorship, limited liability company (SL), public limited company (SA), partnership, and branch office.
- Register the Company Name: Obtain a certificate from the Mercantile Registry (Registro Mercantil Central) to verify that the desired company name is not already taken.
- Get a Company Tax Identification Number (CIF): This is a temporary tax ID number for your business, obtained from the local tax office.
- Open a Business Bank Account: Open a bank account in Spain for your business.
- Sign the Deed of Incorporation: This public deed is signed by all future shareholders, confirming the intention to incorporate.
- Register the Company: Complete the company registration process, which can be done online or in person.
- Register for Social Security: The final step is to register your company with the local social security office.
Benefits for establishing a business in Spain as an expat
Market Accessibility and a Strategic Location
Due to its advantageous geographic position, Spain is a great place to launch an international business since it has access to markets in Latin America, the Middle East, North Africa, and Europe. Due to double taxation avoidance agreements and its gateway location to Europe, it is a desirable destination for worldwide firms seeking to expand.
Business-Friendly Culture and Incentives
Spain has a flexible corporate culture and is eager to attract international talent and investment. The government provides a variety of tax breaks, including lower corporation tax rates for new enterprises, tax incentives for R&D activities, and deductions for specific investments.
Well-Developed Infrastructure
Spain has an amazing infrastructure, including the world’s most comprehensive high-speed rail network, efficient highways, trains, ports, airports, and smart telecommunications, all of which help to facilitate commercial operations and link people.
Economic Opportunities
With the EU’s fifth largest economy and the 11th largest worldwide exporter of commercial services, Spain offers fertile ground for corporate expansion and access to an expanding consumer market. Operating costs, which include personnel, office space, and housing expenditures, are usually lower than in many other European nations.
Favorable Legal Requirements
Foreigners, both EU and non-EU nationals, can start a company in Spain; EU people have a simpler process, however non-EU citizens may need to take additional measures such as acquiring work permits and visas. The Spanish government recently enacted new startup legislation to make the process easier for non-resident investors.
Conclusion
Starting a business in Spain as a foreigner offers a good chance given its thriving economy and welcoming business climate. Despite its bureaucratic problems, Spain’s strong labor force, well-developed infrastructure, and welcoming legal system for foreign companies make it an advantageous entry point into the European market. With the help of its advantageous position, diverse culture, and expanding industries like tourism, technology, and renewable energy, this dynamic environment can support the growth of businesses. Success, however, requires careful preparation, knowledge of local laws, and cultural adjustment. A business endeavor in Spain may lead to profitable returns and create opportunities for long-term growth and wealth if approached and pursued with the appropriate mindset and dedication.Contact OnDemand International, if you want to register your business in Spain as a foreign expat hassle-free.