Spain stands out as one of the most productive countries within the European Union for building firms, driven by its substantial investment rates, expanding manufacturing sector, and favorable business environment. The nation’s growth rate surpasses the EU average, making it an attractive destination for foreign entrepreneurs and experts seeking to establish a company.
Although Spain’s once-vibrant real estate market has slowed significantly, the country has emerged as a low-cost option with ample opportunities for foreign investors.
Spanish, being the third most widely spoken language globally, provides access to potential markets in South America. Moreover, Spain is a major hub for tourism, ranking as the second-largest market in Europe and the fifth-largest in the world.
This article offers a comprehensive guide for foreign companies interested in registering a business in Spain. It will outline the eligibility criteria, required documentation, and procedures necessary for successful company registration in the country.
Quick Facts for Company Registration in Spain
| Quick Facts | Requirements |
| Types of companies | Limited liability company Public Company Branch office Liaison office Civil Office |
| Corporate tax rate | The corporate tax rate in Spain is 25%. However, newly formed corporations are taxed at a 15% rate for both the initial taxation period in which they make generate profit and the subsequent period. |
| Minimum share capital | EUR 3,000 for a Limited Liability Company |
| Minimum no of shareholder | 1 |
| The time frame for the incorporation | 3 to 6 weeks |
| Is Accounting/Annual Return Required? | Yes |
| Local Director Required | No, Directors may not be residents. |
Reasons for Company Formation in Spain
The following reasons will give you a brief idea of why you should proceed with company formation in Spain.
1. Global center for business and commerce
Spain is able to maintain its status as an open and dynamic market because of its location and excellent connectivity. Spain has a favorable geographic location, extensive trade relationships, and accessibility to the marketplaces of the EU, Middle East & North Africa.
2. Robust connections and infrastructural facilities
The nation has also emerged as a leader in the IT sector, particularly in terms of innovative IT and telecommunications systems. In reality, Spain is the location of one of the most significant ICT markets across Europe.
3. Open to Foreign Direct Investments
In order to encourage international enterprises and investments at all stages, the Spanish country has undertaken a pro-free trade and pro-investment stance by lowering corporate rules.
4. Bilateral Agreements
Spain has 18 bilateral agreements for mutual safety and the development of investments, and about 21 bilateral agreements to prevent double taxation.
5. Reduced tax burden
The Spanish Tax Agency takes pride in having a fully automated system where the majority of transactions and agreements may be made online. The aggregate tax burden across all Spanish-based businesses is significantly lower than that of the UE-28 and the Eurozone.
Procedure for Company Registration in Spain
The procedure to register a company in Spain is mentioned below:
Choose the Right Business Structure
There are two main options for starting a business in Spain: working as a freelancer or sole trader (called as “autónomo” in Spanish) or forming a limited liability corporation (“Sociedad Limitada” or SL). The choice between these choices is determined by the business’s size, nature, and desired level of personal liability.
Obtain your NIE number
Foreign entrepreneurs who are wishing to start a business in Spain must obtain an NIE Number (Foreigner Identification Number). This number is required for a variety of company functions, including opening a bank account, complying with tax requirements, and hiring employees.
Decide on a Company Name & Verify it
Prepare a list of at least three names you want to use for your business. They must be sent to the Spanish Corporate Register to check for the name’s availability. The chosen name will be used as an official name on the business bills and invoices.
Open a Business Bank Account
To carry out the business operations, such as receiving money and paying taxes, you need to open a business bank account in Spain. There are different types of banks such as Santander Bank, BBVA Bank Spain etc.
Obtain a CIF (Tax ID Number)
Companies need a CIF, or tax identification number, in order to do a number of business-related tasks, including opening a bank account and submitting taxes.
Establish Shareholders and Create a Shareholder Agreement
Before establishing a company in Spain, you need to define the company’s ownership structure, including the names of shareholders and their respective shares.
Sign the Public Deed of Incorporation at a Notary
The official document of establishment is a legal document that confirms the company’s formation and outlines its structure and objectives. It must be signed in front of a notary.
Signing up for Social Security
Sign up for your newly established company by going to the regional social security office.
Do you also wish to acquire permanent residency in Spain? Set up a business in Spain with the help of our experts and apply for the Spain Business Entrepreneur visa within 90-120 days.
Eligibility Criteria to Start a Company in Spain
For Spain company registration, you must meet the following criteria:
Minimum Capital
The minimal capital needed for company registration in Spain is EUR 1. It is therefore quite affordable to register a company in Spain. There is no minimum capital required for opening a branch office. Forming a branch office in Spain requires the Board of Directors’ approval. A general meeting would support this resolution.
Residency Requirements
For the process of Spain company registration, there are no residency requirements for key management executives. A foreigner may own the business.
Minimum Shareholders
To operate a branch office, you don’t need to have a minimum number of shareholders. For either a public limited company or a private limited business, each stakeholder must have a minimum of one share.
Number of Directors
The minimum number of directors required for a branch office in Spain to be operational is not necessary. A limited liability company’s board of directors must have at least three members. A private limited company can have 12 directors. A public limited company’s board must consist of at least three members.
Documents Required to Register a Company in Spain
For company registration in Spain, you will need the following documents:
- Business Plan
- Article of Incorporation
- Incorporation Deed
- Company Name Certificate
- CIF number (Company tax ID number)
- NIF number (Spanish tax ID number)
- Bylaws of the company
- Bank Statement (Proof of Investment)
- Registered Office Address
- Utility bills that are not more than 3 months old
- Information about the shareholders & directors
Corporate Structures for Company Registration in Spain
The following is the basic structure of Spain company registration:
Branch Office
Branch offices located in Spain are an extension of the parent company. Directors of the board must adopt a resolution to register a company in Spain. The branch office can also be considered to be a subordinate office to the main establishment. Branch offices located in Spain are required to pay certain amounts of corporate tax. In addition, they’ll also need to make quarterly VAT payments according to the authority that has been enacted.
Limited Liability Company
This kind of organization is referred to by the name Sociedad Limited. This kind of company has limited liability. This means there isn’t any form of personal liability on behalf of the employees who are part of the business. Articles of Association as well as other laws about the company will form the legal requirements for the company’s laws (estatutos socials). Annual company accounts must be filed with the relevant Spain company registration.
Joint Stock Company
This kind of entity is sometimes referred to as Sociedad anonima. A joint stock company could be described as an open-ended public limited company that has shares listed on the public stock exchange. The type of business can include its shares on an exchange that is publicly traded. The company will have to be liable for corporate taxes. But dividends will be taxed separately. Directors and managers are the sole ones responsible for overseeing the business. The company’s annual accounts must be registered with the appropriate company registry in Spain.
Required Compliances for Company Registration in Spain
After the company registration is complete, there are a few compliances that must be followed.
These are the compliances that must be observed:
Meeting of Shareholders
Private Limited Companies and Joint Stock Companies must hold shareholder meetings within six months of their financial year. This meeting allows shareholders to vote on company-related matters. This meeting would include approval of the accounts as well as voting.
Board Meetings
The Board Meetings must be held at least once a quarter. The members may call the meeting in some cases. The board meeting is not mandatory for branch offices.
Taxes
Corporate tax and VAT would be collected from branch offices. Joint stock companies and private limited companies will have to pay the respective taxes. The company must also file annual returns.
Other Enrollment
Branch offices must register with both the Commercial Registry and the relevant tax officials. A branch office would be given a tax identification number to file tax returns (NIF). Private limited companies and joint stock companies would also need to comply. However, they would need to obtain respective business licenses. Annual accounts must be maintained by branch offices with the commercial registry. These annual accounts must be kept separate from foreign entities.
Advantages of Spain Company Registration
Here are some of the benefits of having a company registration in Spain:
- Tourism Market: In terms of tourist destinations, Spain second-largest largest market for tourism in Europe and the fifth largest market in the world. Madrid, as well as Barcelona, are both thriving destinations to visit in Spain. Barcelona is home to one of the most beautiful beach areas in Europe which makes it a popular tourist destination as well as a central point. Madrid is home to a variety of tourist attractions that include the bullfighting arena.
- Government Incentives: The Spanish government offers a number of benefits to foreign enterprises. Businesses that invest in various types of education programs for employees will receive a 75% discount on social security contributions. Financial assistance is offered through the Spanish government, which also includes the possibility of a form of interest subsidy on bank loans.
- Tax advantages for Trading Companies: If a company that trades is established in Spain, it will be taxed at 15 percent for the initial two years. In the third year, the trading business would’ve been subject to tax at the usual rate of 25%. There are various benefits for companies that have been established in the Spanish Free Zones. These free zones provide certain amounts of incentives, for instance, some kind of reduced corporate tax. Stamp duty and VAT reductions are also available to these companies.
- Double Taxation Agreements: Spain has a variety of DTAAs that it has with nations like America, the UK, India, and Spain. Therefore, investors will not be taxed twice.
- Corporate tax rate reduction: Trading firms are taxed at a lower rate of 15% for the first two years of operation.
- Strategically Located: Spain is strategically situated at the intersection of Europe, Africa, and the Middle East. Businesses now have access to a sizable and varied market.
Cost for Company Registration in Spain
The costs associated with company registration in Spain vary based in the services you need. The typical charge can range from 5000 to 8000 euros, which includes all govt fees, tax filing, formal registered office, business bank account, virtual office set up and other services.
Entrepreneurs looking to form a limited company in Spain needs to put at least 3,000 euros into a Spanish bank account as the required share capital. At the Mercantile Registry, registration charges must also be made. There can be other small fees, such as those for getting a digital certificate or NIE.
Our experts can assist you register your business in Spain and can also assist you with opening a bank account and acquire virtual office there.
Conclusion
The article focuses on the most common routes to establish a business presence in Spain, which can be done through a corporation or branch office, joint venture, or representative office. As a resource of information, the guide also provides useful information on various tax, regulatory, and economic factors to help those who are interested in entering the Spanish economy.
If you have any questions about registering a corporation in Spain. Consult with OnDemand International. Our experts will help you to solve your queries.
FAQ’s
No matter, wheather you ara resident or non-resident entrepreneur everyone permitted to setup a company in Spain. The only requirement is you need to be legal resident.
It takes around 7 to 14 days to incorporate your business in Spain. The branch will also have to nominate a Spanish resident individual or legal entity to represent the parent company when dealings with Spanish tax authorities concerning its tax obligations.
In Spain, If you incorporate a new company, you need pay 15% of corporate tax rate for the first 2 years. Otherwise, The normal corporate tax rate is 25%.
No, the process of company setup in Spain is very simple and straightforward. But, if you apply by yourself, you might face some intricacies. Contact OnDemand International. They will register your company with the government.
Register as a taxpayer with Agencies Tributaries (Spanish Tax Authority). This is necessary to file the first resident tax return.
