Opening a business in Spain is popular among foreigners looking to access the European market, establish new sales channels, and settle in a developed EU country. Spain has a stable economy with a consistently growing GDP and reasonable taxes. Many business support programs help new entrepreneurs successfully develop their businesses with grants and subsidies. Experts have also included Spain in the ratings of the best countries for business.
Creating a company in Spain allows foreigners to apply for a residence permit and, in the future, permanent residence and citizenship.
This article will explain how to register your business in this country, any restrictions on foreigners, and the advantages as well as promising business areas.
Why should you start a business in Spain?
The main advantage of starting a business in Spain is access to the international market. As part of the EU, the country offers local entrepreneurs new outlets and a unified logistical and trading environment. Here are some of the other advantages to doing business in Spain:
- Stable economic situation. Spain has a strong financial position in the EU. For the second quarter of 2024, GDP amounted to 384,101 million euros, growing 0.8% compared to the previous period.
- Favorable taxes. A flat rate of 25% is applied to businesses, but new companies can enjoy a reduced rate of 15% for the first two years of operation and a rate of 23% for companies with an annual turnover of less than one million euros.
- Government support. Entrepreneurs can count on favorable credit terms at local banks, as well as free consulting services and financing through various government programs (such as INVESTMED, PAEM, and ANCES).
Another reason to consider Spain is the migration policy. Since local authorities want to attract foreign investors, there is an appealing residency program for startup founders. Under this program, you can obtain a renewable residence permit for yourself and your family members for three years at once. As a result, you will have the opportunity to pursue your entrepreneurial ambitions along with a number of other resident privileges.
Common business structures in Spain
There are various forms of doing business in Spain that are suitable for different niches and entrepreneurial plans. Foreigners have no restrictions when it comes to choosing. Depending on the investment amount, number of partners, and activity specifics, one can find an effective solution for the business’s future growth.
The various legal acts that regulate the specifics of business functioning in one form or another include the Commercial Code, Law 20/2007 “On the Status of Self-Employment,” Law 18/2022 “On the Establishment and Development of Companies,” and Law 14/2013 “On the Support of Entrepreneurs and Their Internationalization.” The latter legal act defines the possibility for foreigners to obtain a residence permit in Spain by launching a startup.
Limited Liability Company (SL)
Company founders are only liable for the amount of funds they invest in the business and are not at risk of losing their personal assets. You can set up a business with at least one partner; there are no restrictions on maximum membership. Authorized capital starts at EUR 1. If there are several founders, the conditions regarding the minimum or maximum percentage of capital for each founder do not apply. Investments can be made not only with money, but also with goods.
However, if the share capital is less than EUR 3,000, two creditor protection conditions apply. First, at least 20% of the profit must be allocated to the mandatory reserve, which, when added to the capital, must total EUR 3,000. Second, in the event of the company’s bankruptcy and insufficient assets to cover liabilities, the partners are jointly and severally liable for the difference between EUR 3,000 and the amount of the subscribed capital.
The company name must contain the abbreviation “SRL” or “SL” or the full name of the legal form of organization.
Obtaining Spanish residence permit .
Apply for a Spanish residence permit and open up new opportunities:
- Life in a developed country;
- Residence permit for all family members;
- Prospects for permanent residence and citizenship;
- Visa-free travel throughout Europe.
Leave an application and get a consultation with an immigration specialist
Sole proprietorship
This business model involves one individual carrying out economic activities for profit at his own expense and without involving other people in the management. The entrepreneur may hire employees at his discretion. The sole proprietor has full control over the company, but is responsible for more than just the invested finances. If necessary, personal assets can be used to fulfill obligations. Management, administration, expenses, and investments all rely solely on the entrepreneur.
There is no minimum authorized capital amount, entrepreneurs can start a business with any investment amount. If the individual is married, the liability arising from the business may extend to the spouse as well. A sole proprietor is not required to register with the Commercial Register, though they may do so if they wish.
Joint-stock company (SA)
In such a company, the authorized capital is divided into shares, consisting of contributions from participants who are not liable for obligations with their personal funds. There is no limit on the maximum number of founders, although the minimum is one. Authorized capital must total at least EUR 60,000 and remain in thу currency. At least 25% of the total amount must be deposited when the company is registered.
Non-monetary contributions are allowed if an independent expert prepares a report describing them. Partners may voluntarily transfer shares, except for registered shares or cases with restrictions specified in the articles of association. Shareholders have the right to information and participation in general meetings, as well as the right to challenge corporate decisions and distribute profits and property in the event of liquidation. The company’s name must include “Sociedad Anónima” or the abbreviation “SA.”
Franchising in Spain
Franchising is a system of selling services, technologies, or products that is based on close and continuous cooperation between independent companies (the franchisor and the franchisees). The franchisor transfers the rights to a specific type of business, using a developed business model for its conduct, to the franchisee for a fee in the form of a lump sum. A franchise does not have a separate legal entity because it is a commercial contract between two independently established businesses.
In any case, the entrepreneur needs to create a company in a proper legal form. Franchise activity implies using a recognizable brand and a successful business concept. This approach is popular throughout the world and in Spain because it allows one to quickly reach profitability based on a proven business model and recognizable brand.
In Spain, there are standard rules for conducting this type of business. The parties sign a general contract. At least 20 working days before signing this document, the franchisor must provide the other party with their exact identification data, proof of a Spanish license for using the brand and distinctive signs of the franchise organization, and a detailed description of the business system.
How to start a company in Spain
Before starting a business in Spain, one must choose the correct business structure. For example, sole proprietorship is suitable for small businesses with relatively low turnover that can be managed by one person. Hiring employees is allowed, but the sole proprietor is responsible for all administrative duties. This form is suitable for online sales, a small physical store, a coffee shop, or providing services in cosmetology, makeup, and hair care.
A limited liability company is a good option for small and medium-sized businesses. This form is also relevant for businesses with large turnovers, such as those in the catering industry or providing services in various areas. A joint-stock company requires large investments, so it is best suited for production activities. Once you have determined the type of business, you can proceed with registering your company and handling related paperwork.
Opening a bank account and obtaining a NIE
First, you need to obtain a foreigner identification number (NIE). This number is necessary for registering a company, opening a bank account, buying or renting real estate, and obtaining a residence permit. If you are outside of Spain, apply at the consulate in your place of residence. If you are in Spain, submit the application to the police. In both cases, you must explain why you need the number. Depending on where you apply, the processing time is either 5 days or 2 weeks.
Next, choose the company name and submit the request to the Central Register of Enterprises. The applicant will then receive confirmation that there are no other companies with this name and that it can be used. Then, determine the company’s address, prepare the memorandum of association, and apply to a bank in Spain to open a corporate account. Compare the offers from several financial institutions and choose the most suitable option. In addition to information about the company, banks ask for the identification number of its representative.
Opening an account is usually done on the same day, but it can sometimes take up to 3-4 days if additional background checks are required. Finally, you must deposit the authorized capital and receive the corresponding document, which is submitted to the notary for business registration.
Registering the company with Registro Mercantil and obtaining licenses
Both sole proprietors and LLCs can apply for registration online through the CIRCE system. Otherwise, a visit to a PAE office in person will be required. Either way, a Uniform Electronic Document (DUE) must be completed.
Next, a notary’s participation is required; he or she must be provided with a certificate of contribution of the authorized capital and a certificate of reservation of the company name. The notary will then approve the memorandum of association, submit a request for a temporary NIF (business identification number) to the tax administration, and contact the Commercial Register with the necessary information to establish the company.
The registrar receives all the necessary information and registers the company within six working hours. The registrar also sends the information to the tax administration to process the final NIF. Notification of completion of the process and the NIF itself are sent to the company’s tax address. If the planned activity requires a license, the corresponding request is included in the DUE and sent automatically through CIRCE.
Every business begins with planning. If you want to obtain a Spanish residence permit based on your business, make sure to pay special attention to your business plan. The project must comply with all legal requirements for acceptance by the authorities. Experienced specialists will help you develop a plan and provide you with valuable advice.
Learn more about the details and agree on further cooperation for obtaining legal residency in Spain during the consultation.
Spanish business taxes and accounting
Spain imposes taxes on individuals and businesses. Self-employed individuals pay the first type of tax, which is progressive and depends on the amount of profit. For instance, if a sole proprietor’s income does not exceed EUR 12,450 per year, a 19% tax rate is applied. The maximum tax rate for individuals is 47% for annual earnings exceeding EUR 300,000.
Other companies that operate as legal entities pay a fixed corporate tax of 25% of their profits. New businesses may benefit from a reduced rate of 15% for the first two years. There are other benefits for entrepreneurs in Spain as well. Self-employed individuals aged 30 and older, for instance, can pay reduced social security contributions under certain conditions: a 80% discount for the first six months after registration and 50% and 30% discounts for subsequent six-month periods.
Entrepreneurs in Spain must keep annual accounts. Depending on the type of business, it may be necessary to maintain an inventory book and records of all decisions made.
Unique aspects of doing business in Spain as a foreigner
The conditions for opening and operating a business in Spain are the same for foreigners and Spaniards alike. There are no additional requirements or difficulties for foreign entrepreneurs. The only important detail is that foreigners must consider how to stay in the country long-term, i.e., how to obtain a visa and/or residence permit.
What visas and permits are required to start a business?
To start a business in Spain, a foreigner does not need special authorization or even a visa. For example, if the future entrepreneur has the right to visa-free entry into the country, he/she can use it to complete all the formalities for establishing the company within the allowed 3 months of stay.
As for registering a business in Spain, foreigners who do not have the right to freely visit the country can come on a Schengen visa for this purpose. Another option is to apply for a special annual visa for startup founders, which can then be changed to a residence permit.
How to obtain a residence permit through company registration?
The Spanish government has developed a set of favorable migration programs: the digital nomad visa, residence permits for investors, and residence permits for startup founders.
When applying for a business residence permit, foreigners do not need to have a registered company. Providing a promising business plan and confirming the funds necessary for its financing is sufficient. You must also submit information about yourself, including your education, experience, and involvement in the project. The residence permit is granted immediately for 3 years and can be extended for 2 years each time.
Applications are submitted in Spain to the Department of Large Companies and Strategic Groups (UGE-CE). The processing time is up to 20 working days.
The advantage of obtaining a Spanish business residence permit is that the requirements for candidates are lenient, and there is no need to register a company in advance. There are also no requirements for any fixed investments in the business, which gives you freedom in how you finance your business.
P4 lawyers are ready to help you register for a residence permit in Spain by founding a startup. Specialists can further expedite the process and prevent unnecessary delays.
Popular business opportunities in Spain
Considering the Spanish market and its trends, there are several promising areas for starting a business:
- Tourism. This category includes small cafés, restaurants, stores, and real estate agencies. Given that the country is visited by more than 80 million tourists annually, these services will be in demand. However, it is necessary to consider seasonal aspects and how to purchase real estate in Spain for business purposes or rent fitting premises.
- Agriculture. The country’s excellent warm climate allows for the harvest of subtropical fruits, olives, grapes, corn, and potatoes. Spain is known worldwide for its quality organic products, so these goods will sell quickly.
- Information services. Creating and promoting websites, web design, and advertising are the future, and Spain is a good place to find your niche. The advantage of this option is that you can work online, gradually attract new specialists, and not be limited by the service market.
In addition to the previously mentioned areas, you can consider hairdressing, salons, car repair stores, equipment repair, and clothing and shoe stores. Such services are needed everywhere and always. Therefore, with an interesting business plan, a successful location, and effective advertising, your business should be successful.
Prospects and challenges of doing business in Spain
As in any other country, it can be difficult to win over an audience, build partnerships, and quickly reach the desired level of profitability in Spain. Competition is high in most areas, especially tourism, so you need new and unusual approaches to surprise potential customers. Keep in mind that there is a labor shortage in Spain, so you may have difficulty hiring staff.
If you want to start a business in Spain, you should take into account the aspect of negotiations and business etiquette. Spaniards are unhurried and like to discuss everything in detail, so signing a contract may be preceded by months of communication. You should consider this when planning activities and show respect for this cultural trait of your partners. It is important to establish a relationship of trust in this country, rather than demonstrating a purely calculating thirst for profit.
Overall, Spain is a favorable country for entrepreneurship. The state and tax authorities do not create artificial obstacles for businesspeople. Bureaucracy is present, as it is everywhere, but not to the extent that it significantly interferes with business activities. Therefore, the most important thing for a foreign entrepreneur is to competently choose a niche and think through an effective business plan that considers the market’s unique aspects.
