Investing in Europe has become a goal for many people, especially after the significant efforts made by European governments to attract foreign investment.
European governments have successfully encouraged foreign investors to establish companies in Europe by offering the attractive idea of obtaining European citizenship through investment.
One of the best investment options in Europe is Spain, which has all the necessary factors to support foreign investment. This article will focus on how to establish a company in Spain.
We will explore everything related to establishing a company in Spain, including its advantages, requirements, and how to go about it. Would you like to know more?
Investment in Spain
Spain is among the best investment options in Europe. Despite the significant impact of the COVID-19 pandemic on the Spanish economy, Spain managed to maintain its economic strength and is considered one of the top European countries economically.
Spain managed to preserve its economy through a plan to encourage foreign investment, whether through establishing companies or real estate investments, which is one of the most important forms of investment in Spain.
Additionally, Spain launched a large number of immigration programs that encouraged many foreign migrants to move and obtain residency in Spain. With the money they earn from abroad, these migrants help support the Spanish economy, contributing to an increase in the money Spain receives from abroad.
All these efforts helped Spain remain one of the best European countries economically. But what benefits could foreign investors gain from investing and establishing a company in Spain?
What Are the Benefits of Investing in Spain?
Investing in Spain has many benefits that foreign investors can take advantage of, including:
- Strong Economy: Spain has one of the strongest economies in Europe. Although it was greatly affected by the COVID-19 pandemic, it managed to overcome this setback and is known for its flexibility and fewer bureaucratic hurdles compared to other EU countries.
- Developed Infrastructure: Spain’s excellent infrastructure supports foreign investments, especially in commercial sectors. Spain has one of the best road networks, airports ranked among the best in the world, the third-largest railway network in the world, and three major seaports. All these factors contribute to the success and profitability of any foreign investment.
- Skilled Workforce: Spain boasts a high level of education, with a well-regarded education system that produces highly qualified individuals, both intellectually and practically, who can contribute to the success of investments.
- Taxation System: The tax rates in Spain are in line with the EU average, and the country offers incentives such as tax exemptions for research and development activities, knowledge transfer, and job creation, encouraging foreign investors.
- High Quality of Life: Residents of Spain enjoy a high standard of living, and individual income levels are generally good, making it an attractive place for investment.
- Strategic Location: Spain’s geographical location serves as a gateway between Europe, the Middle East, and Africa, benefiting investors looking to establish businesses in Spain.
- Diverse Investment Options: Spain has laws that allow foreign investors to own property, invest in real estate, or establish businesses, offering various avenues for investment.
Now, let’s focus on one of the most important forms of investment in Spain: establishing a company.
Establishing a Company in Spain
Spain is an ideal destination for foreign investors wishing to establish a company and start a business. There are many options available across Europe, such as establishing a company in Italy, but many investors prefer Spain due to its infrastructure and supportive entrepreneurial ecosystem, especially in cities like Barcelona and Madrid. All you need to do is know where to start and which cities to target when establishing your company in Spain.
This article will serve as a comprehensive guide to answering all questions about the process of establishing a company in Spain, helping you overcome any doubts. Continue reading to the end for full details.
Why Choose to Establish a Company in Spain?
In recent years, Spain has become a real business hub in Europe. Cities like Madrid, Barcelona, and Valencia are key centers for entrepreneurship, attracting all the elements that make businesses successful. The main benefits of establishing a company in Spain are:
- Spain serves as a magnet for startups and is home to many successful major companies.
- The country offers excellent logistics and infrastructure that can support business success.
- Spain provides a large and diverse market that allows various business ideas to thrive.
- Growing a business is an adventure, and Spain, with its people, food, culture, and weather, makes it the perfect place to enjoy this journey.
- The country’s business culture is ideal for building connections and achieving success in your project.
Why Do Foreign Investors Prefer Establishing Companies in Spain?
Regardless of whether you are a foreigner or a local citizen, everyone is allowed to start their business in Spain. The only requirement is that you are a legal resident. However, the process may become more complicated due to factors such as your nationality.
If you are from an EU country, the process is clear and straightforward. All you need to do is obtain your NIE and EU registration certificate, and then you can proceed with the constitutional phase.
If you are from a non-EU country, you will need to obtain a work visa to start your business and establish a company in Spain.
How to Obtain a Work Visa for Establishing a Company in Spain
There are two types of work permits that allow you to establish a company in Spain:
- Entrepreneur Visa
- Self-Employed Work Permit
These are the permits that will grant you the specific type of residence required to establish a company in Spain. You can choose one depending on your business idea.
Entrepreneur Visa in Spain
If your business idea is innovative and technology-focused, you should apply for an Entrepreneur Visa. While the requirements are stricter, and not every business idea qualifies for this visa, it offers many advantages. The application process is much quicker, and you can receive a response within 20-30 days. However, it’s essential to understand the requirements before applying, as you will need to provide a detailed business plan and prove that you have the necessary skills and financing methods to ensure business growth.
Self-Employed Work Permit in Spain
For instance, if you plan to open a traditional store like a café or a local supermarket, the work permit you need to apply for is the self-employed work permit. Even though your business idea doesn’t have to be tech-based to qualify, not all companies will be eligible. So, how do you know which type of business to start?
Finding the Right Business Idea
This is another crucial consideration before starting your business. Depending on the type of company you want to establish, the residence card required may differ. Therefore, finding the right business idea is essential.
Today, due to the internet and the interconnected world it has created, there are many valuable investment opportunities in Spain that you should seriously consider.
Types of Companies in Spain
Before starting the process of establishing a company in Spain, you must first determine its type. However, we are not talking about the business model or a specific project, but rather about its legal structure.
In Spain, there are different company structures defined by commercial law. Each has its own characteristics, and understanding their purposes is crucial. Here’s a brief overview of the most important business structures in Spain.
Sole Trader
This is probably the best option for small businesses as the legal process of setting it up is very simple, and one of its main advantages is that it does not require any initial investment.
However, being a sole trader has a significant disadvantage: there is no distinction between the company’s assets and your personal assets. Therefore, you are fully responsible for any potential company debts.
This legal structure is suitable for freelancers such as painters, web designers, and others who do not need a company to carry out their activities.
Taxes Imposed on Sole Traders
As a sole trader, you will pay income tax (IRPF), meaning you are responsible for your tax returns annually.
Since your activities are regulated under the income tax system, you may end up paying unnecessary taxes if your income exceeds 50,000 – 60,000 euros annually.
So, if you expect to earn more than that, our advice is to choose to set up a limited liability company in Spain.
Limited Liability Company (SL) in Spain
This is undoubtedly the most popular company structure in Spain. Do you know why? Because of its flexibility and the ease of registration, it only requires a minimum capital investment of 3,000 euros.
If you expect to earn more than 60,000 euros, it’s better to set up a company directly rather than operating as a sole trader.
One of its main advantages is that your liability is limited to the capital you have invested. Therefore, if you have invested only 3,000 euros, that’s the maximum amount you can be liable for in case of company debts.
In this case, you won’t pay income tax but instead corporate tax (impuesto de sociedades), which is 25% of your profits. VAT returns (IVA) are also required, although there are many exemptions you can benefit from to reduce the taxable amount significantly.
That’s why we recommend relying on an accountant to manage your quarterly and annual returns. You can hire an experienced certified accountant through the Zajil app, available on the Play Store.
Public Limited Company in Spain
This type of company is known as "sociedad anónima" and is the legal structure designated for large companies that trade in stocks. It has a stricter structure and requires a minimum investment of 60,000 euros.
Its main advantage is that you can get external financing by selling shares in the stock market. However, we suggest starting with a limited liability company and transitioning to a public limited company once you decide to go public.
Opening a Branch in Spain
But what if you already have a company in another country and want to expand into Spain?
In such cases, opening a branch in Spain is the right path, as it allows you to expand into a new market while leveraging your brand and systems.
To open a branch, you will need to submit an official power of attorney and a copy of the company’s deed of incorporation. If required by the laws of your home country, you must also provide a certificate of good standing.
In this case, if you are the person opening and managing the branch in Spain, you must be a resident of the country.
Types of Companies Foreign Investors Can Open in Spain
Steps to Establish and Register a Company in Spain
Would you like to know how to establish a company in Spain as an expatriate? To start your business in Spain, you will need to follow these steps:
- Obtain your NIE number.
- Define and verify the company name.
- Obtain a CIF (Tax Identification Number).
- Open a company bank account.
- Create the shareholders and a shareholder agreement.
- Visit a notary to sign the public deed of incorporation.
- Register the company with the tax authorities.
- Register the company with social security.
Step 1: Obtain Your NIE Number
The first thing you need to do as a foreigner to establish a company in Spain is to obtain your NIE number. This is the identification number that will allow you to open a bank account, register for taxes, etc. It is crucial to work freely in Spain.
Getting an NIE is a simple process. The time it takes depends on whether you are an EU citizen or not: it takes 3 to 5 business days for EU citizens, and for non-EU citizens, the processing time will depend on the relevant immigration office. You can obtain this number in two ways:
- From your home country by applying for the number through the Spanish consulate.
- From within Spain by booking an appointment at the local police station.
Step 2: Obtain a Certificate of Uniqueness
Once you have your NIE number, you will need to obtain a Certificate of Uniqueness. This document certifies that your company name is available and has not been used by another company.
To obtain this certificate, you need to submit a list of three names you wish to use for your company to the Spanish Companies Registry (Registro Mercantil) for availability verification. If available, they will approve one of the three, depending on your preference. This process can take up to 48 hours.
This will be the official name of your company, which will appear on your invoices and other documents.
Step 3: Open a Bank Account for Your Company
Now that you have your NIE, you can easily open a business bank account in Spain. If you are setting up a limited liability company, you will need to deposit 3,000 euros in cash to establish the company, which will be required for the company’s capital investment.
This deposit will create a bank certificate proving the payment, which you will need to bring to the notary when registering the company.
What happens if you don’t have this amount of cash? You can also use equivalent assets (such as your computer, phone, or any similar asset) to meet this amount. However, we don’t recommend this because it will be much harder to divide the company’s capital among shareholders later on.
Step 4: Create the Shareholders and Shareholder Agreement
At this stage, you need to decide on the shareholders of your company. Additionally, the company’s manager must be designated. Once that’s decided, you will create a shareholder agreement, specifying each shareholder’s name and their share percentage.
This is a crucial step as it helps avoid future conflicts and clarifies each party’s responsibilities.
Step 5: Visit a Notary and Sign the Public Deed of Incorporation
With all the necessary documents (NIE, bank certificate, and Registro Mercantil certificate), you will now visit a notary to sign the public deed of incorporation. The notary will officially record the company and provide a temporary VAT number, which will allow you to start operating your business.
This process may take up to three weeks.
Step 6: Register the Company with Tax Authorities
After obtaining the public deed of incorporation from the notary, you will need to visit the Spanish Tax Agency (Agencia Tributaria) to:
- Register the documents and obtain a stamped certificate.
- Obtain the company’s final tax identification number (CIF).
Note that you will need to pay taxes once you complete the registration with the tax authorities.
Step 7: Register with Social Security
The last step is to visit the local social security office to register your newly established business. Keep in mind that if you are registering as a sole trader, there is a specific system called RETA that applies to you. You will need to submit forms 036 or 037, your NIE, passport, and IRPF form during your appointment.
And with that, you are ready to go!
Getting Help to Establish a Company in Spain
This guide is for expatriates who wish to establish a company in Spain. You will face 7 steps to set up your company, but sometimes the process can be a bit tedious.
We’re not just talking about the steps and documents (for example, when it comes to the shareholder agreement), but also the need to keep up with your tax obligations.
For this reason, we strongly recommend contacting us so we can assist you throughout the entire process. Our business lawyers will resolve all your concerns and manage the entire procedure on your behalf, while our accountants will be responsible for your taxes.
You can book a legal consultation with one of our specialized lawyers in corporate matters and company establishment in Spain through WhatsApp. Just click here to book the legal consultation you need.
FAQ
Can expatriates establish a company in Spain?
Yes, expatriates and foreigners are allowed to establish a company in Spain under certain laws that may vary depending on the investor’s original nationality.
What are the benefits of establishing a company in Spain?
The main benefits of opening a company in Spain are as follows:
- Spain is an attractive location for many startups as it is home to many successful large companies.
- The country has good logistics and infrastructure services that can help the success of your business.
- The country offers a large and diverse market that is enough to support various business ideas.
- Growing a company is an exciting adventure, and Spain, with its people, food, culture, and climate, makes it the perfect place to enjoy that journey.
- The business culture in the country is ideal for making connections and achieving success in your project.
Who can establish a company in Spain?
Whether you are a foreigner or a local citizen in Spain, everyone is allowed to start a business in the country. The only condition is that you must be a legal resident. However, the process may become more complex due to other factors, especially your original nationality.
How do you establish a company in Spain and register it legally?
To start your business in Spain, you will need to follow these steps:
- Obtain your NIE number.
- Choose and verify the company name.
- Obtain your CIF (tax identification number).
- Open a bank account to be used by the company.
- Set up shareholders and create a shareholder agreement.
- Go to a notary and sign the deed of incorporation.
- Register the company with the tax authorities.
- Register the company with social security.
Does the company establishment process in Spain have to be done in person, or can it be done with help?
Yes, it is possible to complete the company establishment process in Spain through a legal agent, which can help speed up the registration and legal procedures. At Zajel, we are ready to do everything necessary to assist you in establishing your company and starting your business in Spain.