Spain is an ideal place for entrepreneurs from all over the world to start their businesses. With world-class infrastructure, global talent and a business-friendly environment, cities like Barcelona and Madrid are excellent choices for establishing your entrepreneurial roots. However, the specific process for successfully launching your business may not be so obvious. For this reason, we have developed this comprehensive guide: to clarify any concerns you may have. So get ready to learn, step by step, how to set up your business in Spain as an expat.
What Makes Spain an Ideal Location for Starting Your Business?
In recent times, Spain has become a leading business center in Europe. Cities such as Madrid, Barcelona and Valencia have become key business hubs, bringing together all the factors necessary for business success.
Here are the key benefits of launching your company in Spain:
- The growing number of successful startups in Spain attracts international talent and investment.
- Spain has efficient logistics and infrastructure, fundamental for the success of your business project.
- The Spanish market is wide and varied, allowing different types of business ideas to flourish.
- Developing a business is an exciting adventure, and Spain, with its welcoming people, delicious cuisine, rich culture and pleasant climate, is the ideal environment to live that experience.
- The entrepreneurial culture in Spain is ideal for networking and achieving success with your venture.
Who can set up a company in Spain?
No matter if you are a foreigner or a local citizen in Spain, anyone can start a business activity in the country, the essential requirement being legal residence. Although the process may vary depending on your country of origin.
The steps for the legal incorporation of the business are the same for everyone. The difference lies in the need to be a legal resident in Spain, which adds an additional step you must take.
Let's look at the two possible scenarios:
- If you are a citizen of a European Union country, the process is more straightforward. You just need to obtain your NIE and the EU registration certificate. Then, you can proceed with the incorporation of your business. You can find more information on how to move to Spain as an EU citizen here.
- On the other hand, if you are not an EU citizen, you will need to obtain a work visa to start your business activity in the country.
Obtain a Business Visa: Securing a Work Permit for Establishing a Company
There are two types of work residency that will allow you to complete the process: the entrepreneur visa and the self-employed work permit. These are the two permits that will grant you the specific residency needed to establish a business.
The choice between one or the other will depend on your specific business idea.
Entrepreneur visa
If your business idea is focused on innovation and technology is a key part of your operations, then you should opt for the entrepreneur visa. Although the requirements for this are stricter and not every business idea will qualify for residency, it offers several advantages.
The application process is faster, and you may receive a response in about 20-30 days.
However, it is crucial that you have a good understanding of the requirements before you begin. You will need to present a very detailed business plan and demonstrate that you have the necessary skills and financing methods to ensure the growth of your business.
Therefore, I suggest you read our article on the legal process for obtaining a visa as an entrepreneur.
Self-employed worker visa
If, for example, you are thinking of opening a traditional business, such as a coffee shop or a local supermarket, your option for residency would be the self-employed visa, which is a regular work permit.
Although for this type of visa your project does not necessarily need to be technological or innovative, not all business ideas are automatically valid. The question then arises: how do you know what kind of company you can create?
To answer this question, it is important to research and understand the specific criteria that apply to the self-employed visa. These criteria may include the viability of the business, its economic potential, and how it fits into the local market. Considering these aspects will help you determine if your business idea fits the requirements for this visa.
Which type of company should you choose?
Before starting the process to establish a company, it is crucial to decide its legal structure. We are not referring to the business model or a specific project, but to the legal form under which your company will operate.
In Spain, there are several corporate structures defined by the Commercial Code. Each one has different characteristics and understanding their purpose is fundamental. Let us briefly review the main corporate structures in Spain:
Sole trader
This option is usually ideal for small businesses, since the legal process to establish it is quite simple. One of its most significant advantages is that it does not require an initial investment.
However, being a sole proprietorship also comes with a significant disadvantage: your personal assets and those of the company are not separated. This means that you are fully liable for any debts that the company may accumulate.
Who should opt for this structure? It is ideal for freelancers such as painters, web designers and others whose business does not require the formation of a separate company, as is the case with many freelance jobs.
Sole trader taxes
In terms of taxes, as a sole proprietor, you will be subject to personal income tax (IRPF). This means that you will have to take care of your tax returns every year.
Since your activities are governed under the IRPF regime, there is a possibility that you will end up paying more tax than necessary with this legal structure, especially if your income exceeds 50,000 - 60,000 euros per year.
Therefore, if you expect to earn more than this amount, we recommend that you consider forming a limited liability company.
Sole trader vs “autonomo” (self-employed)
There is a common misunderstanding that is important to clarify here.
It is often mistakenly thought that the terms "self-employed" and self-employed are interchangeable, but this is not the case. It is true that you can obtain your work permit as a freelancer, but that does not mean that the business you set up must be a sole proprietorship.
A freelancer can be two things: a self-employed person and the manager of a company. But being self-employed does not necessarily mean that you manage the company.
Why is this relevant? Because the incorporation process is the same in both cases. You have to complete form 036 or 037, depending on the situation. On this form, you will be asked whether you are a sole proprietor or self-employed. You must select the first option if this is your case.
Limited liability company (SL)
This structure is the most chosen by entrepreneurs in Spain, and its popularity is due to its flexibility and simplicity in the registration process. Only a minimum capital investment of 3,000 euros is required for incorporation.
If you anticipate income of more than 60,000 euros, it is advisable to incorporate a company instead of setting up as a self-employed person.
A significant advantage of this structure is that your liability is limited to the capital contributed. That is, if you invest 3,000 euros, that is the maximum amount you could lose in case of debts.
Instead of paying income tax, you will pay corporate income tax, which is currently 25% of your profits. In addition, you must declare VAT. However, there are several deductions and exemptions that can significantly decrease your taxable income.
For this reason, we recommend that you work with an accountant to manage your quarterly and annual returns. This can result in substantial savings.
Stock corporation
The joint stock company is a legal structure designed for large companies that operate with shares. This business form is distinguished by a more formal structure and a minimum capital of 60,000 euros is required for its incorporation.
A key advantage of the joint stock company is the possibility of obtaining external financing, as the company's shares can be traded on the stock exchange.
However, my suggestion is that you start with a Limited Liability Company (SL) and, later on, consider transforming it into a corporation if you decide to open up to the stock market.
Branch office
If you already have a company in another country and you are interested in expanding in Spain, opening a branch office is an excellent option. This will allow you to enter a new market, taking advantage of your brand recognition and existing operating systems.
To establish a branch of your company in Spain, you will need to submit certain documentation:
- A power of attorney.
- A copy of the public deed of incorporation of your company.
- If your country's commercial legislation requires it, you will also need to present a solvency certificate.
In this specific case, if you personally are going to open and manage the branch in Spain, it is necessary that you are resident in the country.
How to set up a company in Spain as an expat
To start your business in Spain, you must follow these steps:
Obtaining your NIE Number
The first thing you must do as a foreigner is to get your NIE. This is your identification number that will allow you to open a bank account and be fiscally registered in Spain. The NIE is key to operate without restrictions in the country.
The process to obtain the NIE is quite straightforward. The time to obtain it varies: for EU citizens, it usually takes between 3 and 5 working days; for non-EU citizens, it will depend on the corresponding Immigration Office.
There are two ways to obtain this number:
- From your country of origin, at the Spanish consulate.
- Being in Spain and requesting an appointment at a police office.
Naming your company
Once you have obtained the NIE, you need the company name certificate. This document confirms that your company name is available and registered in your name. How to obtain it?
- Choose 3 possible names for your company and send them to the Registro Mercantil de España to verify their availability.
- If they are available, you will be assigned one of them, based on your preferences.
- This process can take up to 48 hours.
This name will be the official name of your company, used on invoices and other documents. You can ask the registry for an additional name for other non-legal uses.
If you wish to register your trademark, here you will find a complete guide on how to do it.
Open a Bank Account for your Company
With your NIE in hand, you can open a bank account for your company in Spain.
If you have opted for a Limited Liability Company, you will need to contribute 3,000 euros as initial capital, deposited in the account.
This initial investment is essential and will be used in the day-to-day operations of the company. You will receive a bank certificate verifying this deposit, which is necessary for the notary on the day of incorporation.
If you do not have this amount in cash, you can contribute equivalent assets, but this is not recommended because of future complications in the sale of shares or distribution of capital.
Establish the Shareholders of the Company
Now you must decide the shareholders of your company and who will be the director.
There are two types of directors:
- The corporate director, who needs no salary or work permit, and signs the annual accounts.
- A director with corporate and labor functions, eliminating the need for another employee.
Creates the shareholder agreement, defining the participation of each shareholder. This step is crucial to prevent future problems, so legal advice is recommended.
Sign the Public Deed at the Notary's office
With all the documents (NIE, bank certificate, certificate from the Commercial Registry), go to the notary to sign the public deed. Here you will establish the shareholders and the administrator, and introduce an address and the activity of the company. It is important to be as broad as possible to avoid future visits to the notary.
The notary will register the company in the Mercantile Register, a process that can take up to 3 weeks. From the day of signing, you will receive a provisional VAT number to start activities.
We will coordinate and represent you before the notary, as well as arrange appointments with the different legal institutions.
Going to the tax office
Once you have the deed from the notary, you must:
- Register the documentation and stamp the deed.
- Obtain the definitive CIF of the company.
- Remember that you will start paying taxes when you start your activities.
Obtain your CIF
You need to identify your company before Hacienda, requesting the CIF. To do so:
- Download and complete the form from the Tax Agency.
- Make an appointment to present it together with your NIE.
- If you are importing or exporting within the EU, you will need an EORI number, which is usually assigned when you register your company.
Registration with Social Security
Finally, register your company with the local Social Security.
If you register as an individual entrepreneur, the RETA regime applies. Submit form 036 or 037, your NIE, passport and IRPF.
Legal Assistance
This guide is designed for expatriates who want to start their business in Spain. The steps can be complex, especially in sensitive aspects such as the shareholder agreement or tax obligations.
We recommend you to contact us for assistance throughout the whole process. Our lawyers and accountants will take care of your doubts and tax formalities.
Book a consultation with our lawyers to resolve any doubts.
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