The purpose of this guide is to provide an introduction to the basic and most common concepts that a non-resident (read this article to find out when it is considered a non-resident person in Spain) or a foreigner may face while starting a business in Spain.
This guide is in no way a substitute for professional advice, as a thorough investigation of the various personal circumstances is required to give the best and most profitable advice.
Please do not hesitate to get in contact with us and we will be glad to provide you with the best solution for your project.
Spain is the ideal place for foreigners from all over the world to set up their own business. Ideal infrastructures, global talent and an entrepreneurial ecosystem make Spain the best option when deciding where to start.
However, the specific steps you need to take to get your business off the ground successfully are less clear. That is why we have created this complete guide to solve all your doubts. So get ready to learn the step-by-step process of starting a business in Spain as a foreigner.
In recent years Spain has become a real European business centre. Madrid, Barcelona or Valencia are important business hubs that attract all the elements that can make a business successful.
In that sense, the main benefits of starting your company in Spain are the following:
Regardless of whether you are a foreigner or a Spanish citizen, anyone can start a business in Spain. The only requirement is that you have legal residency. However, depending on your country of origin, the process can become more complicated.
The actual legal steps of setting up a company are the same whether you are a foreigner or not. The difference is that you need to have a legal residence in the country, which means an extra step you need to do beforehand.
So let’s look at the two possible cases:
There are two different work residence permits that allow you to go through the process: the entrepreneur visa and the self-employed work permit. These are the two permits that will grant you the specific type of residence that allows you to set up a business.
You will choose one or the other depending on your specific business idea.
If the business idea you want to develop is innovative and technology is at the core of the operations, then you should apply for the entrepreneur visa. Although the requirements are much stricter and not just any business idea will qualify for residency, it offers many advantages.
The application process is much quicker, and you can get your answer in as little as 20-30 days.
However, it is essential that you understand the requirements before you start, because you will have to present a really detailed business plan, demonstrate that you have sufficient skills and funding methods to ensure that the company will grow.
If your business is a startup, you can read more about the advantages in our article “Startup Law in Spain”.
Let’s suppose, for example, that you want to open any kind of classic business, such as a coffee shop or a neighbourhood supermarket. In these cases, as the project is not innovative enough (it is something that already exists), the residence permit that will allow you to set it all up is the self-employed worker visa (a regular work permit).
Before starting the process of setting up a company, we must decide what type of company it will be. But we are not talking about the business model or the specific project. We are referring to its legal structure.
In Spain, there are different corporate structures, which are defined by the Commercial Code. Each of them has its own characteristics, and understanding their different purposes is crucial. Let us briefly discuss the main ones.
Probably the best option for small companies, as the legal process for its creation is really simple. One of its main advantages is that it does not require any initial investment.
However, being self-employed has an important disadvantage: there is no distinction between the company’s assets and your personal assets. Therefore, you are fully liable for any possible debts of the company.
Who is this structure for? For painters, web designers… For those individuals whose activity does not require a company for their enterprise.
As a self-employed person, after registering with the tax authorities, you must declare your income every three months. For example, in January you declare your income for the period from October to December and pay 20% of the income as advance tax.
The form in this case is Form 130. You will always have to fill it in, unless 70% of the people you work for are companies that pay the withholding tax on your behalf.
If you are paying self-employed tax in Spain under the modular system (estimación objetiva, in Spanish), where your income levels are based on estimates rather than actual income, then you have to use Form 131. The form must be completed between the 1st and 20th of each quarter: January, April, July and October.
Then, every April, you have to fill in two forms: one for the last three months and one for the previous tax year. The latter declaration (Declaración de la Renta en el Modelo 100) summarises the taxes you have paid during the year.
As your activities are regulated by the IRPF regime, you may end up paying an unnecessary amount of tax by using this legal structure. And that will be the case if your income is more than 50,000 – 60,000 euros per year.
So, in case you expect to earn more than that, our advice is to opt for a limited company.
Apart from personal income tax (IRPF), you must pay Value Added Tax (VAT) every quarter (Form 303) and fill in an annual VAT return or Form 390, although some goods and services, such as educational services, artistic activities and some forms of freelance writing, are exempt.
All of this can be done online through the Tax Agency. If you supply exempt services, you do not have to file a VAT return and you cannot reclaim VAT on your own expenses.
This is undoubtedly the most popular business structure in Spain. Why? Because of its flexibility and ease in the registration process, as it only requires 3,000 euros for the incorporation process as a minimum capital investment.
If you expect to earn more than 60,000 euros, set up a company directly instead of setting up as a self-employed person.
One of its main advantages is that your liability is limited to the capital invested. So, if you have only invested 3,000 euros, that is the maximum amount you can be asked to pay in case of indebtedness.
In this case you will not pay income tax, but corporate tax, which is equivalent to 25% of your profits. A VAT return must also be filed. However, you can benefit from several exemptions that can considerably reduce your taxable income.
That is why we recommend that you rely on a good tax advisor to handle your quarterly and annual returns. You will really save money.
The public limited company is the legal structure reserved for large companies that operate with shares. It is characterised by a much more rigid structure and requires 60,000 euros to set up.
Its main advantage is that it can raise external financing, as the company’s shares can be bought on the stock exchange.
However, we suggest that you start with an S.L. first and then move to a public limited company once you decide to go public.
But what if you already have your own company in any other country and want to expand in Spain?
In such cases, opening a branch in Spain is the right way to go. It will give you the opportunity to expand into a new market while leveraging the power of your brand and systems.
If you want to set up a branch of your company, you will need to present a power of attorney and a copy of the public deed of incorporation of the company. If required by your country’s commercial law, you will also need to submit a solvency certificate. In this specific case, if you are the one opening and managing the branch in Spanish territory, you must be resident in the country.
The first thing to do as a foreigner is to obtain the NIE number. This is the identification number that will allow you to open a bank account, be identified for tax purposes, etc… The NIE is the most important thing to be able to operate freely in Spain.
Obtaining the NIE is a really simple process. The time it takes to obtain it will depend on whether you are an EU citizen or not: it takes 3 to 5 working days to obtain the NIE number for EU citizens; and the time for non-EU citizens will vary depending on the corresponding Immigration Office.
There are two possibilities to obtain this number:
Now that you have your NIE, you can easily open a bank account for your business in Spain.
Assuming you have opted to start a Sociedad Limitada, you are required to put up 3,000 euros in cash for the incorporation of the company, which you must have on deposit in the newly created account.
This is certainly not wasted money and can be used in the day-to-day operations of the company.
The contribution of this amount of money generates a bank certificate attesting to the payment. You must take this document to the notary on the day of the setting up.
Once you have your NIE number, you must obtain what is called a certificate of uniqueness. This document indicates that your company name is free to use and is now in your possession.
To get it, you have to make a list of 3 names that you would like to give to your company. You have to send them to the Registro Mercantil de España to check their availability.
If they are available, they will accept one of the three, depending on the preferences you have previously established when submitting them. This process can take up to 48 hours.
This will be the official company name, which will appear on your invoices and other official documents.
However, you can apply to the registry for an additional name to be used in other situations or for commercial purposes.
At this point, it is necessary to decide how many and who will be the shareholders of the company. In addition, determining who will be the director of the company is a necessary step.
In this regard, there are two different types of directors.
First, there is the corporate director (“mercantile director”). He/she does not need to have a salary or a work permit, and once a year he/she has to sign the annual accounts of the company. Having this type of director implies that he will also have to have a worker under his structure, as required by Spanish law.
But what many companies actually do is to have a director with both corporate and labor functions, thus eliminating the need to have an employee.
Once this is decided, you just have to create the shareholders’ agreement, defining each shareholder and the percentage of participation that each one has. This is one of the most crucial steps in the process, as you need to foresee any future possibilities to avoid problems later on. That is why we strongly recommend to count on a commercial lawyer.
With all the documents mentioned above (NIE number, the bank certificate and the certificate of the Commercial Registry), you must now go to the notary to sign the public deed of incorporation. There you will establish who are the investors/shareholders and the administrator.
In addition, you will have to enter an address.
You will also have to clearly define what the activity of the company is. Our advice is to be as open as possible: enter all the activities related to what you are going to do. This is a crucial step. Why? Because it will avoid the need to go to the notary again in the future if you expand your business or pivot the main activity.
Next, the notary will register the company in the Commercial Registry. This process can take up to 3 weeks. However, from the day we sign the company incorporation at the notary’s office, you will be given a provisional VAT number, with which you can start your activity.
Ahora que ha obtenido la escritura del notario, deberá acudir a la Agencia Tributaria para:
Tenga en cuenta que empezará a pagar impuestos una vez que inicie su actividad.
You need your company to be identified to the tax authorities. That’s why you need to apply for the company’s CIF. So, basically:
If you want to import/export within the EU, you will need an EORI number. In most cases, this is automatically assigned when you register your company, but if not, you will need to apply for one as well.
And finally, the last step: go to your local social security office to register your newly created company. Note that if you register as an individual entrepreneur there is a specific regime that applies, called RETA. At the appointment, you will need to present form 036 or 037, your NIE, passport and IRPF form.
