Doing business in Spain

How quickly can I set up a business?

15-30 days

What is the minimum investment needed?

The required investment depends on the scale and nature of the project.

The minimum share capital requirements are:

• €3,000 for a Sociedad Limitada (S.L.) – Limited Liability Company

• €60,000 for a Sociedad Anónima (S.A.) – Public Limited Company

These amounts relate to share capital only and do not represent the total cost of establishing and operating a business.

How can I raise finance?

Spanish companies may be financed through a combination of:

• Share capital contributions

• Shareholder or group loans

• Intercompany financing arrangements

The appropriate funding structure depends on the business model, group structure and tax considerations.

What are the legal requirements for setting up my business?

Foreign investors can set up a company in Spain without any restriction.

There exists a compulsory formality to obtain a tax identification number for the foreign investors and non-resident directors.

What structure should I consider?

Establishment (a branch of your overseas business)

• Not a separate legal entity but an extension of the overseas parent company
• No limited liability or ring-fencing of the Spanish operations
• If have a permanent establishment in Spain then profits from this PE are liable to Spanish Corporation tax
• Must file parent company accounts, prepared under Spanish Company Law, at Companies House for public inspection, even if these are not made publicly available overseas

Limited Company/Limited Liability Company (SA/SL):

•Provides limited liability and ring-fencing to Spanish operations
•Gives a perception of a local business, with longevity
•Corporation tax to be paid on company profits
•Companies, must have their annual financial statements audited when two of the below conditions are met for two consecutive years:

March, 31st
Company Turnover, exceed 5,700,000.00 €
Company Balance Sheet total assets, exceed 2,850,000.00 €
Company average number of employees, exceed 50

Partnership(Sociedad Civil):

•Members (partners) have unlimited liability
•Profits are allocated to members who then pay Income Tax on these profits personally
•The tax residence of the member, and where the profits in the LLP are originated will determine in what jurisdiction and how these profits are taxed

What advice can you give me in regards to payroll and taxation requirements?

Personal Income Tax

Spanish tax residents are taxed on worldwide income

Income tax rates vary by region and may exceed 50% at the highest levels

Capital gains tax rates range up to 30% for residents

Spain offers a special tax regime for expatriates (“Beckham Law”), under which qualifying individuals may:

Be taxed as non-residents for the year of arrival and the following five years

Pay a flat 24% tax rate on employment income up to €600,000, with excess income taxed at higher rates

Specific conditions apply, and professional advice is recommended.

Social Security

Both employers and employees must contribute to the Spanish Social Security system.
As a general guide:

Employer contributions represent approximately 30% of gross salary

Employee contributions represent approximately 6–7% of gross salary

Spain has social security agreements with the EU, the USA and several other countries, allowing temporary exemptions in certain secondment situations.

Corporate Income Tax

Standard Corporation Tax rate: 25%

Newly formed companies may benefit from a 15% tax rate for the first two profitable years

Reduced and progressive tax rates apply to micro-entities and small-sized companies, subject to turnover thresholds.

VAT

Standard VAT rate: 21%

Reduced rates of 10% and 4–5% apply to certain goods and services

VAT registration is mandatory where taxable supplies are made.
VAT returns are filed:

Quarterly for businesses with turnover below €6,010,121

Monthly for larger companies, which are also subject to real-time electronic reporting obligations (SII)

Is there anything else that I should know?

R&D and Technological Innovation Tax Credits

R&D tax credits of 25% (up to 42% in certain cases)

Technological Innovation tax credits of 12%

Credits may be carried forward for up to 18 years, and cash refunds may be available subject to conditions

Holding Companies

Spain is an attractive jurisdiction for holding companies, offering:

95% exemption on qualifying dividends and capital gains

No withholding tax on qualifying outbound dividends

Participation exemption regime subject to specific requirements

Recent legislative changes apply to companies formed after 1 January 2021, with exceptions for smaller groups.

Spanish Territories with Special Tax Benefits

Certain regions offer additional incentives, including:

Canary Islands – special investment and tax regimes

Basque Country and Navarra – lower corporate tax rates and distinct tax systems