Doing business in Spain

How quickly can I set up a business?

15-30 days

What is the minimum investment needed?

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

• General corporate rate: 25%
  • Applies to companies that do not qualify for a reduced or special tax rate.
• Newly formed companies: 15%
  • Applies to qualifying newly created companies carrying out an economic activity.
  • The 15% rate applies in the first tax period in which the company has a positive taxable base and the immediately following tax period.
  • Certain exclusions and anti-avoidance rules apply.
• Small-sized companies: 23% for 2026
  • Generally applies to qualifying companies with prior-year net turnover of less than €10 million.
  • Companies with prior-year net turnover below €1 million are generally subject to the micro-entity rates instead.
• Micro-entities: 19% / 21% for 2026
  • Applies where prior-year net turnover is less than €1 million.
  • 19% on the first €50,000 of taxable income.
  • 21% on the remaining taxable income.

VAT

• Standard VAT rate: 21%
  • Applies to most goods and services.
• Reduced VAT rates: 10% and 4%
  • Reduced rates apply to specified goods and services.
  • A 0% rate also applies to certain qualifying transactions.
• VAT registration
  • Spain has no general minimum turnover threshold for VAT registration.
  • Businesses and professionals carrying out taxable activities are generally required to register for tax purposes, although VAT treatment depends on the nature of the activities and any applicable exemptions or special regimes.
• Quarterly VAT returns
  • VAT returns are generally filed quarterly, unless the taxpayer is required or eligible to file monthly.
• Monthly VAT returns
  • Monthly filing generally applies to large enterprises with prior-year volume of operations exceeding €6,010,121.04.
  • Monthly filing also applies to businesses registered under REDEME, VAT groups and certain other specified taxpayers.

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