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Starting a Business in Spain: A Comprehensive Guide

Spain is a country that has many opportunities for entrepreneurs who want to expand or start their businesses. They have a diversified economy, a population of more than 47 million inhabitants, and a strategic location in Europe. Furthermore, Spain provides a competitive and attractive market for companies in different sectors. If you want to start a business in Spain, it means that you have to comply with a series of legal, administrative, and fiscal requirements. Which may vary depending on the type of activity, the autonomous community, and the legal form.

In this article, we offer you a complete guide on how to start a business in Spain. We will explain the key aspects that you have to take into account. For instance, the regulations and requirements for companies in Spain and information about taxes and banks. In addition, we will explain the complete process of how to obtain the registration and license of your company. Finally, we will tell you everything you need to know about the hiring process and employee rights. With this guide, we hope you can start your business in Spain with security and confidence.

How to expand your business into Spain

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Generally, expanding a business to a foreign country can be quite daunting. Especially, if you lack the correct information on some essential topics. For instance, legal processes, business structures, and country regulations. This is in order to help the proper functioning of your business in Spain. Below, you will see a set of tips and recommendations on how to expand your business in Spain.

Constitution of an entity in Spain: In Spain, there are different business structures, you have to choose one according to your business needs. The most popular configuration option in Spain for medium and small companies is the Limited Liability Company (SL). The steps you have to follow for this are the following.

Obtain your NIE number: Obtaining an NIE number (Foreign Identity Number) is an essential step to start your business in Spain. The NIE is an identification number that is given to foreigners to carry out activities legally. The process is simple; EU citizens have an easier time with this compared to non-EU citizens.

Register the company: The next step is to register the name of the company in the Central Commercial Registry (RMC). This registration process confirms that the company name does not belong to another existing company. This process does not require much time and can be done online.

Receive the bank certificate: The next step is to open a bank account when opening a business in Spain. Subsequently, you have to request receipt of a bank certificate. Additionally, you may have to deposit a sum into the account.

Select shareholders and directors: Finally, you need to establish the shareholders and decide who will be the directors. You have to determine how many people will have shares and what their percentage will be in the new business in Spain.

Financial Considerations: Taxes and Banking in Spain

Business bank accounts in Spain are provided by major lenders. The positive side is that it is possible to obtain an account adaptable to the specific needs of your business in Spain.

Many banks in Spain offer commercial accounts. Most of these lenders also offer specific products for large companies and the self-employed. To open a bank account, you have to provide proof of your company registration. In addition, large companies have to provide an address and at least two signatories. Trading accounts can vary in price, and instead of a flat fee, some require minimum deposits.

On the other hand, sole traders have to pay taxes quarterly at the standard income tax rate. At the end of each financial year, they have to complete a tax return.

Partnerships operate similarly, but each partner is responsible for paying his or her income tax. However, corporations have a significantly different process. In this case, they have to pay corporate tax in Spain, which taxes worldwide profits.

You need to know that there are tax exemptions available for new businesses. Over the course of the first two years, public limited companies pay a 15% tax on the first 300,000 euros of profit. In addition, paying a 20% tax on profits above this threshold. If you exceed this period, you will have to pay taxes at a higher rate of 25%.

VAT for limited companies: There are some companies exempt from VAT, but the vast majority have to pay it. VAT is charged at 21%, although some businesses in some industries have to pay a lower level. For instance, 4% or 10%.

Legal and Regulatory Requirements in Spain

There are certain regulations for businesses in Spain that everyone has to comply with, which you will see below.

Minimum capital requirements: This will depend on the type of company. For instance, the public limited company (SA) must have a minimum capital of 60,000 euros. However, the private limited company (SL) requires a minimum capital of 3,000 euros, just like the simplified public limited company. There are also types of companies that do not require minimum capital. For example, general partnership (general partnership) and limited partnership.

Shareholders: Companies in Spain are subject to specific shareholder requirements. This is in order to promote transparency and effective corporate governance. To establish any company, you need a minimum of one shareholder and they can be of any nationality. All shareholders must have an identity record and a commercial registry.

In addition, companies have to hold annual general meetings. In them, shareholders can participate and vote on important issues.

Management body: In Spain, all entities must have supervision by an administrative body. The administrative body must protect and prioritize the social interest. This represents the common interest of the shareholders. The obligations of this body have four structures.

  • Supportive advisors.
  • Sole administrator.
  • Joint directors.
  • A board of directors.

Business Registration and Licensing in Spain

Before establishing a company in Spain, foreigners and non-residents must have an NIE. That is the Foreigner Tax Identification Number. The NIE is essential for any tax transaction in Spain. For instance, the constitution of the company. If you have Spanish nationality, you will have an NIF instead of an NIE number.

To apply for NIE, you need to visit the foreign citizen processing office.That is the foreigners’ office of a Spanish national police station.

With this, you can begin the process of forming a limited company. To do this you have to obtain a certificate to verify that the name of the company you want to use is no longer in use. That is, obtain the matching certificate without a name. This is available in the commercial register (RMC). This takes approximately three days before receiving the response from the RMC by courier.

Subsequently, you have to apply for the articles of incorporation to establish the company. This is an official document that establishes the relevant company data. Photo instance, address, name, details of directors, board members, and more.

You have to make an appointment with a local notary to sign the articles of incorporation. This step can take between one and three days depending on the notary. You must deliver to the notary the original documents and photocopies of the relevant documents.

With the original articles of incorporation that the notary will give you, you have to go to the Local Government Tax Authority to register it. The deed that certifies this fact must be sealed. Subsequently, you have to take the deed to the RMC. There, you will be registered in the Spanish Registry of Public Limited Companies. Approximately 15 days must pass to register the deed.

Spanish Labor Market: Hiring and Employment Laws

Labor laws in Spain come from different sources that are key. Among these, you can find the Spanish Constitution, collective dismissal agreements, the Workers’ Statute, and judicial decisions by labor courts. In this way, the Constitution or labor legislation of Spain establishes the rights that are fundamental for employees.

Labor legislation in Spain aims to prioritize the protection of workers. In addition, these laws have been adapted to the changing trends in the labor market. In this way, a framework is ensured that can protect all types of employees. For this reason, if you want to start a business in Spain it is important that you know everything about Spanish labor legislation.

Employment contracts in Spain play an integral role in defining the professional relationship that exists between an employer and an employee. Additionally, it provides clarity about your mutual obligations, terms of employment, employee benefits, and what you can expect from each party. In addition, Spanish labor legislation requires certain elements in employment contracts.

Labor laws in Spain allow different types of contracts to be able to meet various labor agreements. These are mainly classified into two categories and they are permanent contracts and temporary contracts. In this way, each one contains its own rules and obligations. For this reason, when doing business in Spain you must be aware of all the rules and obligations established by labor law.

Employee Rights and Trade Unions in Spain

The Constitution of Spain grants unions the authority to promote and defend all the economic interests of employees. In addition, they also have the power to represent employees in collective bargaining and participate in mandatory preliminary conciliation steps. All this, before they can appear before the government agencies in charge of conciliation.

The Spanish Constitution establishes that freedom of association and representation are fundamental. In this way, all employees, except for senior executives, are represented by representatives who were elected. Furthermore, there is no distinction between white-collar and blue-collar representatives.

Workers must begin the election process. For this reason, the employer has no obligation to promote them. Additionally, there are two types of employee representation. Company committees and individual delegates. In this way, if the company has 50 or fewer workers it will have an individual delegate and if it has more it will have a committee that will vary according to the number of employees.

Delegates and company committees can preside and organize assemblies. In addition, they can take administrative and legal actions and file litigation. They can also supervise and control the company’s compliance with its obligations in matters such as protection and security. In the business culture in Spain, unions are fundamental for the protection of the labor rights of employees.

Wages and Benefits: Compensation Structure in Spain

If you are thinking about opening a business in Spain, you should know about the benefits you should offer your employees. According to the Spanish Workers’ Statute, temporary and permanent employees have the same benefits. However, independent contractors and self-employed workers cannot earn any benefits.

For this reason, we will present to you all the benefits that we can find in Spain:

Overtime benefit: According to labor laws, the maximum number of hours that an employee can work per week is 40. In this way, any amount that exceeds these hours will be considered overtime and the employee will have to receive additional compensation. Additionally, overtime is permitted, as long as the annual limit of 80 hours is not exceeded.

13th and 14th month salary: Employees in Spain have a 13th and 14th month salary. This is known as extraordinary pay, extra pay, or special pay. Furthermore, these additional payments are made apart from the base salary. They are usually paid around the Christmas holidays and during the summer.

Maternity leave: Those employees who are eligible get paid maternity leave for 16 weeks. Additionally, the employee must take 6 weeks of these immediately after birth. The remaining 10 weeks are completely at the discretion of the employee until the child turns 1 year old.

Paternity leave: The father of the couple also receives 16 weeks of paid leave. Additionally, you should take the first 6 weeks immediately after birth. While the remaining 10 weeks can be taken at any time during the first year.

On the other hand, you find other benefits such as paid vacations, public holidays, sick leave, severance pay, and many others.

Minimum Wage Regulations in Spain

business in spain

Full-time employees in Spain have a minimum salary of 1,080 euros per month. In addition to their base salary, employees in Spain have a series of benefits. These benefits include health insurance, food vouchers, and company vehicles (only for employees who qualify for the benefit).

Additionally, all of these benefits are paid for by your employer. On the other hand, there are temporary employees. In this way, if they do not exceed 120 days working for the same company in a period of at least 12 months, the minimum wage will be 51.15 euros per day.

If you are hiring domestic employees, it is important to consider the fact that they are paid by the hour. In this way, the minimum wage for these employees is 8.45 euros per hour. For this reason, if you want to work in Spain or start your business, you should know everything about the minimum wage. In addition, all the labor laws established by Spain for employees and employers.

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