Avoid costly mistakes and ensure your business complies fully with Spain’s legal and tax systems while taking advantage of the country’s many incentives
Spain is the fourth-largest economy in the European Union, with an infrastructure among the world’s top seven for highest quality.
As a strategic hub, the country has the EU’s largest motorway network, two of Europe’s busiest airports, the world’s third most extensive high-speed rail network and three of the 10 busiest ports in Europe for container terminal activity.
Businesses in Spain can access an attractive domestic market with more than 47 million consumers, as well as the EU and the other countries in the Economic European Area (EEA).
Located at the southern edge of the EU, it is an ideal gateway to northern Africa. It’s also a platform for investments in Latin America thanks to its historic links with the region and its numerous bilateral tax treaties.
Spain is among the countries with the world’s least restrictive regulations for international investment: it ranks 10th in the OECD’s FDI Regulatory Restrictiveness Index.
However, operating internationally can be challenging. Foreign investors setting up business in Spain must understand how the local rules, culture and customs can affect legal and regulatory requirements.
Entry options for investors doing business in Spain
Several entities are available to foreign investors setting up in Spain.
1. Limited company
The two main types of limited company are public limited companies (sociedades anónimas, or SAs) and private limited companies (sociedades limitadas, or SLs).
Both have a legal personality, so partners or shareholders are not personally liable for company debts.
Choosing an SA over an SL depends on the type of the business and whether the entity will be regulated (in other words, listed or raise capital), as well as the flexibility required within the business structure.
Small and medium-sized companies tend to incorporate as SLs. The minimum capital requirements are lower than for SAs (€3,000 as opposed to €60,000) and there is greater flexibility and autonomy in structuring and organising the entity.
The shareholders of listed companies must approve annual accounts, which should be filed to the Trade Registry.
2. Branch or representative office
A branch operates as a representative of its foreign parent company and can carry out the parent company’s activities in Spain. The brand is one of the types of permanent establishment (PE), and must fulfil many formal obligations including submitting tax returns.
However, representative offices – not PEs – can carry out only certain support activities such as market studies and local support, not business operations.
Like branches, representative offices don’t have separate legal personalities; so the parent company remains liable for their obligations and debts.
3. Joint venture
Foreign investors can set up a venture with a business already established in Spain. Spanish law allows several types of joint venture. The most important are:
- Temporary joint venture (Unión Temporal de Empresas, or UTE)
- Economic Interest Grouping (Agrupación de Interés Económico, or AIE)
Spain has adopted EU anti-money laundering (AML) and terrorist financing regulations requiring company founders to provide the identity of their ultimate beneficial owners.
Find the right work visa for your employees in Spain
EU nationals as well as those from the EEA and Switzerland can work in Spain without a work permit.
Companies wishing to employ non-EU nationals can request a one-year work permit, which can be renewed until a permanent permit is granted after five years.
Alternatively, the Entrepreneurs’ Law regime provides companies investing in Spain with a more flexible system for hiring managers and highly qualified employees from overseas.
Know the different types of taxation in Spain
Investors in Spain need to know its different forms of taxation.
Businesses pay tax at all three government levels – state, regional and local.
Income tax is levied at state level on companies and individuals.
A company is considered tax resident in Spain if its effective place of business, headquarters or central administration are located there.
The corporate tax rate is currently 25%. However, newly formed companies benefit from a 15% rate during the first two years of taxable profits.
Regions and municipalities can levy specific taxes on business activities, property, land, construction, installations and works.
Make the most of business grants and incentives in Spain
Investors setting up business in Spain can access a broad range of financial aid and incentives set up by the government to promote investment, innovation and economic growth. Companies can also benefit from various EU aid programmes.
Financial aid and incentives in Spain include:
- incentives for specific industrial sectors
- incentives to invest in certain regions
- incentives for innovative small and medium-sized companies
- preferred financing from state-owned lender Official Credit Institute (ICO)
How Intertrust Group can help you set up a business in Spain
Intertrust Group provides a wide range of financial and administrative services to clients operating and investing in the international business environment.
Our 4,000 professionals working together across 30 jurisdictions offer a global reach, deep local knowledge and an extensive international network to help clients achieve their strategic goals.
Our team in Madrid includes specialists in administration services dedicated to servicing funds, multinational corporations, private equity funds and private wealth individuals.
Why Intertrust Group?
- Intertrust Group is a publicly listed company with more than 70 years’ experience providing world-class trust and corporate services to clients around the world.
- We are experts in management and administration services to operational companies and holding structures across the globe.
- We can provide support from corporate secretarial services to directorship services, as well as accounting, tax compliance and AML services, and act as directors for client-owned companies.
- We provide funds, real estate and special purpose vehicle services, as well as depository services.
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