Running a business in Spain can be a daunting prospect for any expat, but with the right knowledge and planning you can be well on your way to success.
Businesses in Spain range from sole proprietorships to multinational corporations, with a wide variety of legal forms available. It’s important to understand the key differences and advantages of each type of business.
Whether you’re starting a business in Spain or want to expand your existing business, it’s important to get familiar with the country’s business culture. It can make a huge difference to your success.
The Spanish business ethos is one of hierarchy and control. Managers often have the authority to make decisions without consulting their employees, and expats accustomed to working with personal initiative will be at a disadvantage in Spanish business settings.
However, Spanish businesspeople also value teamwork and communication. Rather than being in a hurry to implement changes, managers prefer to take their time and consider the impact of their decisions before moving forward.
If you’re interested in starting a business in Spain, the first step is to determine which legal form of company is right for you. There are three main types of companies in Spain: sole trader (empresa individual), public limited liability company (sociedad anonima), and limited liability partnership (sociedad sociedad comanditaria).
A sole trader is the most simple form of company formation in Spain, with no minimum share capital required. This is ideal for those who are just starting out and don’t have much money to invest.
Another common type of company in Spain is a limited liability partnership (sociedad sociedad general o sociedad de lderes limitados). This is an excellent choice for anyone with a few partners and a good idea for how to grow their business.
Limited companies are a little more complex and formal than other forms, but they offer several advantages, including a higher level of protection against liability and more favourable taxation if you earn more than a certain amount. If you’re thinking of setting up a limited company in Spain, it’s important to discuss the costs with your accountant before making any commitments.
As for taxes, there are many different options. Generally, you’ll need to pay income tax on any profits you make and submit quarterly VAT returns through your NIE number.
You’ll also need to set up social security payments for your staff. These depend on the structure of your company and how many people you employ.
Spanish law has a variety of rules that govern all aspects of business. These laws cover constitutional, administrative, criminal and process law. They also govern the relationship between the public administration and the people.
Constitutional law is the legal framework that regulates the government of Spain, determining the structure and operation of the state and the rights and freedoms that citizens are entitled to enjoy. These laws are enforced through the judicial system, which is composed of judges and magistrates.
The judicial system in Spain is based on the Constitution of 1978, which states that justice emanates from the people and is administered by judges and magistrates who shall be independent, irremovable, liable and subject to the rule of law. Judges and magistrates are appointed by the King for a term of five years or until they reach retirement age, and may be dismissed or suspended on the grounds of their performance.
Besides the judicial system, the law sets up the Public Prosecutor’s Office in Spain, which is made up of professional judges and magistrates. The Public Prosecutor’s Office is responsible for the prosecution of all types of crimes in Spain, including those related to money laundering, tax fraud, corruption and terrorism.
In 2014, the Spanish legislature made significant changes to its corporate law, focusing on corporate governance, trust and transparency. In particular, it amended the Corporate Governance Act (Law 5/2021) and enacted pre-existing recommendations from the National Securities Market Commission.
These amendments had a considerable impact on corporate governance in Spain, improving the internal control systems of Spanish companies and creating a better environment for both domestic and foreign investors. In addition, the Law set up a number of new procedures that must be followed by Spanish listed companies.
Under Spanish law, directors of a company must have insurance policies to cover their liability for damages that they may cause to the company. These policies do not cover directors’ wilful misconduct, fraud or criminal conduct, but can cover claims for compensation resulting from actual or alleged wrongful acts performed within the scope of their managerial duties.
Spain has a complex tax system. Each of Spain’s 17 autonomous regions is responsible for taxing income and property in their area, so the amount of taxes you pay will vary depending on where you live.
Individuals, businesses and estates in Spain must report their taxable income on Form 720 (Formo de Ingreso) each year. This form must be completed and submitted online, and it requires a detailed breakdown of your income.
Spanish tax rates are progressive. The highest rates are at 49% in Catalunu and Andalucia, with additional rates that apply based on your age, marital status, work activity, and education level.
Unlike some countries, taxes in Spain are imposed based on a combination of income, corporate and social insurance taxes. This mix means that Spain’s tax system can be either distortionary or neutral, depending on the specific tax policies that it implements.
When non-residents receive remuneration for services they provide to a company in Spain that is situated abroad, the payment will be considered employment income in Spain. This means that the remuneration will be subject to Spanish personal income tax, which is 24% for non-EU residents and 19% for EU residents.
In some cases, the remuneration can be excluded from the tax return if certain conditions are met. This can include situations where the remuneration is paid in a foreign country where the taxpayers are not considered tax residents of that country and where there is an exchange of information clause between Spain and the country or jurisdiction in which the remuneration is received.
Additionally, there is a special tax regime for expats that allows expats to opt-out of the progressive tax rate and avoid paying taxes on foreign sourced income. The requirements to take advantage of this tax regime are quite strict, so it is important to consult with a professional to learn more about this option.
Taxes in Spain can be complex, so it is important to seek expert advice before starting a business. There are a wide range of taxes that affect your business, and many of them require specific forms or documentation to be filed with the Spanish authorities. For instance, there are various taxes on real estate transactions and net wealth.
If you have incorporated a Spanish entity and you are hiring staff through this, it is essential to ensure you hire according to local employment laws. Even a minor deviation from these regulations can land you in deep trouble, affecting your business image and finances.
Spain has a wide range of labour laws and regulations that govern all aspects of employee rights and protections. These include paid holiday leave, public holidays, sick leave and working conditions.
Workers in Spain are also protected by the right to strike. This is a significant benefit and it allows workers to take action if they feel they have been mistreated or their work conditions are unfair.
In addition to this, Spanish employees have a number of other legal rights and protections including: overtime pay, rest periods, social security, medical benefits, and workplace safety.
A number of these rights are governed by collective bargaining agreements and a minimum wage that is determined by each industrial sector. In addition, the government regulates temporary work agencies (empresas de trabajo temporal) that provide workers for client companies.
When a company goes bankrupt, employees are entitled to receive compensation from the state-run insolvency fund. These funds may cover wages, bonuses, and fringe benefits up to one year before the company went insolvent.
Senior executives are referred to in Spanish law as’senior managers’ and are subject to a specific employment relationship under Royal Decree 1382 / 1985 of 1 August 2006. There are various grounds for termination of this contract, such as withdrawal (lack of confidence) or disciplinary dismissal based on objective redundancy and following the legal procedures laid out in the Workers’ Statute.
In addition, senior managers are covered by the’senior executives’ code of conduct, which guarantees a set of guidelines to ensure senior executives have a fair and legitimate work environment. These guidelines include: confidentiality, transparency, non-discrimination and equality, professional behavior, and privacy in the workplace.