Doing Business in Spain
Some facts and figures
With an estimated population of 47.190.493 inhabitants, Spain is a developed market, very attractive from the investment perspective (8th in terms of FDI reception in 2011)1 due to its sizeable economy, its able work force and to its interesting business opportunities arising from the current economic scenario.
The Spanish legal system is based on the Civil Law system. As such, Spanish legal system relies on the codified law.
Starting a business
The Spanish regulation offers several types of vehicles to start a business, ranging from the Branch of Activity (Sucursal) to the Limited Liability Company (Sociedad de Responsabilidad Limitada). The choice of one or other instrument must be made taking into account the investor’s goals and perspectives, tax regime, etc. Capital needs and specific requirements may vary greatly from one to another so it is advisable to seek the professional assistance from a lawyer.
In addition to this, in most of the cases it will be required that the setting up of the Company must be executed before a Public Notary. Being that necessary it is important to bear in mind that, in order the public deed to be granted and being the investors from abroad, the following documents need to be obtained prior to granting the deed:
- Tax Number (Número de Identificación Fiscal – NIF): This document is mandatory for Companies it is provided by the Tax Authorities (Agencia Tributaria) after filling an application and providing the requested documents.
- Foreign ID Number (Número de Identificación de Extranjeros- NIE): This is mandatory for individuals. It is provided by the Police after filling an official application and providing certain documents. It also can be used as Tax Number.
Due to the regulations on money laundry, without said documents no Public Deed can be granted by Notary. These documents may take some time to obtain therefore, in order to avoid unnecessary delays, it is recommended to draft a realistic time schedule.
Besides, in certain cases the foreign investment has to be declared before the Treasury Ministry, however the submission of this information is just for information purposes given that foreign investments are not subject to prior authorization unless strategic business are involved.
Once the Public Deed has been granted, the new Company will need its Spanish NIF so it can operate effectively in the market.
Finally, after the relevant taxes have been paid, Public Deed needs to be registered at the Mercantile Register. Upon completion of that stage new Company will be validly existing pursuant Spanish regulations.
Contracts and commercial
Spanish regulation, as a general rule, admits certain degree of flexibility in drafting agreements. Therefore, the parties’ will, duly expressed by means of an agreement, shall apply unless it contravenes an imperative law or the moral principles and good costumes. Moreover Spain, as member of the European Union and the main International Organizations, acknowledges and respects the most important International Treaties regarding International Trade.
The Spanish Labour regime has been traditionally protective with the employee’s rights. However this perspective is being changed in order to provide companies with mechanisms intended to prevent the loss of jobs due to adverse economic conditions. With said changes Spain aims to have a more flexible job market.
In addition to this, it is important to highlight that all employees and self-employed persons must be covered by Social Security. In case of employees this contribution must be paid by employer.
State encourages subscribing unlimited duration employment agreements by granting economic incentives to companies.
The maximum working hours per week is 40.
Spanish employees enjoy statutory vacation of at least 22 work days.
Collective bargaining agreement may specify better conditions for employees.
Corporate tax rate will vary between 20% and 30% of the company’s earnings, depending on the circumstances.
VAT rates are 4%, 10% and 21%, depending on the goods. 21% is the standard rate.
Applicable income tax rate will be determined taking into account the wages and will range from 24% to 43%.
Finally, it is important to highlight that Spain is also a good gate to the Central and Latin American market, where it is the 3rd largest investor (2011)2 and to the North African market due to its strong relationships with Morocco (2º largest investor in 2011)3.
 Source: Ranking of the United Nations Conference on Trade and Development 2011.
 Source: United Nations’ CEPAL report 2011.
 Source: Spanish Institute of Foreign Commerce (ICEX)