When deciding to start a business in Spain, a foreign investor should be aware of the overall costs related to the registration of the company. The total costs imposed during the registration procedure vary according to the type of company the investor chooses to open and thelicenses and permits that will be required for certain economic activities.
For the beginning, the entrepreneur should prepare the amount required for the share capital of the company. In the case of a limited liability company, theminimum share capital is established at EUR 3,000, while for ajoint stock company, theminimum share capital is set out at EUR 60,000. However, during the incorporation procedure, the investors are required to deposit only 25% of the above mentioned amount. Our team of lawyers in Spain can provide more details on the share capital applicable for other types of Spanish business forms.
Who can help you incorporate a company in Spain?
The foreign investors who don’t want to go in person to Spain in order to open a company may address to a Spanish lawyer, who will handle all the steps of the registration procedure. The foreign citizens may give the power of attorney to local lawyers, who will act on behalf of them and will submit all the required documents to the local Trade Register.
The procedure will require investors to pay a fee that may vary from lawyer to lawyer. For details about the fees and the taxes businessmen have to pay for incorporating a certain type of company, our team of attorneys in Spain can provide in-depth details.
The following video offers a short presentation on the main business start-up costs in Spain:
Those who choose to incorporate a company through a law firm in Spain may also benefit from additional services, such as the virtual office (a cheaper alternative to a traditional office, with important advantages), contracting accounting services, financial consulting services or assistance on the employment legislation.
Taxes in Spain
After starting the economic activity, a company must also pay taxes, such as the following: the corporate tax – applicable at the standard rate of 25%, and the dividend tax – ranging from 0% to 19%, depending on the stipulations of the double taxation treaties signed by Spain.
Companies operating in Spain also have to pay the value added tax (VAT), generally applied at the standard rate of 21%; it can also be imposed the reduced VAT rates of 10% for certain medical products, pharmaceuticals, transport of passengers, admission to cultural, sporting and entertainment events or 4% for foodstuff, newspapers and certain social services, but it can also be applied at the rate of 0% for specific categories of commercial activities.
Investors should also take into consideration the costs associated with the employment of the Spanish workforce. At the moment, such costs are below the European average, especially after the beginning of the economic crisis, when the wages decreased and the unemployment rate increased. However, investors must know that the latest data provided by the Spanish authorities have shown that the unemployment rate is decreasing on a steady manner.
The registration of a Spanish business has specific costs; such costs can vary based on the type of company selected for incorporation. For instance, a sole trader is registered following fewer procedures and this business structure does not have a share capital. For corporate structures, investors should prepare the required minimum share capital, depending on the selected company type. The main costs related to a start-up in Spain are for:
- • incorporation and registration – typically, this procedure will require the payment of specific fees, imposed by the local authorities;
- • accounting – companies operating in Spain will generally hire an accounting firm to handle the company’s accounts;
- • hiring employees and paying the wages and the taxes imposed in this situation;
- • maintenance of the business – such costs can refer to the utility costs (rent, internet, etc.);
- • marketing and advertising, etc. – when advertising a product or a service, companies address to advertising agencies (the same is applicable when conducting marketing studies).
Employment taxes in Spain
Any company operating in Spain will need to hire employees to develop its current commercial activities. In order to hire Spanish workforce, it is necessary to sign employment contracts, which can be established on a permanent or temporary basis. The taxation of the employment activity is performed following the type of contract theemployee has signed.
In Spain, the companies are required to withheld a percentage of the employee’s salary. In a permanent employment contract, the taxation varies based on the value of the salary. As a general rule, the income taxes on salaries range from 24.75% to 52% of the salary. In the case of a temporary contract, the employers may retain a standard percentage, following the employment regulations.
What are the main taxes applicable to Spanish companies?
We have presented up until now some of the taxes investors should expect when running a business in Spain. Our team of lawyers in Spain can offer an in-depth presentation on all the taxes that are applicable to local companies, based on their legal entity (differences can appear between the taxation of corporate structures and other types of entities, such as the sole trader and the partnership). The basic Spanish taxes are presented below:
- • the corporate income tax – this tax is imposed at the standard rate of 25%;
- • however, Spanish companies can also be imposed with a lower corporate income tax, of only 15% (applicable to newly founded businesses);
- • the capital gains tax – this tax is imposed on a progressive system, ranging from 19% to 23%;
- • a capital gains tax of only 19% is imposed for a profit of maximum EUR 6,000;
- • the same tax is applied at a rate of 21% for an income between EUR 6,000 and EUR 50,000;
- • profits above EUR 50,000 are charged with a capital gains tax of 23%.
The values mentioned for the capital gains tax are applicable on the sale of real estate properties and other types of investments and they are charged on the profits obtained on the country’s territory. Persons who are interested in purchasing or selling a property (for commercial or residential purposes) can request legal assistance from our Spanish law firm.
What taxes are applicable to freelancers in Spain?
Since the freelancing trend became more and more present in the business environment, we’d like to present some of the taxes and costs freelancers should take into consideration when entering an economic activity in this country. Freelancers work as self-employed persons, developing a business activity in their own name. Typically, this activity is developed through a sole trader, which is especially designed for this purpose.
The sole trader is not a corporate body, as there is no distinction between the founder and the business. In this case, the sole trader will be taxed following the personal income tax regulations, instead of those created for corporate entities. Our team of Spanish lawyers can assist with legal advice on the costs associated with the registration of this entity, but those interested in starting a freelance activity must know that the basic operating costs are formed by the personal income tax and the social security. This business activity is also charged with the value added tax.
What other types of taxes should investors expect in Spain?
Starting a business in Spain can have a set of costs related to various aspects, as we have presented so far. However, the investors should also take into consideration additional costs that can be charged to them for obtaining various profits and incomes while living in this country. Foreigners who are residents of Spain can expect the below mentioned tax system, which also allows them to obtain tax allowances in certain conditions:
- • the property tax – applicable to Spanish residents and non-residents who own a property in this country;
- • the wealth tax – the rate at which this tax must be paid ranges based on the person’s yearly net assets;
- • it is imposed on wealth with a value higher than EUR 700,000 and it can be charged at a rate of 0.2-2.5%;
- • the inheritance and gift tax – currently, the legislation in Spain no longer makes any distinction between non-residents and residents in Spain, all of them being charged at the same rate (in the past, non-residents were required to pay more compared to Spanish residents);
- • the inheritance and gift tax is charged with a rate of 1-7%;
- • it is also necessary to mention that residents in Spain can obtain various tax allowances;
- • this is applicable when the respective person has children.
Businessmen who need to know more details on theregistration of a companyand the costs related to this operation, are invited to contact our law firm in Spain. Our Spanish lawyers will calculate the total cost of opening a business in this country and can help businessmen with other related aspects. Our team of lawyers in Spain can assist businessmen in selecting the services of a virtual office, which represents the most cost-efficient solution for starting a company here.
The overall costs of starting a business can also vary based on the region where you set up your company, but also on the space you find for your office, along with the main activity of your business.
Thus, the costs of starting a business in Barcelona can vary greatly if you need a small office or if you are search for a place where you can set up a pub or a restaurant. Our lawyers in Barcelona can advise you on this.
If you want to set up a business in Madrid, you can expect to invest a similar amount of money, but this also depends on the particularities of your business and the overall capital you are able/willing to invest.
You can contact our lawyers in Madrid for assistance on how to reduce the overall costs of your initial investment. Our lawyers can offer tax assistance after you start your operations in Spain.