For expats living or intending to settle up in Spain, it may seem easy to set up a business to keep an income while living here instead of living from your savings. But very often, you will find that it is not that easy to set up a company and it’s more expensive than expected. Taxes and contributions to Social Security are high and paperwork in Spain is –as usual – abundant.
The most common company kind is “Sociedad Limitada” or just “S.L.” similar to “Private Limited Company” in U.K. However, is not the only one, when deciding to set up a business in Spain you will have to decide as well which type of business among these fits your interests:
- As a sole trader (self-employed)
- As a partnership
- As a private limited company (PLC – sociedad limitada)
Between all types, the most common two and the once we are going to explain below are the sole trader and the private limited company.
Sole Trader.
This is a fast and cheaper process to become an entrepreneur in Spain, but that does not mean it is plain nor have zero costs. First thing to do is getting a NIE number, if you haven’t got one. This is a foreigner’s identified number and it’s mandatory to whoever wants to do any business affair in Spain, from buying a car to set up a business. It will take up to one month to get one if there is not complications in the process, and it will be the same number forever.
After this step, it will be necessary to arrange a certain volume of paperwork with the Tax Office or “Hacienda” to start the process. You will be asked to bring the NIE number, a plan of your activity as a self-employed. Depending on the activity you are planning to carry out the data asked can be different, in terms of taxation. If you don’t have much experience dealing with Spanish public bodies, is not been long since you moved to Spain or your Spanish language knowledge is not so wide, we recommend to hire a lawyer, it will make things pretty straightforward. You will also have to register in the Spanish Social Security System, and will not able to continue any farther without this registration.
When talking about costs it is not that clear. It may vary depending in a huge number of facts regarding age, type of business, number of workers and so on. In a general basis we can say there is a flat rate of around 250€ per month. Although this tax may seem average, it’s necessary to bear in mind taxes are paid whether you have sales in a month or not. This is indubitably one of the flaws of being an autónomo in Spain. However, there are other policies that soften this rate, for example if your are “autónomo” under 30 years old get a discount of 80% on the monthly tax for the first six months, after a discount of 50% next six months. After this, you will have to pay a 30% off every month (the next 18 months). After that, you will have to pay the full tax, about 250 euros.
For all of this, being autónomo is not as easy as it may look, paying taxes every month and there will not be a set wage so flexibility is essential. It will also be time-consuming, since all the red tape will have to be done on your own. You will have to face debtors and have a careful record of the business such as receipts taxes and VAT records in case you get an audition. A well written receipt must contain the name of the self-employer or business, the number of the business (CIF), date, description of the product, price and VAT.You will also have to present a quarterly VAT.
Private Limited Company
Another one of the most common business forms in Spain is the Private Limited Company or just, Limited Society. These have a minimum capital of 3.000€ provided by the shareholders of the company. It has to be provided at the same moment of the formation and members cannot buy other members shares. The way a S.L makes decisions is by a shareholders’ meeting that has authority to the point to choose the directors.
This process, far from being easy, involves loads of paperwork in Spanish dealing with public bodies such as Tax Office, Companies House or Notaries Public, it will also be of great help if you have everything tied up in terms of contracts, payments, parts, shareholders, this will avoid you many unwanted problems that could have been easily solved. For all of this reason, we strongly recommend getting a solicitor to advise you, help you and dealing with public bodies in any time you may need it. It will be a great time-saving and it will make things much easier.
Once we have seen the basis of the company, we can get to the steps to be followed to start up a S.L.
- First of all, you will need to hold a NIE number to make all transactions and steps of the business. Without it, there is no identification in Spain so your acts will not be valid.
- In second place, we will have to get a certificate from the Central Companies House, this document will certificate there is no other company with the name you intend to give to yours; this is called a “no-name coincidence certificate”.
- Once this is done, the initial contribution has to be made in a short period of time, this has to be a minimum of 3.000€ and it will be deposited in a bank in a Spanish bank account opened before. When the transaction is done, ask for the bank to print you a payment receipt so you have the proof needed for the next step.
- The next step is collecting all documents obtained so far and make an appointment with a Notary Public. Please note Notary will ask you to bring all the original documents of all the steps detailed before, and copies may not be considered as valid. The relation of documents go as follows:
- Certificate from the Mercantile Registry.
- Original NIE.
- Evidence of the bank payment.
The notary will name an administrator (director) in the moment of the creation of the deed, prepare the company’s constitution and finally provide you with a deed of incorporation. This will be the funding document of the company. Once provided it has to be taken to the Tax or Treasury Office and register the deed, this step is subject of a 1% stamp duty previously made. The deed will be stamped and certified
- Next step is obtaining a CIF from the Tax Office; a CIF is a tax identification code. I order to do this, the Tax Office provides a web portal in where to find this application form and many more. Download it and pay it in the bank so the last step will be handle it at the office, along with this application form, you will be asked to provide your NIE and a copy.
- The deed will be taken to the Companies House. This registry, as the name says, keeps a record of every Spanish company, more specifically, there is a registry for every kind of company. They will take all the original documents you previously collected and they will be returned when the process is complete, it should take around 15 days.
- Finally, the last step to successfully create our own business under the legalities of Spanish regulation is some more procedures, this time with the Ministry of Labour and Social Affairs (TGSS). Here, there will be some application forms regarding the type of company you are applying for. This is for social security and occupational accidents insurance purposes. This last step is more complicated that it seems, but is essential and note than the process cannot be completed without this step.
As a final note, do not forget to take your NIE document to every public body visited, you probably won’t be able to successfully operate without it so if you haven’t got one in the first place, please do it. All the steps and procedures described before may take more time or require some further steps. To not to make any mistakes or sign binding documents mistakenly get the advice of a specialised lawyer since the beginning, he will help you with the company form that fits your interests the most and will help you will all steps from the beginning to the end.
