Spain is a land full of opportunities for foreign investors seeking to undertake new projects, but this task is not easy, it requires a lot of planning and dedication. In this article we are going to talk in depth about how to create a company in Spain as a foreigner.
First of all, it should be noted that, although it is possible to create a company in Spain as a foreigner for both EU and non-EU citizens, the steps for the legal incorporation of a business are always the same. The only difference lies in the previous step that any non-Spaniard will have to take, the acquisition of residency.
If you are from any European Union country (i.e., EU citizen), you must register in the Central Register of Foreigners at the Foreigners Office or at a Police Station. In addition, you will need to get your NIE and an EU registration certificate, remember that residents of the European Economic Area, as well as Switzerland, Liechtenstein, Norway or Iceland are also EU citizens.
However, if you are not an EU citizen, you will need to get your work visa to start a business in the country. The fundamental requirement that you must fulfill to create a company in Spain as a foreigner is to have legal residence in Spain, to acquire this you can opt for the entrepreneur visa.
You can apply for this visa if the business you are going to open in Spain requires a high investment, is innovative and avant-garde, this will have to be detailed through a market study and a business plan that proves the value that the company will bring to the Spanish economy (the process takes about three weeks and a month).
Also, you can opt for the self-employed work permit (for more information on this figure you can read our article dedicated exclusively to this figure) in addition, you must also meet these other general requirements:
- Proving that the company’s ideas are capable of generating employment and bringing economic benefits to Spain.
- Have the necessary training and experience for the project (and be able to prove it).
- No criminal record within the last five years.
- Be of legal age.
- Demonstrate that sufficient resources are available for maintenance and housing, as well as the necessary investment to start operations.
- Depending on the type of business, comply with current regulations regarding incorporation requirements.
- Take out health insurance in Spain.
- Not having a “rejectable” status in Spain or in any country with which it has an agreement.
What types of companies are there?
Below, we will explain the most commonly used ones. #1
A sole proprietorship or sole proprietorship is a business composed of a single person, as the name implies, and therefore does not require employees. It is usually the business model of plumbers, artists, among others.
One of its main advantages is that it does not require any type of initial investment, however, the fact that it is a sole proprietorship has an important disadvantage: there is no distinction between the company’s assets and its personnel, therefore, there will be a case of unlimited liability.
As a sole proprietor you pay income tax (IRPF). This implies that you will have to be in charge of filing tax returns on an annual basis.
Since your activities will be regulated by the income tax regime, you may end up paying an unnecessary amount of taxes by using this legal structure if your income is above €60,000 per year, being better to choose another type of company in case your income exceeds the above mentioned ceiling.
Finally, it should be emphasized that it is crucial not to confuse the self-employed entrepreneur with the sole proprietorship; they are two totally different concepts.
In order to incorporate a limited company, a minimum investment of 3,000 euros is required, which is not very high. Another advantage is that the liability is limited according to the amount of money contributed, therefore, if only the initial capital of €3,000 was invested, that is the maximum amount that can be requested in case of insolvency.
The taxes you will pay with this type of business will be corporate income tax and VAT. For all these reasons, it has become the most popular business structure in Spain.
Public Limited Company
This is the second most commonly used type of corporation. When we talk about a corporation we are already referring to a large company, since 60,000 € are needed for its incorporation with 25% paid up at the time of the public deed.
In addition, this structure makes it possible to obtain external financing, i.e., its shares are traded on the stock exchange.
In case you are not looking to create a company in Spain as a foreigner, but you have your own company in any other country and you want to expand in Spain, the appropriate figure for this situation is the branch.
According to Articles 295 et seq. of the Commercial Registry Regulations, a branch is any secondary establishment with permanent representation and a certain degree of management autonomy, through which the company’s activities are carried out, in whole or in part.
This brings several benefits such as that the main responsibilities of the business in Spain are assumed by the foreign parent company; any legal obligations such as tax penalties or payments to employees that are required will also be the responsibility of the parent company; and finally there is no minimum legal share capital requirement.
The main steps to create a company in Spain as a foreigner are:
- Have a valid passport.
- Present documents proving that you meet the requirements for setting up a company in Spain as a foreigner, such as medical insurance, certificate of residence, criminal record and a market study proving the economic benefit that the business project would bring to the country.
- Open a bank account in Spain.
- Enter the immigration portal to fill out the official form(EX-07).
- Register with the Spanish Tax Agency through form 036 or 037, as well as with the Social Security as self-employed.
- You will also need to submit documents related to your economic activity, such as operating permits, etc.
- Pay residency and work fees. These shall be accrued at the time the application is admitted for processing, and must be paid within ten working days(Form 790, code 052, item 2.1 initial temporary residence authorizations). And Form 790 Code 062, item 1.5 authorizations for self-employment).
Once constituted, in principle, you will have permission to keep your company in Spain for one year, if it is the case that the company does not work, it will have to be closed in this first year, as this time is quite low, it is necessary to carry out an exhaustive market study to ensure that the company can take off in this time. On the other hand, if the company works, it can renew its activity for two years, and after four years it is no longer necessary to renew.
Finally, it should be noted that newly created companies must apply a corporate income tax rate of 15% during the first two years of life, provided that they are not taxed at a lower rate. With respect to single types, there are exceptions related to entrepreneurship; they are as follows:
- Non-profit entities are taxed at a rate of 10%.
- However, entities engaged in the research and exploitation of deposits will be taxed at a higher rate of 30%, the same as credit institutions.
- Investment funds of a financial nature, as well as real estate investment or mortgage market regulation funds are taxed at 1%.
- If the company is incorporated in the Canary Islands Special Zone, it is taxed at 4%.
- Listed companies investing in the real estate market are taxed at 0%.
- Pension funds are also taxed at 0%.
For more information on taxation for companies in Spain you can access the following guide by Santander TRADE.
In order to create a company in Spain as a foreigner, it is extremely important to get the right advice from a lawyer.