Company in Spain

General information

25%

Tax rate

4 - 5 Weeks

Time of establishment of the company

3000 Euro

Minimum capital

Spain belongs to the group of highly developed countries and ranks fifth in terms of GDP in Europe. Despite the economic crisis, Spain is currently one of the most dynamically developing countries in the European Union.  Spain also has a fiscal and monetary policy to combat unemployment and inflation, as well as the economic structure of an industrialised country.

Types of companies

There are several types of businesses for foreign investors:

  • Limited liability company (Sociedad Limitada, SL)

The most popular form of economic activity in Spain. It may be established by one or more natural or legal persons. The minimum initial capital is EUR 3006 and is divided into shares of equal value. Sociedad Limitada is a form intended primarily for small and medium-sized enterprises. The liability of shareholders is limited to the amount of capital contributed.

  • Limited liability company new company (Sociedad Limitada Nueva Empresa, SLNE)

It was established in 2003 to facilitate the establishment of companies. SLNE can be registered within 24 hours of the submission to the Commercial Register of an electronic document containing the articles of association, confirmed by a notary public. Partners may only be natural persons in the number of no more than 5 persons. It is not possible to be a partner in 2 different companies at the same time (when establishing a company). Minimum share capital is 3012 Euro, maximum 120202 Euro. If this limit is exceeded, there is an obligation to transform into another type of company. The share capital can only be contributed in cash.

  • Joint Stock Company (Sociedad Anónima, SA)

It may be established by at least three shareholders who contribute min. 25% of the minimum capital (EUR 60102). It is a form of economic activity beneficial for medium and large enterprises. A joint-stock company is obliged to pay corporation tax and the liability of its shareholders is limited to the amount of the contributed capital. If a company intends to operate on the stock exchange, as a bank or issue bonds, the establishment of this type of company is indispensable and requires the involvement of experts and auditors.

  • Limited partnership (Sociedad Comanditaria, SC)

The company consists of general partners who bear unlimited liability with their own assets and at least one limited liability partner. The general partners have the right to represent and manage the company.

  • Branch or representative office

If you register your company, you must make an entry in the Commercial Register. It is necessary to present documents, translated and legalised, confirming the existence of a company, its current statute, the composition of the management board and the agreement on the establishment of a branch. After the registration of the branch, you should start to keep accounts (as the branch will operate in Spain on a permanent basis) and start submitting the relevant tax returns.

 

Before you start your business, you must apply for a Spanish identification number called NO. This document can be obtained from the Spanish Embassy in the country where you live before you arrive in Spain.

Company registration procedure

Registration of the company:

  • Obtaining from the Central Commercial Register a individual certificate of the company (Certificacion Negativa del Nombre) confirming the absence of another company of the same name.
  • Creation of a bank account and payment of capital. The founders of the company must register it with the Commercial Register and the Foreign Investment Register (Registro denwersores del Ministrao de Economia y Hacienda).
  • The tax office then assigns the company a NIF number.
  • In order to start business, you will also need the permission of the Municipal Office (Licencia Municipal de Apertura)
  • Obtaining an insurance identification number from Tesoreria General de la Seuridad Social.

Shareholders:

There are no restrictions on the number of shareholders. Foreign shareholders are allowed.

Management Board:

The management of the company is held by one or more directors. They may act jointly or individually.

Supervision:

The supervisory body is the board of directors. They can be from 3 to 12.

Registered office:

The company must have a registration address, telephone and mail forwarding. It is suggested to have a physical office or at least exercising control from a territory of Spain.

Time to set up a company:

The time to establish a company is about 4 weeks.

Capital:

The minimum capital is EUR 3000. It is divided into shares. The capital must be credited in full to the account during the registration of the company.

Taxes and finances

Tax residence of the company

A company is resident if it is registered in Spain or is managed and controlled from a territory of Spain. Residents pay tax on income from both domestic and non-resident activities. Non-residents pay tax only on income earned in Spain. It is levied on the company’s revenues from its activities, passive income and capital gains.

CIT rate

25% In some cases, special rates may apply. Normal operating expenses may be deducted. All company assets except land are subject to depreciation provided that they are used for business purposes. Straight-line and degressive methods are allowed. Depreciation rates range from 2% to 33% per annum. Losses can be transferred indefinitely and can be deducted at any time in the future, but can usually only be offset against 70% of the profits of a given year with a few exceptions (50% if the turnover in the previous year was between €20 and 60 million; 25% if it exceeded €60 million; losses not exceeding €1 million net can be deducted without limits). Retrospective loss  decudtion is not permitted. Capital gains are usually taxed in the same way as income (25% rate).

Double taxation

Spain is a party to a number of treaties that provide businesses with an exemption from double taxation.

Counteracting tax avoidance

Spain has implemented a transfer pricing system and the regulation largely follows those issued by the OECD. Full documentation is required. According to CFC rules, a parent company pays Spanish CIT on the income earned by a foreign subsidiary if it holds at least 50% of its capital, shares and votes, and the income tax paid by the subsidiary abroad must be less than 75% of the Spanish tax. International companies with a total turnover of more than 750 million Euros must prepare a report on their activities in each country. Some payers may be subject to different requirements.

Accounting

The tax year is the financial year. It may not exceed 12 months. Tax returns must be submitted within 6 months and 25 days from the end of the tax year. Companies are obliged to pay tax in advance (in April, October and December). It is possible to submit consolidated statements. In order to be eligible, the Spanish parent company must have, directly or indirectly, a minimum of 75% of the shares and a minimum of 50% of the votes of the subsidiary. The limitation period is 4 years from the deadline for filing declarations if amendments are submitted, which is calculated from the beginning. In the case of tax offences, the statute of limitations is 5 years and can sometimes be extended to as much as 10 years.

Withholding taxes

  • Dividends and Interest paid to non-residents are taxed at a rate of 19% unless tax agreements or EU directives reduce it.
  • Royalties, Consultancy fees paid to non-residents are taxed at 24%. The 19% rate applies to payments made to an EU or EEA resident.
  • The tax on interbranch money transfers is 19%.

VAT

The standard rate is 21% (reduced by 10%; 4%; 0%). Registration is obligatory for all entrepreneurs carrying out transactions subject to this tax. Declarations and payments are submitted electronically on a monthly basis if the turnover in the last year exceeded 6 million Euros. Otherwise, they are carried out on a quarterly basis.

Other taxes

  • Capital duty – applies in the case of capital reduction or liquidation of a company. The rate is 1%.
  • Real estate tax – the rate is maximum 1.3% of the cadastral value and its amount depends on the location of the property. Non-residents who own real estate in Spain are subject to 3% tax if they are resident in a country that is a tax haven and the real estate is not used for any other activity than leasing.
  • Transfer tax – Companies pay transfer tax on transactions which are not related to their normal activities or which are not subject to VAT. The rate is 6% for the transfer of real estate; 4% for the transfer of movable assets and concessions. They may be higher or lower depending on the region.
  • Stamp duty is imposed on notarized documents that can be registered in the public register. The rate is 0.5% of the value of the transaction concluded on the document. Depending on the region this fee may be higher (rates from 0.75% to 2.5%).
  • Customs duty is levied on products originating outside the EU. Excise duty is levied on alcohol and alcoholic beverages, tobacco, hydrocarbons.
  • Ecological taxes – imposed on vehicles (new or used) during their registration. The rate ranges from 0% to 12% depending on the type of vehicle and its carbon dioxide emissions.
  • Insurers pay tax in the amount of 6% of premiums paid.
  • Companies with a turnover in excess of one million euros are subject to business tax. Larger companies are exempt for the first 2 years of their activity.

Local labor law

Other information

The Spanish company serves our customers to conquer Iberian markets, often also French markets. Our clients are also considering companies in Spain in order to invest in real estate, e.g. in the Canary Islands, etc.