Starting a business in Spain as a foreigner can leave you with a lot of questions. After all, there’s so much you need to learn about local regulations, taxes, costs, and visa requirements. This guide is for those expats and foreigners who’re ready and eager to start a business in Spain. We’ll cover:
Spain is a terrific place to start a business as it offers several benefits to entrepreneurs and investors.
As a freelancer or entrepreneur in Spain, you won’t be affected by the high unemployment rate of the country. Instead, you can set your own rates to potentially earn more than the average salary and have the opportunity to create employment for others! You’d also benefit from tax cuts and zero to low initial capital requirements.
Other personal benefits include operating out of the economic hubs — Barcelona and Madrid — which are also hugely popular with expats.
On an economic level, starting a business here also has advantages. As Spain has the 5th biggest economy in the EU, you can take advantage of an expanding consumer market and robust infrastructure. Spain is also the 11th greatest global exporter of commercial services, which means you can enjoy the benefits of living in Spain and serve customers globally.
Foreigners who come from outside the EU or from other EU countries can start a business in Spain, as long as they’re legal residents in the country. Are you a non-EU citizen on a visa? You’ll need to switch to a different visa to be allowed to start your business in Spain.
If you’re a foreigner wishing to move to Spain to start a business, you’ll need to apply for a self-employment or entrepreneur visa and collect a residence permit before coming to Spain. After that, you’ll need to follow the same procedures for starting a business as the rest.
The process of starting a business in Spain is slightly easier for foreigners already residing in Spain.
If you’re an EU citizen, you’ll only need to apply for an NIE number – your tax ID in Spain – and register your address at the local town hall to collect your empadronamiento.
For foreigners coming from abroad, there’re stricter rules and longer wait times. But recently, the Spanish government passed new startup laws to ease the process for non-resident investors. Now, non-resident investors are no longer required to obtain the NIE number. Getting a tax identification number (NIF) will be sufficient to start the bureaucratic process.
Apply for the entrepreneurship visa if you’ve an idea for a business that’s based on technology and innovation. It can involve machine learning, artificial intelligence, cybersecurity, etc.
A freelancing visa is the easiest way to start your own business in Spain. It’s a great visa choice if your idea isn’t innovative and doesn’t include technology. Your business can be anything: a small consultancy firm, travel agency or local supermarket.
Whether you’re in Spain or abroad, you’ll need to show the following documents to prove that you meet the key requirements:
Applying from Spain —
To apply for an entrepreneurship visa, submit your application online to the Unidad de Grandes y colectivos estratégicos or UGE (Large Business and Strategic Sector Units). You need to be in Spain throughout the whole process and you’ll know the decision within 20-30 days.
Non-EU citizens need to have lived in Spain for at least 3 years to apply for this visa from within Spain.”
Your new residence permit will be granted for 2 years and can be renewed if you continue to meet the above requirements. After 5 years, you can apply for a permanent residence permit.
Applying from abroad —
The process is longer for foreigners applying from abroad.
First, you’ve to get approval for your business plan from the Spanish economic and commercial office. Then, you need to collect the required documents mentioned above for the entrepreneur visa application and submit them to the Spanish consulate in your country. They’ll issue your visa within 10 days.
After this, you’ll have 1 year to travel to Spain and apply online for a work and residence permit at the UGE. After your submission, your application will be evaluated within 30 working days.
Once they approve, you’ll be granted 2 years visa with the possibility to extend if you continue to meet the above requirements.
The type of business structure you choose for your company depends on how you want to operate it and how much risk you want to take.
Broadly speaking, there’re 2 main business structures – unincorporated and incorporated. The most popular unincorporated business structures include freelancer, sole trader, or partnership. The most popular incorporated business structure in Spain is a limited company.
|Unincorporated business||Incorporated business|
|You want to work solo or hire very few people.||You expect to scale up your company and hire several people or you’re opening a new branch in Spain.|
|You don’t need to have an initial investment.||You need an initial investment.|
|You want fewer formalities, paperwork and complexity when starting a business.||Is more time-consuming and expensive to launch.|
|You don’t need to show financial planning before you form your company.||You need to have an approved business proposal with financial planning. You’ll also need a business lawyer.|
|You want to benefit from tax deductions on utility bills, rent, advertising expenses, etc.||In addition to these, companies with big R&D investments can benefit from the tax reduction.|
|You’re legally responsible and personally liable for any debts incurred.||You’re only liable for the total investment in the company; you won’t be personally liable for company debts.|
|You pay progressive income taxes annually between April to May. You can end up paying 45% taxes if you earn a lot.||You pay a fixed corporate tax. This can be profitable if you’ve a significantly high turnover as the corporate tax doesn’t increase as turnover increases.|
Best for — those who want to freelance, have the ability to hire others, launch a business without much hassle, and maintain simple accounting.
Set up costs — no minimum investment required.
Liability — you’re personally liable for debts incurred by your company. So your personal assets can be taken if your company is in debt.
From 2023, the social security contributions will depend on your earnings instead.”
How to become empresa individual —
Even though both freelancers (autónomo) and sole traders (empresa individual) get the self-employed work visa, there’re some key differences between the two.
A freelancer only needs to register as an autónomo; they don’t need to start a business. But a sole trader is both a freelancer and administrator at their company.
When you want to apply for a work permit as a freelancer, you either fill modelo 037 or 036. If you operate as a sole trader, you need to fill out modelo 036.
As a freelancer, you can’t hire employees. But as a sole trader you can.
Customers pay part of the tax to the government on behalf of the freelancer, but this doesn’t apply to a sole trader.
Best for — those who want to launch a business as a group of 2 or more partners and spread the risk of individual liability if in debt.
Set up costs — no legal investment level required.
Liability — each partner is personally liable for debts incurred by the company; the company's debt will be divided between the partners.
Taxes— each partner will pay progressive personal income tax every quarter, file a tax return annually, and pay social security contributions (a minimum of €294 per month). Together, all partners will pay withholding tax and declare VAT taxes quarterly (21%).
How to start a sociedad civil —
Best for — when you’ve money to invest, don’t want to be personally liable, and expect to earn a lot.
Set up costs — the initial capital investment requirement is as little as €3,000.
Liability — you’re not personally liable for company debts. Only the amount invested in the business will be lost if your company goes bankrupt.
Taxes — you’ll pay a corporate tax (impuesto de sociedades) on profits. This is 25% for established companies; new companies pay 15% on the first €300,000 and 20% on the remainder profit for the first 2 years. You’ll also pay VAT.
How to start a sociedad limitida —
For opening a limited company in Spain, there’re 7 general steps you need to follow
Obtain your foreigner tax identification number– NIE.
You need to have an NIE number to handle all your financial affairs in Spain.
Register the company name at Mercantile Registry (Registro Mercantil Centra).
Send a list of 3 potential company names to the Mercantile Registry to check if they’re unique and to reserve the names. The names should also include the type of company (Sociedad Limitida). Once the application is submitted, you’ll receive a certificate within 3 days confirming the official name of your business.
Get your company’s tax identification number (CIF) from the Spanish Tax Agency (Agència Tributària).
CIF (certificado de identificacion fiscal) is the tax ID and VAT number of Spanish companies. You’ll obtain this by submitting form 036 online via their website or in person.
Open a company bank account.
You need to open a bank account under your company name using your company’s tax code and the certificate confirming your company’s name. You’ll need to deposit the investment you need to launch your business (minimum €3,000) and obtain a certificate from the bank proving you’ve made the investment.
Sign the deed of incorporation.
You need to get a signed deed of incorporation from your local notary to officially form your business. This deed will contain all the necessary information, such as the company name, address, and details of shareholders. To get this deed, submit the original and copies of:
The notary will process the details and publish the deed within 3 days.
Register your limited company in the Spanish Register of Limited Companies
Get your deed of incorporation stamped by the Agència Tributària. Go to Mercantile Registry with your stamped deed and original documents to register your company. This whole process will take approximately 2 weeks. Once officially registered, go back to Agència Tributària and show your deed and NIE to collect your official CIF (corporate tax id) number.
Register the company for the social security (seguridad social)
As an owner, you’re responsible for making social security contributions on behalf of your company and the company’s employees. To register your company at the social security office, bring the following documents and their copies:
Expected costs associated with starting a sole trader:
Expected costs associated with a limited company:
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