Starting a Business in Spain
Text: Doornbos & Cheema
Ibiza is still one of the most popular places in Spain for people to launch their own business. Set up is straightforward, but it can be time-consuming. Before beginning your venture make sure you have:
STEPS TO TAKE TO START A BUSINESS IN SPAIN
If you intend to start a business in Spain it will be well worth the cost to have the help of a Gestoría or accountant.
STEP ONE – A N.I.E. number is required if you want to set-up your business in Spain. This is simply an identification number for foreigners which you may already have as it is needed for many purposes such as renting a property or buying a car. You can apply for this with the alien police office.
STEP TWO – Decide with your accountant the structure of your business. The most common ones are:
SELF EMPLOYED: (Autónomo) with the business being run in the name of the individual. Registration takes a few days and notary assistance is not required.
PARTNERSHIP: (COMUNIDAD DE BIENES / C.B.) A C.B. is a community of assets, joint ownership between all partners. They also carry joint liabilities. Registration takes a few days and notary assistance is not required.
LIMITED LIABILITY COMPANY: (SOCIEDAD DE RESPONSABILIDAD LIMITADA / S.L) An S.L. has registered shareholders and a set minimum trading capital of €3006. An S.L. is similar to a British Limited. The single most important advantage of trading via an S.L. is that there is a limited liability of the company´s shareholders. Registration takes a few weeks and a notary is required to formalise its structure and existence. You can also opt for a Sociedad Express. This is a simplified version of a S.L. and can be set up in a few days. However notary assistance is still required.
STEP THREE – Once decided upon your accountant will register your business activities with the Ministry of Economic Affairs (HACIENDA) You will then receive an identification number known as a CÓDIGO DE IDENTIFICACIÓN FISCAL (CIF).
STEP FOUR – In principle you will also need to register your business with the Social Security office (SEGURIDAD SOCIAL) If you are self employed expect to pay approximately €254 a month. This gives you entitlement to the local health service. If you pay in for 15 years you qualify to receive a pension.
In some instances you will also need to register your business with the local town and apply for an opening licence (LICENCIA DE APERTURA) which defines what your business is and how it will operate.
Corporate Income Tax (IMPUESTO DE SOCIEDADES / I.S.): Spain’s standard corporate income tax rate is 25% up to the first 300,000 euros of taxable income. A tax incentive /credit of 5% applies if your number of staff is the same or more than the previous year.
Value added tax (IMPUESTO SOBRE EL VALOR AÑADIDO / I.V.A.): There are 3 different IVA rates in Spain, 4, 8 & 18%. The rate you pay is dependent on the type of good or service you have purchased or sold. The purpose of VAT is as a tax on end-consumers; businesses are generally entitled to deduct VAT borne against VAT charged.
Tax on Business Activity (IMPUESTO DE ACTIVIDAD ECONÓMICA / I.A.E.): This is an annual municipality tax paid by businesses operating within the municipality. This tax rate is dependent on many factors, such as turnover, location, type of business and number of employees. It is for businesses that have an annual turnover of over one million euros.
Self employment tax: (IMPUESTO SOBRE LA RENTA DE LOS PERSONAS FÍSICAS / I.R.P.F.). This is income tax and is calculated over a progressive tax rate.
Each new business is unique to itself. As such, the business formation must be well thought out to fit the specific needs of each business venture. Many factors must be considered when deciding how to properly start a company. A well thought out start-up can save much work and money in the future. We strongly recommend consulting with a professional before deciding on how to launch your new business venture. •