Spain, in addition to the good quality of life and security, is one of the European Union countries that facilitates the opening of new small businesses. However, the entrepreneur needs to prepare properly before opening his business as this country is demanding in terms of documentation and bureaucracy. This can make it difficult to quickly establish the business.

The creation of a company in Spain requires that it be incorporated before a notary and registered in the Mercantile Registry. Therefore, the following steps must be completed:

• If the company is incorporated through a representative, the founder must grant a power of attorney to the company;
• Request for the Tax Identification Number (NIF) or the Foreign Identity Number (NIE) in case the individual is from another country;
• Application for a company name authorization certificate;
• Opening a bank account to deposit capital contributions, in addition to obtaining bank certification;
• Incorporation of the company before a notary, through the deed of the constitution and its statutes;
• Request for a provisional TIN for the company;
• Payment of property transfer tax;
• Company registration in the Mercantile Registry;
• Obtaining the company's definitive NIF;
• Legalization of the official trade book;
• Finally, tax and employment formalities.

Entrepreneur nationality

The rules for opening a company in Spain also depend on the nationality of the entrepreneur. If you are a national of one of the member states of the European Union, countries belonging to the EEA or Switzerland, the process is easy. That is, not requiring any special authorization or documentation.

Otherwise, he must apply for a work permit at the Spanish embassy in his home country in order to be able to move to Spain and open a business there. This permit must be renewed annually, however, after 5 years the entrepreneur can apply for a Spanish resident status.

Foreign entrepreneurs who want to open their business in Spain must have a Foreigner Identification Number (NIE). This is a sequential, unique and exclusive personal identification number and must be included in all self-assessments, tax returns, communications or documents submitted to the Spanish tax authorities. Thus, the NIE can be requested in the entrepreneur's country of origin or at the General Commissariat for Foreigners and Borders in Spain.

Company opening

The power of attorney can be granted by a person with sufficient legitimacy, to any natural or legal person. In the case of the person who is going to cede power to another being Spanish, he only has to go to a notary and it is not necessary the presence or approval by the person who will receive the power of attorney.

On the other hand, in the case of a foreigner, the power of attorney is normally carried out in the country of origin. In this case, the person who will cede power must go to a registry office and the power of attorney must be legalized in accordance with the Hague Apostille Convention of 1961, if the country in question is a member, otherwise the usual procedures of that country must be followed. . Furthermore, it is necessary that this oath of power be translated into Spanish.

Regarding documents required to do this procedure, the individual who will cede power must present a declaration of his authority and ability to grant the power of attorney.

Necessary documents

The Spanish government is very demanding regarding the documentation needed to establish a company in their country. Below are the various documents essential for an entrepreneur:

• Power of attorney: founders must provide the power of attorney to the person who will create the new company on their behalf in Spain;
• NIE or NIF for foreign partners and administrators;
• Company name authorization certificate: An application to the Mercantile Registry must be made in order to determine if the name already exists or can be used. This certificate is valid for three months and needs to be renewed if the company is not incorporated within the stipulated period of time, during which time no other company can use or apply under that name;
• Bank certificate: the amount payable at the time of opening a new company is normally deposited or transferred to a bank account opened in Spain in the name of the new company with the words “company in the process of formation” added;
• Documents to be presented to the Spanish notary: bylaws of the new company, legitimate identification documents of the company's founders and a duly completed foreign investment declaration;
• Declaration of beneficial ownership: the notary must identify the natural persons who own or control, directly or indirectly, more than 25% of the capital or voting rights of the legal persons involved, or who exercise, directly or indirectly, control over the administration of these people by other means;
• Provisional NIF before the Spanish Tax Agency;
• Payment of property transfer tax and stamp duty;
• Documentation to be submitted to the Mercantile Registry;
• Definitive NIF of the Spanish Tax Agency;
• Legalization of the official trade book in the Mercantile Registry;
• Official declaration of commencement of activity before the Spanish Tax Agency, if applicable;
• Finally, the company's social security registration, if applicable.

costs associated

There is no fixed cost when starting a business in Spain. This value depends on several factors, such as the initial capital of the new company, number of partners, among others.

The cost associated with company registration is between €100 and €150. However, there are other types of expenses to take into account, such as the payment of the notary, which can either present a value of €150 for a Limited Company or €300 for a Public Limited Company. When the share capital of a Limited Company does not exceed €3,100 and certain other requirements are not met, the notary and registration fees are fixed at €60 and €40 respectively.

Thus, an entrepreneur can see his company officially incorporated under Spanish law 15 to 30 days after submitting all the necessary documents to the Mercantile Registry.

Fees and taxes

After the start of economic activities, the company will have to pay taxes. The number of taxes the company will have to pay depends on its type. The most frequent Spanish taxes are highlighted below:

Corporation tax

A standard rate of 25% with new companies receiving tax breaks. Thus, in the first two years it allows them to only pay tax of 15% on the first €300,000 of profit and 20% on profits above this amount.

Income tax

A national and regional tax imposed on all individuals who work or run their own business. At the national level, the rate varies between 9.5 and 22.5%, while by region it varies, with Madrid being the lowest rate and Catalonia being the highest.

Value Added Tax (VAT)

While some companies are exempt from this tax, the vast majority need to pay this tax. It is normally charged at 21% of the company's profits, but it can be as little as 10% in the case of certain medical products, pharmaceuticals, cultural events, among others, or 4% in the case of food, newspapers and other social services.

Social Security

Like other countries, it is necessary to make social security contributions. Partnerships and freelancers contribute at a rate of €265 per month, in addition to additional contributions if they are employing an employee. On the other hand, in the case of limited companies, contributions are made at a rate of 29.9% of employees' salaries.