buy property in spain - spanish property for sale

Setting Up A Business In Spain

If you have been thinking of setting up a business in Spain but have been deterred because you do not know how, we hope this article will give you some help and guidance.

The nature of the business you propose to establish will determine the type of business structure to be formed. It will be different if the business is designed to run a restaurant or nightclub compared, to say, a computer software house or timeshare organisation.

This decision will also be influenced by the share capital of the company and the partners or shareholders the company will have in Spain.

The first legal choice to make is whether to form a company or to act as a Sole Trader.

If a company is chosen, the procedure to form it is similar to the United Kingdom and the decisions you have to make are comparable. However, the requirements are different.

Types of Business Structures

There are different types of company under Spanish Law but the forms that tend to be most commonly adopted by foreign investors are the following:

Sociedad Anonima (SA): this is equivalent to a UK Public Limited Company or an American Corporation and requires a minimum share capital of 10m Pesetas.

Sociedad De Responsabilidad Limitada (SL): a Private Limited Company, which has a minimum share capital of 500,000 Pesetas.

Sucursal (Branch): A permanent branch office with some independence but with the same legal status as the parent company.

Empresario Individual: a Sole Trader, where an individual manages the business, provides the capital and assumes the risk.

There are others, such as partnerships and co-ownerships, but those above are the most common.

The type of business structure formed will also govern the legal rights and obligations it has, so it is vital to ensure that the most suitable model is used. It should be noted however, that in many instances the law provides only a minimum of standards or general rules. The founders of a company have a great deal of flexibility in tailoring the structure of the company to their specific needs through appropriate drafting of the bylaws or Articles of Association for which purpose they should seek legal advice.

Requirements

Despite the different requirements for each company, the actual process to be followed in forming a new company is basically the same. The first step is to decide on a name. That name must then be checked against all existing companies to ensure that it is unique. A certificate will then be granted certifying that the name is valid (called a Negative Name Certificate).

A tax number needs to be obtained, (similar to a company registration number in the UK). This number is provisional at first, and will be confirmed when the company has been registered at the Companies Registry.

This number can then be used to set up the bank accounts, into which the capital of the company can be paid.

Spanish Law insists that at least part of a new company's capital must be placed into the bank account, and the type of company formed dictates the amount of capital which needs to be paid into the account, for example, 100% of the capital in the case of an SL and 25% in the case of an SA.

Most importantly the Deed of Incorporation needs to be drafted, which records details of the shareholders, the amount of capital the company has and the Articles of Association. These are in effect the Arules@ of the company.

The shareholders or their representatives must appear before a Notary Public in order to execute this document.

Subsequently, the Deed of Incorporation has to be registered in the Companies Registry.

Tax Requirements

After the Deed of Incorporation has been executed before the Notary Public there is a period of 30 days to pay the Stamp Duty on the formation of the company.

Another tax requisite is to register for the business activities tax, which is a Local Council Tax, paid annually, and varies according to municipalities and activities.

Once the company has been registered in the Companies Registry, it must obtain a definitive tax identification number and register for VAT purposes.

Municipal Permits

If your business requires premises, you need a 'Business Opening Licence', (requiring payment of an Opening Licence Tax, which is a small one-off municipal levy), from the Local Council before starting your business. This will be granted once the authorities are satisfied that the premises are suitable for the proposed business, that they comply with planning permission and are safe and hygienic.

To sell or serve alcohol or food you require a health licence. Establishments that serve food must undergo sanitary and technical inspections and the employees need to obtain a food handlers medical certificate.

Labour requisites

You must register the Business with the Social Security.

If you are an employer you have to 'affiliate' (register) the employees to the Social Security System, if they are not already registered.

You must also apply for the 'Alta' or registration of the worker in the Social Security General Scheme or another scheme. There are several schemes, according to activities, but the general one covers the majority of non self-employed workers. The self-employed workers have to register in their own scheme. Registration has to be applied for whenever a person has been out of work for a period and is resuming his or her active life.

These procedures are carried out at the offices of the Social Security, which are called 'Tesoreria Territorial de la Seguridad Social'.

It is also necessary to register the place of work with the Ministry of Labour and to obtain an 'Activities and Facilities Licence' for the premises, to ensure that they do not breach regulations.

Upon commencement of the business activities you have to send the Provincial Office of the Ministry of Labour a 'Notification of Opening of the Offices' and have ready for the Labour Inspectors visits the 'Visits Books' and a 'Personnel Book' where you list all the workers of the company according to categories.

You should note that as an employer, you must observe Spanish labour laws and regulations in relation to contracts, workers' rights, minimum salaries and social security payments, which are very often compulsory regardless of what is agreed with the worker.

Incentives

There are a wide range of investment incentives available to anyone planning to establish a business in Spain, from Municipal Councils, Regional Governments, the National Government or the European Union.

They include investment subsidies, tax relief, low or free interest loans, social security rebates, reduced registration tax during the start-up period, and training and employment incentives. There are also Government incentives for investment in certain regions or areas or specific industries.

Conclusion

There are many new opportunities in Spain, but to make the most of them, the prospective investor will almost certainly need specialist legal and accountancy advice. A general article of this nature cannot attempt to cover all the legal and financial aspects involved and you are therefore recommended always to seek professional advice.

We hope this article will give you some guidance in the formation of a company or establishing a business in Spain in which we wish you every success.