If you’re thinking of starting a business in Spain, or moving your existing business to a sunnier climate, there are a range of factors to consider. Differences in market demand, business practices and culture, legal requirements and currency costs should all be incorporated into your plan.
What are the main industries in Spain?
Spain is a hub for imports and exports – Valencia is the busiest port in the Mediterranean and the fifth-busiest in Europe. Fossil fuels, chemicals, machinery and consumer goods are imported from across the world, primarily from Germany, France and China. The key exports reflect the diversity of industry in Spain and include pharmaceuticals, automobiles, wine, citrus fruits and other agricultural goods.
Business in Spain is varied and focused on a number of growing markets. As well as agriculture, manufacturing, energy and electricity are major industries in Spain and tourism is a major contributor to the economy, accounting for 11% of GDP.
If you’re looking for an opportunity to grow a tourism business in Spain, you’ll benefit from a ready-made market. More than 75 million tourists visit the country each year and it is the world’s third most popular tourist destination. If you’re starting a tourism business in Spain, you’ll also benefit from the fact that the World Tourism Organization HQ is located in Spain, providing a great opportunity to build your business with a strong and well-connected network.
Tourism isn’t the only option is you’re looking to start a business in Spain. Automobiles and pharmaceuticals are among the leading exports in Spain; the country is the second-largest car manufacturer with 2.8m units a year and the pharmaceutical market is valued at USD25 billion. Energy is a growing area; the country has invested heavily in renewables and while only 3% of the electricity produced is currently exported, this is an area that looks set to grow.
How to open a business in Spain
EU citizens can set up a partnership or as a sole trader with relative ease, but expats outside the EU, which will include British citizens by 2021, will require a work permit to be able to move to Spain and start a business. Work permits must be renewed every year, but after five years you can apply for residency and will no longer need to apply on an annual basis if this is granted. As well as EU citizenship or a valid work permit, you will also need the following to start a business in Spain:
• Foreigner’s tax identification number (NIE)
• Registration to the Mercantile Registry (Registro Mercantil Central or RMC)
• Company tax identification number (CIF)
• A business bank account with a minimum deposit of €3,000
• Signed deed of incorporation
• Social security registration
Setting up a limited company in Spain has a minimum financial requirement, so you’ll need to be able to demonstrate that you have the resources to back your business. The sociedad limitada or S.L. Incorporation is the most common form of limited company; the structure protects business owners from personal liability in the event of bankruptcy, but does involve additional tax, accounting, and mercantile obligations including annual corporation tax returns and statutory accounts. There are additional declarations required, including filing VAT returns (IVA). The rules are less stringent for sole traders and partnerships, and as an individual you can also set up as a freelancer, known in Spain as profesionales autonomos.
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Registering a business in Spain
The first step when registering your business in Spain is to verify that the company name you have planned is available by applying for a no-name coincidence certificate with The Mercantile Registry (RMC), which can be completed online. If you’re planning to open a subsidiary business in Spain, the process is simpler, but you will need to include the following in your application:
• A copy of the main company’s certificate of incorporation and certificate of good standing
• Notarized power of attorney
• Spanish tax identification number (NIE)
• A member of staff at the Spanish branch to be a resident in Spain, who will agree to be liable for any company debts and tax payments
If you’re concerned about costs, the cheapest way to get started is to form an unincorporated company, either as a sole trader (empresa individual) or partnership (sociedad civil). With these arrangements, there are no minimum investment requirements and there is significantly less red tape than registering a limited company.
Challenges of doing business in Spain
A review from World Bank and International Finance Corporation ranked Spain 136th in the world for how simple it is to start a business, with ten procedures - each with several stages – to complete. Some businesses have found the level of bureaucracy and red tape a challenge, which is why it’s worth checking all the requirements before you make the move. Construction permits take 182 days to be delivered and require several inspections and certificates.
Connection to the national grid can be high cost initially and requires permission from the local council. Property registration requires five separate procedures and while taxation on profits is relatively low compared to elsewhere in the world, labour tax and contributions are higher than the OECD average and a survey estimated that it takes 167 hours a year and eight separate payments to meet all tax requirements.
When it comes to work culture, Spain is a diverse and multicultural society. Personal relationships are important in the business environment so take the time to build a strong network. When it comes to employing staff, most employees work a 40-hour week, have 30 days’ annual leave and are made 14 salary payments per year – one a month, with additional payments in July and December.
However you plan to start and run your business in Spain, a currency specialist can help you manage overseas costs and revenue with great rates, expert guidance and a selection of currency tools to support your business in Spain.