If you’re planning to start a business in Spain or acquire an existing company, there are some essential points you should be aware of to avoid unpleasant surprises. From share capital to taxation for foreigners, here are eight crucial tips to help you make informed decisions.
Written by Abigail Sked
Legal Advisor
8 Key Facts to know before starting a business in Spain
Abigail Sked, Legal Advisor (Subtitles available in English and Spanish)
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SHARE CAPITAL: IS €1 ENOUGH?
Can I really set up a company in Spain with just one euro of share capital?
Since 2022 it's been possible to set up a Spanish Limited Liability Company (Sociedad Limitada, SL) with just €1 of share capital. Sounds appealing, right? But beware: if your capital is below €3,000, shareholders could be liable with their personal assets if the company goes into debt. Banks and suppliers may also be wary. Our advice is to start with at least €3,000 to avoid these issues.
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Non-cash contributions
Can I contribute assets instead of cash when forming my company?
You don’t need to contribute only cash. Companies can be set up using assets like property, vehicles, or intellectual property rights. This is useful if you want to include existing assets in the company without injecting cash. For an SL, no audit report is required to confirm the value of these contributions.
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FOREIGN INVESTMENT NOTIFICATIONS
What steps should I take as a foreign investor in Spain?
Foreign investors should know that any investment or divestment in Spain must be declared in the Ministry of Industry, Commerce, and Tourism’s Investment Registry after the transaction. Failure to do so can lead to penalties or administrative problems.
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DIRECTOR’S RESPONSIBILITIES
What responsibilities and risks does a company director have in Spain?
The role of a company director (administrador) carries significant responsibilities, not just in day-to-day management. Directors may be personally liable if the company fails to meet its obligations.
Their duties include signing contracts, convening meetings, filing annual accounts, and overseeing tax and employment obligations. This role should not be confused with the secretarial functions which can be delegated to your management team or legal advisers. Choosing who will assume this position is a strategic decision that affects company governance and liability.
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SPANISH TAX CALENDAR
When are the key tax deadlines in Spain?
The fiscal year in Spain runs from the 1st of January to the 31st of December, meaning:
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Personal Income Tax (IRPF) returns are filed between April and June of the following year.
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Corporation Tax (Impuesto de Sociedades) returns must be submitted in July for the previous year’s results.
Knowing these deadlines helps avoid issues with the tax authorities.
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CORPORATion TAX BENEFITS FOR NEW COMPANIES
Are there any tax advantages for newly established companies?
Newly created companies enjoy a reduced Corporation Tax rate of 15% for the first two profitable years, instead of the standard 25%. This can significantly improve early-stage profitability.
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TAXATION FOR EXPATS: THE BECKHAM LAW
How does Spain’s “Beckham Law” work and what benefits does it offer to expats?
If you’re relocating to Spain, the so-called Beckham Law offers a special tax regime, allowing you to pay a flat 24% on income up to €600,000. This can be a substantial advantage compared to the progressive IRPF rate, which can reach up to 47%.
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THE KEY ROLE OF THE NOTARY IN SPAIN
Why is the notary such an essential figure in Spanish legal and business transactions?
Notaries are essential in Spain, authenticating documents and providing legal advice. They are required for company formation, modifications, dissolution, share transfers, and powers of attorney. Notaries help prevent disputes, ensure legal compliance, and provide certainty in key corporate transactions. Notarial documents carry significant legal weight.
WE Can HELP YOU INVEST IN SPAIN!
Setting up or acquiring a company in Spain as a foreigner can be complex, but with the right guidance, it’s a great business opportunity. At CONESA LEGAL, we can assist you every step of the way; assisting with the company formation, property transactions, taxation, foreign investment, and residency.
Contact us today and we'll walk you through your upcoming, Spanish, business adventure.
