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Employment and Business Start Ups

Spain - Self-Employment and Business Start Ups

Anybody who is legally entitled to live and work in Spain has the right to start their own business there. There are no restrictions on EU citizens setting up in business as long as they have been given their foreigner’s identification number (numero de identificacion de extranjero). This is the equivalent of the tax identification number. This begins with an X and has 7 or 8 digits and is finished with another letter. A business is given a similar number known as a CIF (certificado de identificacion fiscal).

Those who are not EU citizens need to have a visa and a work permit and will also need to be able to prove that they have the money required to start their business. It will also be necessary to confirm that they will provide work for Spanish nationals. If the intended business is a regulated profession then qualifications will need to be recognised before they will be able to register with the regulating body.

When starting a business there are a number of procedures that you will need to take into consideration and these depend a great deal on the type of business which is being established. It is recommended to get the opinion of a legal advisor (gestor) while the process is ongoing. They will also be able to advise on the need for a special license, but the requirements for this vary from region to region.

If one wants to establish a business as a sole trader (autonomo) there is no minimum requirement for financial investment. The person is considered to be self-employed and any debts incurred by the company are the responsibility of the sole trader. In order to set up in business it is essential to have the foreigner’s identification number (NIE). When this number has been obtained the business owner will need to register for tax (impuesto de actividades economicas), declare that the business has been started (declaracion censal de inicio de actividad) and register for social security. For a self employed person the part of the social security system that applies is known as RETA (regimen especial de trabajadores autonomos). These payments need to be made even when the business owner is not working.

If wanting to begin a partnership (sociedad civil) there is also no minimum level of investment required. The partnership needs to be a minimum of two people and all debts and other financial considerations are split between the partners. It is not obligatory but recommended to complete a partnership agreement (contrato de constitucion) and sign it in the presence of a notary, in addition to the steps already mentioned for a sole trader. If there are specific business premises being used then an opening license (licencia municipal de apertura) will need to be applied for at the local town hall.

Another option for a business structure is a ‘co-ownership’. This works in a very similar way to a partnership. Each partner has unlimited liability and a partnership agreement will need to be drawn up. This will detail the amount of money put in by each partner. In addition there will need to be registrations for tax and social security as well as the declaration for starting a business.

When setting up a new company it should be noted that the IAE tax (impuesto de actividades economicas) is not applicable for the first two tax periods and turnover will need to reach a minimum amount before the company will have to pay it.

Other companies have limited liability status and are known as an SA, SL or an SLNE. An SA (sociedad limitada) is the type of company which is most used in Spain and there are a number of requirements such as a minimum capital required. The SL is a new business limited company and has requirements in the name of the company, which must include the letters ‘SLNE’ (sociedad limitada nueva empresa). When the company is established the maximum number of shareholders is limited to 5. An ‘SA’ company is the same as a public limited company and the start-up capital requirement is much higher than other company types.

Company names need to be registered and owners should apply for a ‘certificate of uniqueness’ (certificacion negative de la denominacion social). Company owners should go to the nearest Central Commercial Registry (registro mercantil central) and will need to pay a small fee. A bank account will need to be opened in the name of the company and the bank will issue a deposit certificate if there is a minimum amount of capital required. A public deed of incorporation can be issued by a notary to include all the details of the business and of the shareholders.

Each company has to have its own CIF (codigo de intentificacion fiscal). The local tax office can issue this number and initially the number will be a temporary one, with the permanent number issued within six months of the business starting. It is necessary to pay transfer tax and stamp duty and this based on a sum of 1% of the total capital put into the company. This needs to be done within 30 days of the deed of incorporation being created. The company can then be registered with the central commercial registry and must be done within two months of the date of the deed of incorporation. The declaration to start the business can then be made and the company can be registered for tax. As part of Spanish law the accounts books, minutes book and VAT register book all need to be stamped by the central commercial registry before they can be used.

When this has been completed the company can apply for an opening licence and notify the regional work authorities office. A log book of all business activities must be kept and should be up to date at all times as it can be requested for inspection with very little notice.

Useful Resources

Invest in Spain website (in English)
Business advice from Ministry of Industry, Tourism and Trade
Tel: +34 901 53 58 00

Direccion General Politicia de la Pequena y mediana Empresa (Department of Small to Medium Enterprises)
Tel: 900 19 00 92

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