Spain is actually a good choice to start a business. As the OCDE reports says, the recovery is projected to strengthen gradually over the next two years:
1) The improving labor market and stronger confidence will aid private consumption. Investment will pick up as prospects improve.
3) The unemployment rate should decline gradually as growth picks up, but will remain high through the projection period.
4) Spare capacity will keep wage growth down and price inflation very low.
If you decide to establish your business you should know that there are different ways to set up a business in Spain:
- A representative office: Choosing this option means you can only conduct market research; you cannot sign contracts with clients. This is the first step for some companies before they establish a branch or subsidiary.
- A branch: Is considered a permanent establishment which depends on its headquarters. There are some steps to take before setting up a branch which are different from setting up a new Spanish company. There must be agreement from the headquarters regarding the creation of the branch; the Spanish consulate of the country where the headquarters is located must also register and validate its existence. There must be registration of the deed with the Mercantile Registry, and the headquarters must submit its financial statements each year. If there is a double tax treaty between the two countries, the taxes that the company must pay will be regulated in the treaty and in the non-resident income tax regulation of Spain.
- A subsidiary: Is also considered a permanent establishment. In this case it is the subsidiary that sends its financial statements to the Mercantile Registry. A subsidiary has its residence in Spain, so the taxes it must pay are controlled by the Corporate Income Tax regulation of Spain and in the Double Tax Treaty between the countries. Moreover it is mandatory to make a minimum deposit of 3,000 Euros into a bank account to establish the subsidiary and also the steps of a branch.
- A new company. In this case the steps to follow are only carried out in Spain, so you do not need to register any information about the company abroad or its headquarters. The taxes are the same as with the subsidiary. The most common type of company is the S.L. (limited corporation) and, as with the subsidiary, you must deposit a minimum of 3,000 Euros.
- Self-employment. As a non-resident you can do business in Spain as a self-employed person. For this you need a NIE (Identification Number in Spain) and register with the tax authority and Social Security. There are some taxes which must be paid quarterly such as IVA (VAT), IRPF (Income tax), etc, and some annual statements too.
Do not forget to ask our specialists if you require any further information.
Mr. David Segura
International Tax Consultant