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Business law in Spain

business law in spain

As experts’ optimistic forecasts postulate, in the next couple of years Spain has the opportunity to consolidate its status as the fastest-growing economy in the European Union. The country’s index of 3.2% was an excellent indication of the progress made in 2016 and suggests favorable future prospects. Such tangible progress is linked to plans for the country’s post-crisis recovery and has been boosted by initiatives employed by the Spanish government to improve its legislative base (including its legislative reach in the fields of international economy and business law in Spain) and to develop measures for attracting foreign investment to Spain.

Below, the key points describing the modern Spanish business environment are detailed. In conjunction with an analysis of business law in Spain, the factors listed below will help you to build a comprehensive picture of the prospects and particularities of conducting business in this country.

  • The current economic growth in Spain is fueled primarily by export revenues, by an increase in foreign investments in such fields as tourism, construction, and real estate, and by internal demand;
  • The main challenge of the Spanish economy continues to be the high level of unemployment, especially among young people. As of the end of 2016, the unemployment level in Spain was 20.05% A significant volume of foreign investments has always been one of the unique features of the Spanish economy. Since the approval of the law, “On Supporting Measures for Entrepreneurs and their Internationalization,” the volume of foreign investment has increased even more. As a result, the procedures for investment and labor migration for non-residents from all over the world have been simplified considerably.
  • When analyzing the sector composition, it is worth noting that 81.1% of Spanish companies operate in the area of service, 24% of which represent trade.
  • The most potentially profitable spheres for investment in new businesses in Spain are the following: the IT sphere, tourism, beauty salons, clothing and footwear shops, ateliers, and hair salons.

Business law in Spain: what does it regulate?

Spain boasts its own civil code and legislation based on legislative acts made by governmental bodies at various levels. Spain is both a member of the E.U. and a federal state comprised of 17 autonomous regions. Commercial, corporate, and intellectual property laws are regulated on the federal level, while the governments of autonomies are eligible to adopt their own legislation on such issues as healthcare, education, environmental protection, and consumer law.

Business law in Spain regulates all activities in the field of business management, including operation, taxation issues, and corporate social liability. Below is a brief outline of the kinds of entrepreneurship that are regulated by different sections of the Spanish business laws.

Organizational and legal form of a legal entity

Organizational and legal form of a legal entity

Most types of companies and their activities are regulated by the Spanish Corporate Enterprises Act, including joint-stock companies (Sociedad anonima), limited liability companies (Sociedad limitada), branches of companies (Sucursales), and limited partnerships (Sociedad comanditaria por acciones). General partnerships (Sociedad colectiva) are regulated by the Spanish Commercial Code. These types of legal entities vary in terms of charter capital, number of members, and level of responsibility (depending on whether the business is small, medium-sized, or large). The most common types of small and medium-sized businesses (PyMEs, Pequeña y mediana empresa) are joint-stock companies and limited liability companies.

The main legislative acts of business law in Spain that regulate labor relations are the following:

  • Workers’ statute, 1995
  • Law on Social Security, 1994
  • Law on the Prevention of Professional Risks, 1995

These laws are valid for Spanish citizens who work abroad as well as for Spanish companies, provided that the parties of the labor contract have preemptively chosen Spanish legislation as the applicable law. However, some laws remain in effect regardless of the legislation choice, such as the laws aimed at combating discrimination in the work place and regulating minimal salary. As a rule, Spanish labor appeal courts have jurisdiction concerning all labor relations disputes that take place in Spanish territory.

Taxation in Spain

Taxation in Spain

According to Spanish business laws, the Spanish government levies the following taxes:

  • Income tax
  • Wealth tax
  • Company income tax
  • VAT
  • Property transfer tax
  • Inheritance tax

Some of these taxes are levied by the governmental authorities of the Spanish provinces. Moreover, local authorities can charge additional property tax, capital gains tax (property-related), new construction tax, and economic activity tax (the latter refers primarily to large businesses).

In determining rulings on aspects related to taxation, business laws in Spain consider the legal status (resident or non-resident) of physical or legal entities; this status can make a great difference in determining the tax burden and tax base in these cases.

Accounting and reporting of a legal entity

Business laws in Spain envisage that all companies must exercise accounting for their profits and expenses according to the standards established by the Commercial Code of Spain and according to the documents of the central financial and control administration of Spain. All Spanish companies registered in the Commercial Register must submit a report of the company’s activities at the end of the year, including the balance sheet, profit and loss statement with comments included, and a statement of changes to the charter capital.

Governmental support of small and medium-sized business - this kind of internal investment in Spain is also relatively well-developed. Over one hundred small and medium-sized business support programs of different levels (state and regional) operate in the territory of Spain. Regional programs include around 80 areas of financing. State programs for the support of small and medium-sized businesses are coordinated by the main department of industry for small and medium-sized businesses (DGPYME) at the Ministry of Industry, Energy, and Tourism.

If you have any questions concerning how to run a business in Spain or would like to clarify some peculiar features of the Spanish business laws, feel free to contact our specialists at the INEEDSpain service center, who will always provide timely consultations and the information you need.

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