A business in Spain can be established in two ways: by starting a new company or by buying a company that already exists. Both options have advantages and disadvantages.
Business in Spain: to establish a new company or to buy an existing company?
The advantages of starting a new business in Spain are obvious: there are no “underwater stones” such as unpaid taxes or social deductions, accounts payable, labor agreements with old workers, etc.
Starting a business from scratch in Spain allows for personal control of economic, tax, and labor agreements from the date of the company’s foundation without requiring the resolution of prior problems.
However, there are certain disadvantages for some types of business that can cancel out even the most positive aspects:
- First, it is important to remember that the company registration procedure takes several weeks and is carried out under the guidance of an experienced consultant who charges for all services.
- Second, it is currently problematic, or sometimes impossible, to obtain a license for some businesses in Spain, especially nightclubs, restaurants, cafes and bars that have a night schedule and/or have terraces outside the building (on the street). Also, it can be difficult to install amusement machines and cigarette vending machines.
Therefore, the company’s line of activity generally determines the way to establish a business in Spain.
Doing business in Spain
The topic of doing business in Spain is directly related to accounting organization, tax services, and labor relations.
When doing business in Spain, the following types of taxes will be encountered:
- Personal Income Tax (IRPF): progressive and charged at the rate of 19-45%.
- Value Added Tax (IVA): consumption tax with effective rates of 0%, 4%, 8% and 21%.
- Corporate Income Tax (Impuesto de Sociedades): charged at the rate of 15-25%.
- Economic Activity Tax (IAE): direct tax that gives privilege to all entrepreneurs and companies, the net turnover of which does not exceed 1 million euros.
Aside from the taxes listed above, real estate businesses in Spain pay the following taxes: transfer tax, real estate tax, documented legal acts tax, land value increment tax, etc. Due to the complexity of the fiscal system and obscurity of some tax types, to avoid problems with revenue services and potential fines, it is highly recommended that control of the tax payment be placed in the hands of professionals.
Business in Spain also necessitates an organized accounting system. When it comes to a small company that consists of several persons, it is wise to delegate recordkeeping to a specialized firm (“gestoría” or “asesoría” in Spanish). The same firm will undertake all the work related to organization of the labor agreements, social deductions control, workers’ layoffs, etc.
INEEDSpain offers the whole spectrum of services in the sphere of business registration or purchase of a business in Spain. Contact us to schedule a consultation, and we will gladly answer all your questions.