Starting a Business in Spain

Spain currently has a sizable community of foreign residents and many turn to self-employment or starting a business to make a living. It is important to do sufficient research before setting up a business in Spain.

The path is strewn with pitfalls for the uninformed. The process of starting a new business in Spain is definitely challenging and very frustrating, especially if Spanish is not your native language. Patience and tolerance are the keywords.

The good news is that things are improving and regulations and procedures have become less complicated since Spain became a full member of the European Union in1993.

It is only when you come up against the full force of Spanish bureaucracy that you understand what it really means to be a foreigner in Spain.

Bureaucratic hurdles in doing business in Spain

The bureaucracy and red tape associated with starting a business  in Spain is daunting at first and, at times, seemingly impossible.

You will be inundated with official documents and must be able to understand them as well as certain regulations and procedures that need to be adhered to.

It is strongly recommend that you use professional assistance. Make contact with a good gestoria (form fillers/advisers) to advise you on all bureaucratic procedures and help you with the paperwork.

Find a good asesor fiscal (tax consultant) to handle your book keeping and consider consulting an abogado (lawyer) to make sure you understand your contracts.

A good adviser in each of these categories will certainly save you time, trouble and money and many of them speak English. (See end of article for a description of professional services offered).

Most of the paperwork that you will be picking up and delivering will be to the local Ayuntamiento – town hall.

You will know this place inside out once you have established your business!

Spain has a thriving tourist market and this is where most investors turn to start businesses: real estate, bars, restaurants, clubs, hotels, internet cafes, etc.

However, there is a market for all manner of businesses. Thus, as soon as you have done research and have your business plan ready, it is advisable to consult a tax advisor and a business specialist to make sure you can actually carry out your plan, how you want and where you want to start your business in Spain.

Many people begin the process of establishing their new business and later find out that the particular location does not permit that type of business, time wasted!

Once you have found your location, you will need to carry out due diligence in the normal way checking contracts for premises, staff, clients, suppliers and that fiscal obligations have been met.

This is very important because many times new tenants get stuck being responsible for the unpaid bills of past tenants (electricity, water, hacienda).

This can unexpectedly add to your start up cost.

It is equally important to check out licensing, the specifics for opening and closing hours, music restrictions (live and stereo), outdoor signage and employee regulations.

These are heavily enforced and if not complied to, it can slow down your opening or shut you down once you have opened.

While hoping for the best, you should be prepared for any problems that may arise and be sure that you have a backup plan, including adequate emergency funds to last until you have established your business in Spain.

The general rule of thumb here in Spain is to calculate how long you think it will take to open your business and how much your desired budget is – and double it!

The rules for starting a business in Spain are more or less the same as those in any other European country. Any citizen that is part of the EU has the same working rights/business owner as any Spanish citizen.

Businesses are sold in a similar way and will require the buyer and seller to confirm the sale/transfer with an official notary. Changes of administrators of a company (directors not shareholders) will be registered with the provincial “regristro mercantil”. There are no specific taxes on the purchase of a business.

Taxes apply to your business in Spain

If you do not already have a NIE (foreigner’s tax identification number) in Spain, you will need to apply for this at the local Police station.

This will usually be given to you within two weeks, more or less.

As self employed, trabajador autónomo, you will also need to apply for your Spanish Social Security card and register yourself as a businessman with the IAE (Impuesto Sobre Actividades Económicas-tax on economic activities).

The IAE tax widely varies from business to business. For example, a bar or restaurant owner will pay according to the size of the establishment and even the location. Your gestoria will help you determine your category.

You could pay as little as 200 euros a year or a much as 2000 euros depending on your self employment status.

Even if you have an accountant, make sure to personally keep accurate books noting all your payments of IVA, Spain’s Value Added Tax, plus your expenses for the gestoria, accounting and legal advice.

A small business is obliged to start paying tax by using the modular system. In the case of bars or restaurants the tax agency decides what the income tax should be based on an analysis of how many tables there are, how many waiters are employed, the square metres of your premises and other factors.

You will be charged business tax on this assigned amount each quarter. At the end of the year you will file your complete return of actual income and take your deductions for business expenses. If the tax agency owes you money in return, you claim the refund.

The main advantage here is that you do not have to send in a detailed set of quarterly statements as these are presented at the end of the year.

Professional help in doing business in Spain

Assistance is readily available in Spain for new business owners.

Depending on your needs, there are professional services for all types of necessities. It is not worth it to try and beat the system and try to do everything yourself.

The professionals offer their services at reasonable rates and will do things correctly the first time around, saving time.

Below is a description of the most common assistance available to those wishing to start a business in Spain.

• *Gestor –Form fillers that can assist with various legal and professional issues
• **Abogado – Lawyers
• Asesor Fiscal – Financial Advisors or Tax advisor
• Contable – Accountants
• Notario – Public Notary

*The Gestoria is a profession dedicated principally to helping with Spanish bureaucracy. Many foreigners hesititate to use this service because it is unfamiliar to what they are accustomed to. It originates from the days when illiteracy in Spain was very high and the bureaucracy was complicated.

For a moderate fee a Gestor can save you hours of legwork. They will know which forms to get and where and how to fill them in and give you basic advice.

At the tax office he will save time by knowing which line to stand in. When there is a problem he will know the best way to approach the civil servants to sort it out.

**An Abogado is a lawyer and legal advisor. If you are starting a business you may want to consider employing the services of an experienced lawyer, especially if you require a complex contract.

Some lawyers specialize in different areas of the law so it is wise to check that a lawyer is familiar with your requirements.

Do not hesitate to ask your lawyer for an estimate of his charges and get it in writing. You will find that fees are generally lower in Spain.

A lawyer often pays taxes and fees on your behalf when you are first starting a new business. It is common practice for a lawyer to ask you for a sum of money to put into his “client account”, you will only receive a receipt at this point.

When all the transactions are complete you will receive the original documents for the taxes paid, a statement of the lawyers own fees and the balance of your funds.

Many larger offices in towns offer the services of all these professionals in a “one stop shop” idea.

This can be convenient as it is possible you may need the services of more than one professional.

One common complaint of many residents about their Gestorias is that they are not pro-active enough in suggesting options or alternatives.

Perhaps this is due to the nature of the financial compensation they receive for their services,which is often minimal and it does not encourage that little bit of extra investigation.

It is advisable to seek the help of these professionals, yet it is important to know exactly what is going on: when payments are due, why they are a certain amount, etc.

It is your name on the business and you will be the one responsible for any errors in paperwork, payment of taxes and so forth.

Once you are set up, continue with the Gestoria and the accountant to file your papers and keep things on track.

If you have made it through the red tape maze, you should be set to move ahead and make the business in Spain a smashing success!

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