How to Enter in Spain — Legal Tips
Part (1/2) of the Best Practices To Enter in Spain Initiative
At Bynd VC, we have the commitment to invest and support growth in startups with a connection to the Iberian market.
We have noticed that a common topic of conversation between founders is Internationalization — how to expand and grow the business to other markets.
Having such a strong Iberian footprint, it was only natural to think “What better way to help founders, than to provide them with the right tools to enter the Spanish market?”
Overview of the legal considerations for a foreign company to enter in Spain
You can enter in Spain following different paths such as:
- Natural Person;
- Branch Office;
- Permanent Establishment;
- Joint Venture;
Although there are many possible routes from which to choose from, the most commonly used is the establishment of a limited liability company (LLC) through a subsidiary or by setting up a new company through a joint stock company (SA).
When entrepreneurs start a business in Spain, they typically do it through a LLC. This leads to the majority of investments made in Seed and VC rounds to be in LLCs.
Taking a closer look into the two main options — LLC and SA — the main characteristics are as follows:
*In the case of Branch/Permanent Establishment the responsibility lies on the parent company.
** The telematic process is a good option if you need to speed up the process and have reduced costs — you can go to the service point that attends entrepreneurs or you can set up the company electronically (it will send that electronic act to to the notary and you can have a company set up in just 48 hours).
Regarding the responsibility of the governing body — the directors:
- Have subjective and objective responsibility
- Customary to sign or to render a liability insurance for directors
Main Go-to steps, timings and costs to establish a foreign firm in Spain
When looking into the processes and requirements to set up a company in Spain, one may be confused with all the laws and acts to be followed.
The two first actions to take are the following:
- Request the Company name that you want to have
- Open a bank account for the Company in Spain
- Request the legal identification number
- Submit the Declaration of Foreign Investment.
The process is the same across different regions in Spain.
If you do not live in Spain, requesting the Company’s name, opening the bank account, requesting the identification numbers, and submitting the declaration of foreign investment are easier to obtain by having a local representative, to whom you will give a power of attorney.
The power of attorney has to be notarized and apostilled in the local country to be valid in Spain.
Regarding the identification numbers, two must be considered:
- NIE — Foreign identification number for individuals
- NIF — Tax identification number for corporations
Any corporation or any individual that has an economic activity in Spain has to obtain this foreign identification number or tax identification number.
The tax identification number for corporations is obtained with the tax authority (your legal representative can be given a power of attorney to do this for you)
The foreign identification number has to be obtained with the police and it might be a good option to request it directly in the consulate of Spain in your country.
Finally, in the context of the anti-money laundering laws, any entity that invests in Spain has the obligation to attest and declare before the Spanish notary if there is an individual who owns, directly or indirectly, more than 25% stake in the company. If there isn’t any, you just have to appoint the Board Members of your Company.
The main tax and fiscal incentives in spain
Corporate income tax (Impuesto sobre Sociedades)
- General rate: 25%
Tax on the income of resident individuals:
1. Personal Income Tax (Impuesto sobre la Renta de las Personas Físicas)
- General rate: 19% to 45%;
- Savings income rate: 19% to 23%
2. Non-Resident Income Tax (Impuesto sobre la Renta de No Residentes)
- General rate: 24%;
- Dividends: 19%;
- Interest: 19%;
- Royalties: 24%
Value Added Tax (Impuesto sobre el Valor Añadido)
- General rate: 21%
- Reduced rate (purchase of homes, hotel and restaurant services, etc.): 10%
- Super-reduced rate (purchase of essential goods): 4%
- Exempt: financial transactions, insurance, sanitary services, home rental,
- Exemption (95%) of dividends and incomes from transfer of securities for companies owing more than 5% of the capital stock.
- Deductions in the Personal Income Tax for investors in newcos
- Without guarantees: ENISA, CDTi
- With guarantees: Emprendetur, ICO
You can review the “Best Practices in Spain” event here
For more legal information, you can access these relevant links:
YouandLaw is a law firm specialized in startups, investors and the Spanish ecosystem.
They advise in Corporate law, privacy, tax law, dissolution of companies, and other matters. They also support the day-to-day activities of a startup.
For more information, you can find the company on: