A Guide to Setup an Entity in Spain

Introduction

Welcome to Spain’s Dynamic Business Environment

Hola! If you’re looking to expand your business horizons, Spain is a fantastic choice. Spain’s vibrant economy and welcoming culture make it an excellent destination for businesses aiming to go international.

Why This Guide?

This guide is your friendly companion on this exciting journey. We’ll dive into the nitty-gritty of setting up shop in Spain to make your transition as smooth as a glass of fine Rioja wine. Setting up an entity in Spain involves several key steps, each critical to ensuring your business is legally compliant and ready to operate. Here’s a detailed walkthrough:

Decide on the Type of Business Entity:

• Sole Proprietorship (Empresario Individual): Suitable for small, individual businesses.
• Partnership (Sociedad Civil): Ideal for small businesses with more than one owner.
• Limited Liability Company (Sociedad de Responsabilidad Limitada, S.L.): Most common for small to medium-sized businesses, limiting owners’ liability.
• Corporation (Sociedad Anónima, S.A.): Suitable for larger businesses, with a higher minimum capital requirement.
• See our full post on Spain Company Types for more details. 

Obtain a Certificate of Uniqueness for the Company Name (Certificación Negativa de la Denominación Social)

This step is essential to ensure that the chosen name for your business is unique and not already in use by another entity in Spain.

• Application Process:
  • You need to apply for this certificate at the Central Commercial Registry (Registro Mercantil Central) in Spain.
  • The application can be done online or in person.
  • You should provide several potential names for your business in order of preference, as the first choice might already be taken.
• Checking for Uniqueness:
  • The Registry checks the proposed names against their database to ensure no existing company has the same or a very similar name.
• Issuance of the Certificate:
  • Once a name is confirmed as unique, the Registry issues the ‘Certificación Negativa de la Denominación Social’.
  • This certificate effectively reserves the company name for a limited period, usually a few months.
• Cost and Time Frame:
  • There is a small fee for this service.
  • The process typically takes a few days to a week.
• Importance:
  • This certificate is required to proceed with the rest of the company formation process, including the drafting of the company’s bylaws and the deed of incorporation.

Open a Bank Account and Deposit Initial Capital

Opening a bank account and depositing the initial capital is a necessary step to establish the financial foundation of your new company in Spain.

• Choosing a Bank:
  • Select a bank that suits your business needs. Consider factors like international services, fees, and digital banking facilities.
  • Spain has a range of banks, both local and international, that cater to businesses.
• Required Documentation:
  • To open a business account, you’ll typically need your passport, proof of address, and the Certificate of Uniqueness for your company name.
  • Additional documents might include the deed of incorporation (if already available) and a business plan.
• Deposit Initial Capital:
  • For a Limited Liability Company (Sociedad de Responsabilidad Limitada, S.L.), the minimum capital required is €3,000. For a Corporation (Sociedad Anónima, S.A.), it’s €60,000.
  • This capital must be deposited into the newly opened bank account in the company’s name.
• Proof of Deposit:
  • The bank will provide a certificate confirming the deposit of the initial capital.
  • This certificate is needed for the notarial deed of incorporation.
• Considerations for Non-Residents:
  • Non-residents may face additional requirements or scrutiny when opening a bank account in Spain, particularly related to the source of funds and compliance with anti-money laundering regulations.
• Time Frame and Costs:
  • The process can vary in length, but it’s usually quite swift if all documentation is in order.
  • There might be account opening fees, and banks have different structures for maintenance fees and transaction charges.

Draft and Sign the Deed of Incorporation (Escritura de Constitución):

• This document includes company details like the name, address, business purpose, share capital, and information about the shareholders and directors.
• The deed must be signed before a public notary.

Obtain a Tax Identification Number (CIF/NIF):

Obtaining a Tax Identification Number (CIF/NIF) is a crucial step in setting up a business entity in Spain. This number is essential for all your business transactions and tax purposes. Here’s an overview of the process:

Understanding CIF/NIF

• CIF (Código de Identificación Fiscal): This is the tax identification number for companies in Spain.
• NIF (Número de Identificación Fiscal): This is the tax ID for individuals, including individual entrepreneurs and professionals.

Steps to Obtain a CIF for a Business Entity

• Application Form:
  • You need to fill out the official application form, which is known as Modelo 036 or Modelo 037 (simplified version).
  • These forms are available at the Spanish Tax Office (Agencia Tributaria) or can be downloaded from their website.
• Required Documentation:
  • Along with the completed form, you’ll need to submit various documents. These typically include the deed of incorporation, the certificate of uniqueness for the company name, proof of the company’s registered address, and identification documents of the company’s legal representatives.
  • For non-residents, additional documentation may be required, such as proof of legal residence.
• Submission to the Tax Office:
  • Submit the application and accompanying documents to the local tax office.
  • This can usually be done in person, by mail, or online (if you have the necessary digital certificates).
• Verification Process:
  • The Tax Office will review the application and verify the details. They may request additional information or clarification.
• Issuance of the CIF:
  • Once your application is approved, the Tax Office will issue the CIF for your company.
  • This number should be used in all business-related transactions, invoices, and official communications.
• Time Frame:
  • The process can take from a few days to a few weeks, depending on various factors such as the completeness of your application and the workload of the tax office.
• Cost:
  • Generally, there is no cost for obtaining a CIF, but it’s advisable to check for any updates or specific charges that might apply.
• Importance for Business Operations:
  • The CIF is essential for all tax purposes in Spain, including VAT filings, corporate tax returns, and dealing with customs if you’re involved in import/export activities.
• Ongoing Compliance:
  • Ensure that the information associated with your CIF remains current. Any changes in the company’s structure, address, or legal representatives should be reported to the Tax Office.

Additional Considerations

• For Non-Residents: If you’re a non-resident setting up a business in Spain, you may face additional requirements. It’s advisable to seek guidance from a tax advisor who is familiar with the nuances of Spanish tax law for non-residents.

• Digital Certificate: Having a digital certificate can simplify the process, allowing you to submit forms and communicate with the tax authorities online.
• Legal and Tax Advice: Given the complexities of tax laws, it’s wise to consult with legal and tax professionals. They can ensure that your application is correctly filled out and that you comply with all Spanish tax regulations.

Remaining Steps:

• Register for Taxation:
  • Register with the State Tax Administration Agency (Agencia Estatal de Administración Tributaria) for corporate tax, VAT, and other relevant taxes.
• Register with Social Security:
  • If you’re employing staff, register with the General Social Security Fund (Tesorería General de la Seguridad Social).
• Implement Accounting and Reporting Systems:
  • Set up accounting systems to track finances and comply with Spanish accounting and reporting regulations.
• Register for Worker’s Accident Insurance:
  • Mandatory for businesses with employees, this insurance covers workplace accidents and occupational diseases.
• Set Up Employee Payroll and Social Security Contributions:
  • Ensure proper payroll management and payment of social security contributions for employees.
• Establish a Legal Address for the Business:
  • You need a registered office address in Spain, which can be either a physical office or a virtual office, depending on your business type.
• Ongoing Compliance:
  • Regularly review and ensure compliance with all relevant laws and regulations. This includes annual tax filings, updating company records, and renewing licenses as needed.
• Seek Professional Assistance:
  • Given the complexity of the process, it’s often wise to consult with legal, tax, and business professionals experienced in Spanish corporate law and practices.

How can GEOS help?

Unlock global expansion with our expertise and global platform—operated by seasoned professionals with firsthand experience in over 150 countries. From entity setup to ongoing maintenance, our all-in-one platform and consultative approach ensure efficient, compliant, and tailored solutions for your business’s journey to international expansion.

Schedule a consultation with us here. 

This article does not constitute legal advice.