CORPORATE LAW

Self-employed

The simplest form of business is sole proprietorship. This means that your personal finances are totally tied to those of the business. If your business cannot pay its debts, it must pay with the help of personal finances. A sole proprietorship is registered with the tax authorities where the business is conducted. When registering, you must present your Spanish social security number (NIE), passport and completed registration forms. Once the company is registered, it must register with the Social Security Fund for payment of a social security contribution (about €320 per month) covering medical care, unemployment and state pension.

Companies

In companies the capital is divided into shares and participations. One partner is sufficient to create a company, but there can be as many as you want. The company must file a tax return. The person appointed as administrator of the company pays the social expenses with a fixed amount, approximately 320 euros/month, from the month in which the business is started.

The minimum initial capital is EUR 3,000 and is deposited in any bank. The amount is blocked until the company is fully registered. The cost of incorporation will vary according to the complexity.

Application for company name

Application is made for the registration of the company name in the central registry of names in Madrid. Normally, you request three names which are given in the order in which you want them. The name is protected throughout Spain. Once the name is approved, you have two months to complete the formation of the company. The sole proprietorship receives the same name as the owner and another name is for business purposes only.

Final Steps

With copies of the company documents, the tax authorities must apply to the tax authorities for an organization number for the newly established company. This is a preliminary number but in practice it always coincides with the final one obtained when all the papers are in order. Finally, within 30 days after the Notary’s visit, the corporate deed and the naming certificate plus the receipt for payment of the stamp duty tax must be sent to the Commercial Registry of the province to which the company belongs. The company is then registered in a register similar to the Register at the Swedish Companies Registration Office in Sundsvall. Once the company is registered, the final organization number is obtained.

The above procedure takes between six weeks and a few months. It cannot be carried out without the qualified assistance of an experienced accountant/lawyer.

Stamp Tax

Within 30 working days after the visit of the Notary, stamp duty must be paid. The amount is 1% of the subscribed capital.

Once the company is registered

Once the company is registered, the following steps must also be taken.

Registration with the tax authority for income tax and VAT.

Application for an opening license. In that sense, the municipal authority verifies that the premises where the activity is going to be developed is adequate. The control depends on the business.
Start-up activities must be registered with the Social Security Office.
If you hire someone (including a family member), an employment contract must be signed.

Javaloyes & Suarez has been creating businesses for foreigners for more than 20 years. Do not hesitate to trust us to help you create yours. We have business consultancy to take care of your accounting.

Spanish VAT is one of the lowest in Europe. The VAT systems of EU countries are very similar, but there are some differences. VAT is not available in the Canary Islands or in the Spanish enclaves of Ceuta and Melilla located in Morocco. Anyone who sells goods or services professionally must declare VAT to the tax authorities four times a year. Large companies do it every month.

21 %

Trade in goods and services is the basis for VAT, as well as imports of goods. The default sales tax is 21%. This is the most common rate and always applies unless a lower rate is specified.

10 %

A lower percentage, 10 %, applies to trade and import of food, water, sale of private homes (new production), domestic transport (cab, bus, flights, trains, tolls, etc.), hotels (1-4 stars, while 5-star hotels apply 21 %), restaurants (including alcoholic beverages).

4 %

The minimum rate, 4%, applies to basic foodstuffs (bread, milk, eggs, fruits and vegetables), books, newspapers and equipment for the disabled.

0 %

Like most EU countries, there is a zero % rule for medical treatment, insurance premiums, bank charges, education and rental of private accommodation.

VAT declaration

The VAT return is quarterly. It corresponds to a whole calendar year, from January 1 to December 2 31, so four quarterly returns must be filed during the year. At the end of the year, during the month of January of the following year, an annual VAT return is made, a moment that also serves to regularize any quarterly situation that has not been possible to regularize at the appropriate time.

All companies must keep accounts according to the Spanish accounting plan unless they have opted for flat rate taxation, which eliminates the need for accounting. If you are not an accounting professional, we recommend you to hire javaloyes & Suárez Asesoría Fiscal y Contable. It is not necessary to send the financial statements anywhere, except that in your tax return you must attach the tax return.