CORPORATE LAW

NIE-number and company name

The first thing to do is always to obtain a Spanish social security number (NIE number). That is the very prerequisite for you to be able to move on. The social security number is obtained at the police station where you live.

Sole proprietorship (Autónomo)

The simplest form of enterprise is sole proprietorship. This means that your personal finances are fully linked to that of the company. If your company cannot pay its debts, you must pay with the help of personal finances. A sole proprietorship is registered with the tax authorities of the place where the business is conducted. Upon registration, you must present your Spanish social security number (NIE), passport, and completed registration forms. Once the company is registered, you must register with the Social Insurance Fund for the payment of a social security contribution (about 320 euros per month) covering health care, unemployment, and state pension.

Capital Company (S.L. Sociedad Limitada)
The capital is divided into shares. One owner is enough, but you can be as many as you like. Audit duty is not in effect. Income tax is for the company is at 25%. The person appointed as the company’s manager (administrator) pays social costs with a fixed amount, currently about 320 euros / month, from the month the business is started.

The minimum capital is EUR 3,000 and is paid into any bank. The amount is blocked until the company is fully registered. The cost of forming the company varies but can be estimated at about 2,500 euros. The amount must be advanced by the owners as the share capital must not be moved until the company is fully registered. VAT (IVA) is paid every quarter. You have three weeks to calculate and pay the VAT. If the input VAT exceeds the outgoing amount, the amount is not refunded but is rolled over to the next VAT period. Social security costs for staff are paid monthly. Every financial year is the basis for the income tax. At the end of the financial year, special accounting documents must be prepared. External audit requirements are missing. Provisional tax is paid continuously during the year in relation to the previous year’s result.

Application for company name
The company name is applied for to be registered with the central name register in Madrid. Normally, you apply for three names that are given in the order you want them. The name is protected throughout Spain. Once the name is approved, it has two months to complete the formation of the company. Sole proprietorship receives the same name as the owner and another name is only of a marketing nature.

Last steps
With copies of the company documents, the tax authorities must apply to the tax authorities for an organisation number for the newly established company. This is a preliminary number but in practice always matches the final one obtained when all the papers are in order. Finally, within 30 days of the visit to the Notary, the company documents and the name certificate plus the receipt that the stamp duty has been paid to the company register of the province to which the company belongs must be sent. The company is then registered in a register similar to the Register of 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 qualified assistance from an experienced accountant/lawyer.

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

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

• Registration with the tax authority regarding income tax and VAT.
• Application for an opening licence. In that regard, the municipal authority checks that the premises where the activity is to be carried out are appropriate. Control depends on the business.
• The start-up activities must be registered with the Social Security Office.
• If you hire someone (including a family member), a contract of employment must be signed.

Spanish VAT is one of the lowest in Europe. Eu countries’ VAT systems 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 report VAT to the Treasury four times a year. Big 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 percentage and always applies unless a lower percentage is specified.

10 %

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

4 %

The minimum percentage, 4 %, applies to basic foodstuffs (bread, milk, eggs, fruit and vegetables), books, newspapers and disabled equipment.

0 %

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

IVA declaration

Each three-month period beginning January – March is the basis for the VAT report. The difference between VAT on sales and VAT on purchases is paid within three weeks of the end of the period. The tax authority does not pay back VAT during the year, but the VAT claim is rolled forward. At the end of the calendar year, a refund can be requested but is often combined with a tax audit.

Posting
All companies must keep a bookkeeping according to the Spanish chart of accounts unless you have chosen flat-rate taxation that eliminates the need to book. Spanish accounting is very different from Swedish. If you are not a professional in accounting, you are advised to post yourself. The financial statements need not be sent anywhere, except that in your tax return you must attach the fiscal statement.

This is the short and simple description of how businesses are set up in Spain. In reality, you may be faced with more difficult questions, so our advice is to always have the help of a good lawyer.