Difficulties and challenges when doing business in Spain

Spain is a modern economy with attractive geographic positioning and climate, but still, starting a business or registration of a new company, entering the market can be challenging and arduous. The Kingdom of Spain belongs to the European Union and at the same time it is the gateway to Americas – Spain can be a convenient platform international businesses growth and is now the seventh-largest recipient of foreign direct investment (FDI) in the world.

Although foreign investors are attracted by Spain for its strong domestic market and by the possibility of operating in over-seas markets using Spain as a base, starting a business in Spain and registering a company in Spain sometime can occur a challenging process.

One of the most powerful economy in the world and fourth economy in the Eurozone, Spain has been growing steadily, since 2015. Although its “ease of doing business” position is evaluated at 32, “starting a business” is ranked at 85. Indeed, if you want to register a new company in Spain you have to overcome many stages of the registration procedure.

The most popular form of business in Spain is the private limited liability company . Before a foreign investor starts the process of registration of a company in Spain, he must obtain a foreigner’s tax identification number or NIE that will be necessary in all fiscal transactions.

Then you have to implement many formalities in the right order. The first step is checking the desired company name at the Mercantile Register. The you have to arrange founding documents and articles of association. The next step is to deposit the share capital to the Spanish bank account. A minimum share capital is about EUR 3,000.00. A bank certificate as the evidence of payment has to be delivered to the notary. You also have to apply for the tax identification code. Later, with the previous documents, you should visit a notary to sign the deed of incorporation. Then, you have to go to the Local Government Tax Authority  again to register the deed. And then to register the company incorporation at the Mercantile Register and the announcement about the incorporation of the company in Spain should be published in the Official Journal. And this is not the end. You then have to obtain the permanent Corporate Tax Identification Number (CIF) at the local tax authority.

Thus, as you can see the procedure is long and can take up to 4-6 weeks before you register the company. The experts say that there are ten procedures involving several stages before you start a new company and this can be quite daunting to international business.

Unfortunately, Spain is shrouded in bureaucracy and this can make the everyday running of a business very complicated. The experts also point out that some requirements of the process of registration seems to be rather unusual (e.g. certificate of uniqueness). Each company has to register the company’s employees at the local general treasury of social security. Spanish labour legislation places emphasis on protecting workers and not on empowering business owners. Legal acts prevent entrepreneurs from easily giving employee stock options, and it is also expensive for owners fire an employee. The corporate profit tax is in Spain is not high, but labour taxes and contributions are much higher than average, which means the total tax rate as a percentage of profit is still quite high.

All Spanish limited liability companies must have a registered office where official correspondence can be sent. And if your Spanish company has more than one place of business, all of them must be declared on tax forms. If you want to register a property for your future registered office you should know that registering a property requires five procedures, where the execution and delivery of the public deed of purchase of the property can be very complicated.

If your newly registered company deals with construction business and construction permits, you have to be aware that it takes 182 days to get construction permits in Spain, with several certificates and inspections required as part of the process. Moreover, companies may also be required to obtain an operating license before the registration of the building can be completed and the property can be provided with water, electricity and other utility services.

Unfortunately, bribery and corruption are also common in the country. So, before restring your business in Spain, it is advisable to get an advice of a professional lawyer to help you evaluate your prospective, possible expenses and help you avoid mistakes.