Starting your own business in Spain is a good idea, especially if you want to earn an income while residing here. There are many advantages to starting a small business and becoming your own boss, however, there are also a number of things to consider before you take the first step and therefore it is important to get legal assistance from a competent lawyer.
Beginning Business as a self employed person
The self employed businessman must be an adult and be legally able to start a business i.e. he must not be legally or judicially incapacitated. As the owner of the company he directs and administers it, he has unlimited responsibility with his assets for any debts that he may have with any third party. The quotas for Social Security are the same whether he has a limited liability company or a public limited company. The minimum contribution with Temporary Disability coverage is 248.35 €/month (at the time of writing) and the minimum contribution without Temporary Disability coverage is 220.85 €/month (at the time of writing). Men of under 30 years of age (35 years in the case of women) and women of over 45 years of age have a reduction of 30% during the first 15 months. Disabled people get a 50% reduction during the first 5 years. Immediate family members of the contributor will also have the right to health care, as long as the established conditions are adhered to regarding current legislation.
The main advantage of limited liability companies is that shareholders and directors are not liable for the debts and obligations of the corporation.
What do you need to form one?
- Original and copy of a valid passport, N.I.E (foreigner’s identification number) in the case of foreigners, and D.N.I. / N.I.F. for those persons who are of Spanish nationality, plus other personal details that are not included in the anterior documentation, for example address and marital status.
- Certificate of Social Denomination issued by the Central Commercial Registry.
- If the contribution of social capital is in cash, a certificate from the bank showing the investment of the money and its origin, the deposit must be made into a current account in the name of the company, the minimum being 3.005,06 €, for a limited liability company and 60.101,21 € for a public limited company.
- A declaration of foreign investments in Spain must be provided at the notary if there share holders are non residents in Spain.
- If you will not be present for the constitution of the company, you should sign a special power of attorney.
The articles of association must contain information such is the name of the company, object and activity, commencing date, capital share, share holders names and rest of their particulars, business address, designation of the director of the company and the powers of the same, and list of limitations for the transfer shares to third parties.
Main steps to be followed after the signing at the notary:
- Apply for the company C.I.F (tax identification code) at the tax office.
- To pay 1.5% (stamp duty) of the capital share of the company to the Junta de Andalucía within 30 days after the signing of the deeds.
- Tax form 036, which is the registration with the tax system for which the company will be liable.
- Tax form 845, which contains the description of the activity, start date and description of the business premises.
- Inscription of the company director in the Social Security system.
- Inscription of the company in the commercial registry.
Other procedures in the case of opening a business or an office:
Procedures at the town administration
Licensing of activities and facilities (Opening)
Documents to be submitted: Form “Impreso normalizado”, copy of the IAE registration (impuesto actividades economicas or economic activity tax), Lease contract or deed of the premises, NIE of the applicant or articles of association and CIF (company fiscal identification), the specification of activity of the premises, premises plans, estimate of the facilities and equipment costs.
Permits (licencia de obras or building license): It is necessary in order to conduct any type of building works in a room, building or establishment.
Change of ownership of a business; The ownership of a business license may be changed if the business is in operation or has been in operation during the six months preceding the date on which the ownership will be changed.
If you hire employees:
Application for the contribution account number of the company: It is related to the social security contributions given by the company. It must be requested before the worker begins working in the company.
Workplace opening request (Comunicación de Apertura del centro de trabajo): It must be carried out by companies that open a new workplace or to resume activity. The request is addressed to the Provincial Department of Labor, Social Security and Social Affairs.
Request for “libro de visita” and “hojas de reclamación”. The “libro de visita” or visiting book is mandatory for all companies or self employed persons when they have employees. It has to be legalized by the Provincial Inspector of the county hall (‘Junta de Andalucía’ in Granada). It will be used by the social security inspectors to write comments during an inspection and must be available at any time upon request of the authorities. A complaints book ‘libro de hojas de reclamacion’ which is obligatory for all businesses must be available for any clients who wish to make any claims or complaints. This has to be applied for at the county hall (by filling in a form and paying the fee of 2 euros) and you will be provided with the book and a sheet of paper advertising the fact that complaints forms are available which must be on view to the public.
Other points of interest
Company tax: 25% earned up to 120.202 € and at 30% from that figure upwards.
In Spain there are 3 different VAT rates 4%, 10% and 21%.
The VAT (IVA) has to be settled and paid each quarter (end of January, April, July and October). The forms to be filled out and stamped at the bank are: VAT form 300, Personal income tax is form 130 and withheld taxes for employees is form 110.