What unfamiliar steps do foreign companies need to take when in Spain?

Business advice to set up a company in SpainDo you know the requirements for setting up a business in Spain? We believe you should be aware that it is not a simple task as it requires several complex steps and thus it is important to engage the support of lawyers with specialised knowledge in this area. In this post we explain the different ways a company can be established in Spain and what requirements you must meet.

The first thing you should do is answer a series of questions:

  • What activity are you going to carry out in Spain and how?
  • What sort of company do you have in mind for these activities in Spain?
  • What taxes will you need to pay?
  • Are there double taxation agreements for these activities?
  • What are your legal obligations in Spain?
  • Do you need to engage the services of a business advisor here in Spain or is it possible to carry out these steps from a different country?

The answers to these questions will give you a hint of the steps you will need to take and their complexity.

Ways of setting up a company in Spain

Although each case is different and each company must bear in mind its own circumstances and the objectives to be met in Spain, as a general rule, there are certain ways in which a foreign company can be brought to Spain, which are the following:

  • Representative office. This is often the first step taken in order to have a presence in a chosen country, but it carries with it the disadvantage that it is not a legal entity and cannot engage in economic activity. The representative office can, however, carry out market research to assess the viability of the project and decide whether it should go ahead in the target country (in this case Spain) or not.
  • Subsidiary. This does not have a body corporate and relies on the parent company.
  • Affiliated branch. This is a limited liability society with a separate legal identity to the parent company, although its actions may be controlled by the parent company. The processes for setting up an affiliated branch in Spain are the same as those for setting up a Spanish company, except for certain characteristics which we will look at below. The steps to take are the following:
    • Apply for a company name at the Central Mercantile Register
    • Obtain a Número de Identidad de Extranjero (NIE), which is an identification number for foreigners.
    • Make a capital allocation deposit.
    • Apply for a provisional Tax Identification Number (NIF).
    • Authorize the new company before a Notary Public by issuing the articles of incorporation.
    • Pay the corresponding taxes.
    • File the articles of incorporation with the Central Mercantile Office.
    • Obtain a permanent Tax Identification Number.

Specific requirements for foreign businesses setting up a company in Spain

There is a series of requirements to set up a business in Spain that are often unknown to companies that wish to set up business in Spain. Some of these include:

  • Obtaining an Identification Number for Foreigners (NIE) for the non-resident person wishing to set up the company. This can be obtained from the Spanish Consulate in the country of residence of the person making the application or at a police station in Spain. This step can be carried out in person or by a legal representative on their behalf.
  • Applying for a Tax Identification Number (NIF). All individuals wishing to carry out economic activity in Spain or those companies without a body corporate, as well as business owners in person, should apply for a Tax Identification Number via the 036 form. This form is a declaration of registration, change of address and/or variation of personal data for the purposes of the tax register covering businesses, professionals and withholders.
  • Request electronic notifications from the Spanish tax authorities for the foreign company. Foreign individuals or legal entities must apply for a digital certificate with which they authorize the Spanish tax authorities to communicate with them electronically. It is important to bear in mind that current Spanish regulations state that all tax notifications must be carried out electronically.
  • Submit a declaration of foreign investment (D1A). A form D-1A is used to declare  foreign investment in unlisted Spanish companies. This must be presented within a month from the date of making the investment.
  • Appoint a tax and legal representative. If the company being set up in Spain is not established as a permanent business, then a legal and tax representative must be appointed. This simple step allows a company to operate in Spain from the very beginning.
  • Seek business advice from an expert. Although not obligatory, it is recommended that you consult a specialist in order to set up a business in Spain if unfamiliar with Spanish legislation. In order to choose the right business advisor, there are certain aspects to be considered:
    • They should have experience in setting up companies for foreigners in Spain
    • They should have in-depth knowledge of the requirements for setting up a business in Spain, for both legal and tax obligations.
    • They should carry out a preliminary study of the specific requirements and tax implications for the Spanish business operations
    • That you can communicate fluently with them in English any time you need.
    • They offer additional services such as cash handling or that they can offer legal and tax representation.

As we have seen, it is important to carry out the formalities properly and make a series of decisions that will have an influence on the future of the company to be created in Spain, which is why we strongly recommend relying upon the help of a specialized business advisor.

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