Doing Business in Spain
Country facts
Capital | Madrid |
Population | 46.4 million |
GDP | 1314.58 billion USD |
Language | Spanish |
Average Monthly Gross Salary in Euro | €2,189 |
Currency | Euro |
World Bank Doing Business Ranking | 28 (USA Ranking 6) |
Most Common Form of Business Entity
A foreign business can establish their operations in Spain as a company, partnership or branch. The most common form of legal entities are:
Limited Liability Company (Sociedad Limitada “S.L”) | Joint Stock Company (Sociedad Anonima “S.A”) | |
Capital Requirements | €3,000 minimum Share Capital needs to be paid in full when entity is formed. |
€60,000 minimum At least 25% to be paid when entity is formed |
Directors | Minimum of 3 board members required | Minimum of 3 board members required |
Shareholders | 1 or more individuals or legal entities | 1 or more individuals or legal entities |
Corporate Taxation:
In 2018 the standard Corporate tax rate is 25%.
Employment / HR Requirements
Employment Contracts: An employment contract can be verbal but it is recommended to execute employment contracts in writing. A written contract is required in the case of specific types of employment, such as a training contract, temporary jobs for some specific roles or contracts for employees working abroad for a Spanish company.
Employee Tax: Employees whose residence or usual place of abode is in Spain, are considered tax residents unless they are subject to a special regime for impatriates. The income tax rate ranges from 19% to 48% with the maximum rate varying depending on the region of Spain. The taxation is progressive and is applied in bands. The lowest band is 19% on the portion of income between €0 to €12,450, with the highest being 48% on the portion of income exceeding €60,000.
Social security contributions are paid by both employer and employee. Employee contributions are deducted at source from salary payments, with employee contributions being 6.35% of the gross salary.
Employers: Employers must withhold tax income tax and social security contributions on behalf of their employees. In addition to the employee’s contributions, the employer must pay social security contributions of 29.90% of the employee’s gross salary.
Valued Added Tax:
The standard rate of VAT is 21%; one reduced rate of 10% and one super reduced rate of 4% applies to basic necessities such as bread, milk, books and medicines.
Valued Added Tax on Digital Services:
All Non-EU based businesses that provide electronic services or download to individuals or non-business consumers in Spain must register for VAT either in Spain or in another EU state.
Data Protection:
Spain has yet to adopted the EU General Data Protection Regulation. The key variations from the GDPR Requirements are:
- Reduces the age of consent for minors to 15 years old.
- Restricts the use of legitimate interests as a lawful ground for processing personal data to certain circumstances where consent is impractical, such as whistleblowing, CCTV for crime prevention, and credit references.
- Permits anonymous reports for whistleblowing.
- Imposes a requirement to notify the data protection authority within ten days if a data protection officer is appointed.