Establishing a business in Spain

Limited Liability Company- Sociedad Limitada S.L.

Sociedad Limitada S.L. company is the most common company type in Spain; limited company can be set up by one shareholder and one director, minimum share capital to open S.L. is 3.005,06 Euro. Partners are not personally liable for company’s debts; their liability is limited to their investment in the company. Only one shareholder is needed, however there is no limit on the number of shareholders. Shares of a Limited Liability Company cannot be listed on a Stock Exchange, these are indivisible and cannot be freely transferred.

Joint Stock Company – Sociedad Anónima S.A.

Sociedad Anónima S.A. company can be set up by one shareholder, at least one director, minimum share capital to open is 60.101,21 Euro. The capital must be fully subscribed and paid up to at least a quarter of the nominal value of each share. Each share gives its holder the right to vote, priority subscription rights, participation in the distribution of the company’s profits. Shares have to be registered in the name of the holder while they are not fully paid. Shares may be listed on the Spanish Stock Exchange under a number of conditions.

Shareholders may freely transfer their shares, unless corporate bylaws state restrictions on the transfer of shares. The shareholders are not personally liable for corporate debts; they are only liable to the extent of their contribution to the corporate.

Branch Office

The branch is an organization depending on its parent company, which is located abroad. It has the same legal personality as its parent company and runs similar activity. A branch has to be set up through a public deed made before a notary and registered at the Corporate Registry.

Taxation in Spain

Corporate tax in Spain

The general rate of corporate tax in Spain was reduced in 2015 to 28 percent and to 25 percent for 2016 and 2017. Newly formed companies pay 15 percent for the first two years of business. A reduction of 10 percent tax may be granted to profits locked into a special reserve for five years. Company tax returns must be filed within six months and 25 days after the end of the accounting period. Payment is by instalments in April, October and December, each instalment usually being 18 percent of the tax liability.

VAT (IVA) in Spain

There are three levels of VAT (value-added tax) or Impuesto sobre el Valor Añadido (IVA) in Spain:

  • IVA general – 21 percent on goods and services.
  • IVA reducido – 10 percent on passenger transport, toll roads, amateur sporting events, exhibitions, health products, non-basic foods, rubbish collection, pest control and wastewater treatment.
  • IVA superreducido – 4 percent on essential foods, medicine, books and newspapers.

As of July 1, 2017, the Spanish tax authority will implement a new VAT policy which will require all VAT payers (chiefly freelancers) to submit all invoice data online via the official Agencia Tributaria within four days of the date of issuance, and no later than the 16th day of the month following its issuance. In 2017 VAT payers will be granted an eight-day period instead of four.

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