January 22, 2009
Guide to business in Spain1
Spain, an EU Member State since 1986, is today, one of the world’s most developed countries,
with a very important role in the international, political and economic arenas.
The Spanish legal system is based on the continental civil law. It outlines the separation of the
public sector and the private sector of the juridical organisation, generalizing the division of the
same in fields that include the constitutional, penal, administrative, tributary, civil, mercantile,
social and procedural matters.
I - Establishing a business in Spain
Various alternatives are open to the foreign investor once the decision to invest in Spain has been
Incorporation of a Spanish company (S.A., S.L.N.E., S.E., S.P,E.), or the formation of a
branch or permanent establishment.
Association with other businesses already established in Spain. Foreign investors may find
a joint-venture more appropriate, since it allows the parties to share risks and combine
resources and expertise (with an Economic Interest Grouping or Agrupación de Interés
Económic”, a Temporary Business Association or Unión Temporal de Empresas, a silent
partnership or contrato de cuenta en participación, or through Spanish corporations or
Using the various forms of distribution agreements available in Spain, without
establishing a centre of operations. The alternatives include: signing a distribution
agreement, operating through an agent, operating through commission agents or
The two most common form of legal entities are: the corporation (Sociedad Anónima or S.A.),
and the limited liability company (Sociedad de Responsabilidad Limitada or S.L.). Similar steps
and expenses are involved for both legal forms.
The basic requirements for establishing a corporation are:
- Issue by the Spanish Central Mercantile Register of a certificate of clearance for use of
the name of the new company. This step should precede all others, to ensure that the
proposed name can in fact be used.
- Execution of the public deed of incorporation in the presence of a Spanish notary public.
The public notary is an important figure in the corporate life of companies for establishing
the authenticity (date and signatures) of certain documents.
- Evidence of the identity of the founding shareholders.
Incorporation takes between six and eight weeks although this period may be longer if a NIE
(foreign tax identity number required for foreign individuals or entities operating in Spain) must
be obtained for any of the foreign directors.
This guide provides general information only and does not constitute legal advice for any
II - The Spanish financial system
The operators in the Spanish financial system can be classified as follows:
• The central bank (The Bank of Spain) and the traditional credit institutions.
• Other credit institutions: specialized in certain asset products (leasing, financing,
mortgage loans) which cannot take public deposits.
• Electronic Money Entities (introduced by Law 44/2002 on Financial Law).
• The Spanish Confederation of Savings Banks - Confederación Española de Cajas de
• The State’s finance agency and investment bank - Instituto de Crédito Oficial.
• Investment institutions (SICAV, SII…).
III - Tax system
The Spanish tax system is similar to the other major OECD tax systems. It has some incentives
to increase competitiveness of Spanish companies or investments made from Spain, in particular
to Latin America.
Regarding the Corporate Tax, the general rate is 30 %. Amongst the most relevant tax benefits, it
is worth noting that there is a freedom of amortization during 2009 and 2010 on new assets.
There is also an allowance for amortization of the financial goodwill generated by the acquisition
of foreign companies.
There is also a special tax regime for holdings which acquire foreign participations (ETVE): the
received dividends are not taxable nor the capital gains derived from the sale of such
Regarding the taxation of individual residents, it is worth noting that income tax is progressive,
ranging from 24 % to 43 %, bearing in mind that the first 8.000 euros are exempt. The income
derived from savings, interests, dividends and capital gains are subject to a fixed rate of 18 %.
Moreover, Spain eliminated in 2008 the Wealth Tax and there is a beneficial tax regime for
expatriates moving to Spain.
IV - Investment aid and incentives in Spain
The Spanish authorities have developed and implemented a wide range of aid instruments and
incentives. Potential investors are able to access European aid programs, which provide further
incentives for investing in Spain.
These investment aid measures can be classified as follows:
• State and regional incentives for training and employment (Credit for training
• State incentives for specific industries (R&T and IT, tourism, agro food…).
• Incentives for investments in certain regions.
• State incentives for SMEs (“InnoEmpresa” – For innovation in Small- and Medium-sized
• Incentives for internationalization (PROINVEX - major foreign investment program).
• EU aid (European Investment Bank).
V - Labour and Social Security regulations
The basic law in the field of labour law is the Workers’ Statute - Estatuto de los Trabajadores
(Legislative Royal Decree 1/1995), which defines the respective rights of employees and
employers, general terms of labour employment contracts, procedures for dismissal and collective
bargaining rules, among other aspects. In addition, there are specific regulations for different
industries and certain groups of employees such as commercial representatives and senior
management personnel. The Law 43/2006 to Improve Growth and Employment was signed in
2006 and modified by laws 44/2007 and 51/2007.
VI - Intellectual Property law
Generally Intellectual Property is consistent with the laws of others EU Member States. Spain has
ratified the most relevant international treaties in Intellectual Property´s legislation, which entails
that non-Spanish nationals may obtain protection of their IP rights in Spain, and that Spanish
nationals may obtain such protection in virtually every other country.
VII - Company and commercial law
The Commercial Code, the Corporations Law, the LLC Law and the Mercantile Register
Regulations are the basic sources of law in this field besides the S.A and the S.L. The Limited
Liability Company Law of 1996 was updated with the Law 7/2003.
The E.U.’s Council of Ministers adopted Council Regulation 2157/2001 (Act 19/2005 guarantees
the effectiveness of the Regulation) and Council Directive 2001/86/CE (completed through Act
31/2006), which passes the Statute for a European Company (S.E). The Law 2/2007 on
Professional Services Firms regulates the formation of commercial undertakings by members of
Lastly, in January 1, 2008, the law 16/2007 on the reform and adaptation of the
corporate/commercial legislation on accounting matters for its international harmonization based
on EU legislation and which amends the Commercial Code, the Corporations Law and the LLC
Law entered into force.
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