Setting up a company in Spain 

In recent years, Spain has been one of the Eurozone countries where the economy has grown above the average European index.

For many reasons, Barcelona and Madrid are two multicultural and world recognised cities which provide foreign investors with the confidence and tools needed to grow their businesses.

Whilst setting up a company in Spain should not be a complex activity, we recommend our clients seek independent legal advice .

Types of entity

Under current regulations, Spain offers two types of entity. You should choose the appropriate corporate structure depending on the size of your business as well as the industry the company operates in.

The most popular types of entities are the following:

Limited Liability Company -Sociedad de Responsabilidad Limitada- (S.r.l.);

Public Limited Company -Sociedad Anonima- (S.A.)

This table shows some of the main differences between these two structures:

The Limited Liability Company -Sociedad de Responsabilidad Limitada- (S.r.l.) is the main type of structure chosen by Small and Medium Enterprises (SMEs).

Should the entity have a sole shareholder, the current regulation establishes that the corporate name should contain the acronym S.r.l.u., so that any third party interested in trading with the company is aware that there is one shareholder only.

Taxation 

From January 2016, the rate of corporation tax applicable is equal to 25%. In some particular cases, such as for cooperatives or non-governmental organisations, the applicable rate will be lowered to 20% and 10% respectively. 

Spanish VAT 

Spanish VAT is a tax applied to transactions involving the transfer of goods or services, and the applicable rate is equal to 21%. In limited cases this rate is applied at a reduced proportion. For instance, for food and services such as transport of passengers, the applicable rate is equal to 10%. Furthermore a 4% rate is applied for basic products such as medicines, essentials, books, magazines and newspapers.

The Canary Islands’ tax regime 

For several years, despite being part of Spain, the Canary Islands have had a special tax regime (REF). 

In relation to the formalities to set up a company here, note that there is no difference compared to other cities on the mainland. There are, however, other aspects that should be considered related to VAT aspects. In fact, in the Canary Islands no VAT (21%) applies but, instead, there is another tax known as IGIC, with a current rate equal to 7%. 

Furthermore, the Canary Islands also benefit from a special tax regime known as the Special Area (ZEC). This is a legal and authorised tax regime, approved by the European Union. This regime has been designed for the islands in order to attract investment and companies to the area. The regime has recently been extended by the Spanish Government and the EU until 2026.

Bank account

Other services