COMPANY INCORPORATION IN SPAIN
We incorporate for our clients any type of companies, like private limited companies, public limited companies and partnerships.
The good news is that the process of incorporation of companies in Spain has been greatly improved lastly with the new rules enacted in 2022; if you chose a private limited company (“sociedad de responsabilidad limitada”) no initial share capital is currently needed. Thus, there is no need to open an account in one of the main street banks. This is often a bit of a hassle due to the strict Anty Money Laundering Provisions (“AML”) these banks apply, making online applications difficult.
Likewise, the most time-consuming task, which was getting the Tax Number (“NIF”) for the individuals involved – foreign directors or founders of the company- although is still required, can be obtained simultaneously when signing the Deed of Incorporation. No longer need to wait for 4-6 weeks to get an appointment at the Police Office to get it.
True, in Spain we are still far from many jurisdictions in the speed and easiness to set up a company, but the new developments have arguably enhanced the process. Once the papers are prepared abroad (see below), the company can be ready in 7-10 days, depending on the place.
The main issue, however, continues to be the Social Security enrollment of the foreign company Directors. The Social Security Service has the view that the Directors of the Company should be enrolled in the Spanish Social Security, either as self-employed or in the General Regime, even if they work and live abroad and they do not get paid for this office.
We believe this approach is wrong, as Social Security contributions should be based on the territorial principle. It follows that only Directors working physically in Spain should trigger these contributions. But this is a very controversial point and there is a certain risk if the Directors are not enrolled in the Social Security; this adds to the cost of running a company in Spain, making the use of Spanish companies less feasible than other jurisdictions for some business (online trading…). Of course, if you intend to do business in Spain and Portugal, then you have basically no choice. Likewise, the use of Spanish companies as holding companies can have many tax advantages.
The formation of a Spanish company requires the following actions:
- Request of the company name “Certificación Negativa del Nombre” – a Certificate stating that the company name you intend to use is not already taken. This Certificate takes 1-2 days, so it is always a good idea to request the name “asap”. The investor can short list up to five projected names, just in case the preferred one is not available.
- Application for the foreign shareholder Tax Identification Number (“NIE / NIF”). If the Directors of the company are foreigners, then a NIF for them must
- Opening of a bank account in order to fund the company in formation. The bank must issue a certificate stating that the funds have been received for the capital of the company in formation. The funds deposited in this bank account cannot be released until the company has come to legal existence when the incorporation process has been completed. Opening a bank account by a non-resident is becoming tough to do due to anti money laundering guidelines, so the incorporation process may be simplified by a contribution in kind of any asset. Of course, sooner or later a Spanish bank account should be opened, at least to pay taxes
- Writing of the official by laws of the company, stating the following information:
- Company name
- Business purpose
- Registered Office
- Share Capital
- Duration of the company
- Any other relevant information (restriction to the sale of shares…)
- Signature of the Deed of Incorporation before a Spanish notary.
- Filling in of forms for the Capital Tax, although as from January 2013, the incorporation of companies are exempt from this tax
- Registration of the company at the local Mercantile Register
- Registration of the company before the Tax Authorities and in the National Social Security Scheme.
We can do all of the above on behalf of your company by means of a Power of Attorney so that you do not need to bother with all these legal issues.