It's important for consultants and entrepreneurs in Spain to have everything above board even before it is set up, and that involves each individual having a NIE (social security) Number. Getting a social security number simply involves filling out a form at the local Spanish social security office. Once that's been done the staff there will issue you with a number and a temporary card until the permanent one is sent. All you need to take to the office is your passport and a photocopy of it.
You do not actually need to have a job in Spain to have a NIE number, but you need one in order to work, so it's worth getting one as soon as you move, so that it's all set up even before you consider starting a business. This number is also needed to work out what social security contribution (essentially the same as National Insurance contributions in the UK) you will be required to make. Self employed individuals need to pay these themselves but if working for a larger company then your manager will deduct the amount automatically from your pay.
As well as social security contributions self employed individuals working in Spain are required to pay an up-front tax payment. This tax payment is worked out as 20% of the profit from each quarter (3 months) of the previous year, but at the end of the next tax year the majority of that money can be claimed back simply as business expense.
Secondly you'll want to do some research into whether your service is marketable in Spain. Chances are that if it was successful in the UK or elsewhere with a similar culture in the EU then it will be successful in Spain too, but it's best to check. Different areas in Spain have a larger market for different industries and sectors so it's well worth researching them. Take the south for instance, the steel and iron industry is particularly abundant there, yet clothing and food production is more popular in the south. This type of research can be done with some simply market research or looking into the competition. Spain has its fair share of 'cowboys' in public sector trades, so you will want to establish that your business is legitimate and separate it from the competition from the get-go.
Another important factor in starting a business in Spain is that you will need to choose a legal Spanish business plan and register the company or yourself with the relevant plan, in order to be operating legally. This isn't necessary for IT related companies but it is always best to check, just in case. These business plans/styles include Sole Proprietor (Autónomo), Partnership (sociedad civil), Public Limited Company (Sociedad Anónima) and more, and there is at least one which will be relevant to your specific business.
Once all the legalities have been set up and your business is above board it's time to get organised. That might involve finding an accountant or 'Gestor' to help you with the more in depth paperwork and these can usually be found via business directories or by simply googling, but perhaps a more reliable way of finding reputable and legitimate help is to contact the Embassy of Spain.
It's highly recommended that you gain business help and advice when thinking of starting up a company or even working freelance in another country as the likelihood is that they do things very differently to the UK. Once this has been established you are free to move onto the exciting part of setting up a business and getting the ball rolling.
Main steps to follow
In general terms, to acquire legal status and start any economic activity in Spain, the following procedural formalities are necessary (in some cases additional steps may be required):
Registration of the company name. You must apply for a certificate issued by the Central Commercial Registry (Registro Mercantil Central), confirming that the name you intend to use is not already registered.
Apply for your C.I.F (company tax identification code) at the tax office (Delegación de Hacienda).
Deposit the capital into a bank account in the company's name; the amount of capital will depend upon the type of corporation you intend to set up. e.g. for a limited liability company, minimum deposit will be € 3,005.06.
Deed of incorporation. The founding partners, when applicable, shall sign the constitution deed for the business before a notary in Spain. The name certification, the C.I.F. and bank receipt justifying that the deposit has been done will be required.
Pay the transfer tax at the tax office of the province where the company has incorporated. Deed of incorporation and C.I.F. will be required. The amount to pay is 1% of the company capital share.
Registering the company at the Corporate Registry (Registro Mercantil), it shall be done once the transfer tax has been paid. Deed of incorporation will be required. Any company interested in doing business with a Spanish corporation may consult the Corporate Registry in order to seek accurate information about that corporation.
A Formal Declaration to start the activity of the company shall be filed before the Spanish Tax Office (Delegación de Hacienda), which shall contain the tax system for which the company will be liable.
The company will be liable for the Spanish Tax on Economic Activity. It will be necessary to enter the company in the Tax Office (Delegación de Hacienda) for that purpose. The Spanish Tax Office will ask for the company details: description of the activity to be carried out, start date of the activity, description of the business premises… an official activity code will be allocated to enable your company pay this tax.
Registration of the company at the Social Security General Treasurership.
The company's director with direct control of the society shall join the Autonomous workers' special system.
It is necessary that your company acquires the "libro de matrícula". This book will log personnel registration as well as the visits that Labour Inspectors (Inspección de trabajo) pay to the work centre.
Communication of the opening of the work center or resumption of economic activity, it must be filed before the Regional Work Authorities Office (Dirección Provincial de Trabajo).
You must apply for the opening license at the Spanish Town Council (Ayuntamiento). You will be required to present the premises map and its general location, description of the company activity and receipt of local tax payment.
Depending on the kind of company, tax books (libros contables) may be required.
Declaration of foreign investments in Spain. Foreign investments assigned to set up a company in Spain shall be declared to the Spanish Investments Register (Registro de Inversiones) of the Tax and Economy Ministry (Ministerio de Economía y Hacienda). Declaration will be made ex post, unless the investment source is considered a fiscal haven by Spanish legislation. Investors may be required to present addtional documentation.
We strongly advise you to contract the services of a Spanish Lawyer, in this way you will avoid future complications and time-wasting "red tape" of any kind, as he knows the ins and outs of the paperwork.
If you need to hire employees for your business in Spain, you shall register them at the Social Security General Treasurership (Tesorería General de la Seguridad Social). From that moment you will have 10 days to register their employment contract with the Spanish Institute of Employment (Instituto Nacional de Empleo -INEM). It is illegal to hire workers without any contracts or Social Security, you may be fined by Labour Inspectors for unregistered employees.
Remember that employees in Spain, whether they are Spanish or foreigners, are entitled to all the benefits provided by the Spanish labour legislation: working conditions, dismissal indemnities, maternity leave, etc.
Spanish law provides different types of employment contracts, some of them permit the rendering of services where additional labour is needed, e.g. the part time work contract… this may help to solve small new businesses' needs in certain moments.
Spanish government fosters job creation by giving subsidies to entrepreneurs, these subsidies are granted by local, regional or national authorities.
You shall pay Social Security contributions for your employees, you may obtain reductions in their social security contributions when employing people for indefinite periods who must meet special criteria; e.g. people who have been registered as unemployed for a year, women aged under 30…
Regarding to salaries, be noticed that Spaniards are often paid an extra months' pay (pagas extraordinarias) at Christmas and in July.
These are only general guidelines and not definitive statements of the law, all questions about the law's applications to individual cases shall be directed to a Spanish Lawyer.
Subsidies granted by the Spanish government
Spanish government gives incentives aimed at promoting the creation of industrial estates, innovation, technological improvement, research, development, and job creation. Spanish and foreign-owned companies as well as individuals willing to set up their own company in Spain may receive these subsidies.
The incentives are granted by local, regional or national authorities, and may consist of non-refundable cash subsidies as a percentage of eligible investment expenditure.
Your company shall meet the requirements that the national, regional or local administrative body establishes in order to apply for each subsidy. Usually, applicants are required to do something prior their applications: e.g. hire workers, make any specific investment…
Applications shall normally be submitted within a short period of time since the subsidy was published.
Depending on the exact nature of your business there may be a whole series of aids and grants available to you. We may provide you with clear and accurate information about Spanish subsidies adequate for your needs, and may deal with your application.