Spanish Private Companies

Although a member of the EU and a signatory of many Double Tax Treaties, company formation in Spain can not be highly recommended unless there is no alternative. The main disadvantages of creating a company in Spain are outlined below.

Spain has one of the highest tax rates in Europe. The basic rate of corporate tax rate of 30% though depending on the annual turnover, this can be 25% but this is still considerably higher compared to other countries like Malta where it is effectively 5% or the Isle of Man (0%). There is also a withholding of 21% payable on interest and dividend payments. Capital gains are treated as ordinary business income taxable at 30%. There is also a complex network of other taxes including wealth taxes. In light of this it is advisable that Spanish advice be sought before proceeding. 

Minimum capital amount is very high: 60,000 euros in the case of plcs and 3,000 in the case of limited companies. Also, unlike the case of the UK where you can create companies online, company formation in Spain requires a number of visits in person to different offices though these may be possible under power of attorney (with associated costs).

Beaurocracy and Reporting
Extremely burocratic and lenghty process. Formation is not straight forward and it is very time consuming and tedious. It takes approximately 5 weeks to create a company although it can be more depending on how long it takes to obtain an NIE (Numero de identificacion de extranjero which is your identification number in Spain). All directors and shareholders need an NIE. This can be compared with the United Kingdom where formation is imediate or Malta where formation takes around 24 hours. Annual auditing is required and the accounting is a complex process. The administration system is very rigid for instance non monetary contributions must be carried out through a report by an independent expert and any changes must be done in writing.

Limited Liability
Legal entity equivalent to the Limited Company (Ltd). The shareholders are not personally liable for the debts of the company. For more information on limited liability and other features of companies please see our main article on private companies in the products section. The partners are not personally liable for the company’s debts.

Share Capital
The minimum backing capital is €3,005.06. The capital is divided into equal, indivisible and cumulative equity holdings provided by all the partners.

Private Companies
A “Sociedad Limitada” (or Private Company) is incorporated through public deed signed in the presence of a notary public and registered at the “Registro Mercantil” (Companies House).

A “Sociedad Limitada” is preferable to a “Sociedad Anónima” for the following reasons:

  1. Share backing capital is €3,000 as opposed to €60,102 (Sociedad Anónima).
  2. Accounting is simpler and a process of simplified accounting is an option during the first three years after formation.
  3. Administration is more flexible. For instance, bylaw amendments and non monetary contributions do not need to be accompanied by a report from an independent expert.
  4. Meetings of shareholders and dissolution of the company do not need to be published in the Official Bulletin of the Registro Mercantil (Companies House) and newspapers.
  5. The term of the office of Director can be indefinite as opposed to the “Sociedad Anónima” (6 years).