Today, there are many entrepreneurs who choose to create companies in Spain. To do business in Spain, there are three main options: self-employed or one of the two types of limited company sociadad limitada or sociadad anónima.
Self-employed
In Spain this means you have the status of trabajador autónomo, which in summary means the following:
You are an adult individual who will be carrying out commercial activity without having any type of employment contract with another legal entity. For example, this may be the case for company directors, translators or writers.
Responsibility: As for most other countries the individual is personally responsible out of his/her personal assets for all debts incurred in the course of their commercial activities.
Social security: You will be required to sign up to state social security under the scheme for autónomos (self-employed). Minimum monthly contributions are set at €208.
Tax: a self-employed person pays tax at the same rate as for all individuals. There are 5 tiers of taxation.
Income (€/year)
Applicable tax rate
0 to 4,161.59
15%
4,161.60 to 14,357.51
24%
14,357.52 to 26,842.31
28%
26,842.32 to 46,817.99
37%
above 46,818
45%
2006 rates
Sociedad Limitada (SL)
Capital: Start-up capital of €3,006 is required for the incorporation of an SL. This can be withdrawn immediately after the company’s creation.
Responsibility: this is limited to the capital invested by the shareholder(s).
Number of shareholders: there is a minimum of one individual and the law does not specify a limit to the number of shareholders. When the company has a single shareholder is described as a SLU ( Sociedad Limitada Unipersonal).
Investment: The company can be established with cash and/or non-cash assets, but not investments of working time.
Legal personality: the company must be constituted in front of a public notary and entered in the local companies register ( registro mercantil).
Dividend payments: before dividends can be paid, 10% of earnings must be retained until total retained earnings are equal or above 20% of the paid up capital of the company. Dividends can be distributed on the condition that, post distribution, the book value of the company is not less than the paid up capital total.
Taxes: for small and medium sized companies where turnover is less than €8 million, corporation tax is 30% for the the first tranches of profits from €0 to €120,202. 35% taxation is applied on profits above this level.
Sociedad Anónima (SA)
Capital: Start-up capital of €60,102 is required for the incorporation of an SA, a fourth of which must be paid at the point of incorporation. There is no legal time limit specified in which the remaining capital must be paid into the company.
Responsibility: this is limited to the capital invested by the shareholder(s).
Number of shareholders: there is a minimum of one individual and the law does not specify a limit to the number of shareholders. When the company has a single shareholder is described as a SAU ( Sociedad Anónima Unipersonal).
Investment: The company can be established with cash and/or non-cash assets.
Legal personality: the company must be constituted in front of a public notary and entered in the local companies register ( registro mercantil).
Decision making: by default decisions can be made by a simple majority of shareholders, but the company’s articles can be modified in order to raise the level of majority required for decision-making.
Board of directors: this is defined by the company’s articles. It can be made up of a sole director ( administrador único), two or several directors or even a board of directors (of 3 to 12 participants).
Dividend payments: before dividends can be paid, 10% of earnings must be retained until total retained earnings are equal or above 20% of the paid up capital of the company. Dividends can be distributed on the condition that, post distribution, the book value of the company is not less than the paid up capital total.
Taxes: for small and medium sized companies where turnover is less than €8 million, corporation tax is 30% for the the first tranches of profits from €0 to €120,202. 35% taxation is applied on profits above this level.
This article has been written by Amedia Partners in Barcelona.
