Setting Up a Business in Spain: Immigration and Tax Aspects for International Entrepreneurs
International entrepreneurs setting up a business in Spain face the combined challenges of business establishment, immigration, and tax compliance. Spain offers several business structures (SL, SA, SLU, branch of foreign company), several immigration paths (entrepreneur visa, digital nomad visa, investment visa), and various tax considerations (corporate tax, VAT, social security, personal tax). The 2022 Startup Law has improved several aspects of entrepreneurship in Spain, including the entrepreneur visa, the investor route of the Beckham Law, and various tax benefits for innovative startups. This article covers the comprehensive landscape for international entrepreneurs establishing in Spain. A dedicated international business adviser is essential.
Business structures for international entrepreneurs
The main business structures available in Spain include: Sociedad Limitada (SL, similar to LLC, minimum capital €3,000); Sociedad Limitada Unipersonal (SLU, single-member SL); Sociedad Anónima (SA, similar to corporation, minimum capital €60,000); branch of foreign company (sucursal); permanent establishment (PE) of foreign company. The choice depends on the business needs, the planned activities, and the entrepreneur’s circumstances.
For most international entrepreneurs, the SL is the standard choice: limited liability, modest capital requirement, flexibility of governance, suitable for small to medium businesses. The SA is preferred for businesses planning to attract significant external investment or to go public. The branch is appropriate for foreign companies extending their existing business to Spain without creating a separate Spanish entity.
Incorporation procedure
The incorporation procedure for a Spanish SL includes: choice of company name and reservation (with the Central Mercantile Registry); preparation of the company statutes; opening of a bank account in the company’s name; deposit of the minimum capital; signature of the public deed of incorporation before a notary; registration with the Mercantile Registry; obtaining the company tax identification number (CIF); registration with the tax authority and social security.
The total procedure typically takes 3-6 weeks from start to operational company. The Startup Law has introduced a simplified procedure for innovative startups (digital incorporation, reduced fees, faster registration) that can compress the timeline to 1-2 weeks for qualifying entities. Professional support is essential for navigating the procedure efficiently.
Immigration: the entrepreneur visa
The entrepreneur visa is available to non-EU nationals planning to develop an entrepreneurial activity in Spain. The qualifying activity must be of "general interest" (innovative character, economic impact, employment creation). The application is made to Empresa Nacional de Innovación (ENISA) for the validation of the business plan, then to the immigration authority for the visa.
The entrepreneur visa is granted for 1 year initially and is renewable for 2-year periods up to 5 years total. After 5 years, permanent residence is possible. The visa allows the entrepreneur to live and work in Spain developing the qualifying business. Family members can be included in the application.
Immigration: the digital nomad visa
The digital nomad visa is an alternative for entrepreneurs who work remotely (typically as freelancers for foreign clients or as employees of foreign companies). The visa was discussed in detail in a previous article. Detail in our digital nomad visa guide.
For some international entrepreneurs, the digital nomad visa is preferable to the entrepreneur visa: less bureaucratic, no ENISA validation required, suitable for individual remote workers. For entrepreneurs planning to build a Spanish company with Spanish operations and employees, the entrepreneur visa is more appropriate.
Spanish corporate tax (IS)
Spanish companies are subject to the Corporate Income Tax (Impuesto sobre Sociedades, IS) at the standard rate of 25%. New companies benefit from a reduced rate of 15% for the first two years of profit. Small companies (revenue below €1 million) benefit from a reduced rate of 23% (or 15% for the first two years for new companies). The reduced rates make Spain competitive for new and small businesses.
The IS base is calculated on the standard accrual accounting principles with various adjustments. Spain allows substantial deductions for R&D and innovation activities, for employment creation (specific incentives), and for various other policy-favored activities. The detailed planning of the IS base can substantially reduce the effective tax rate.
Startup-specific tax benefits
The 2022 Startup Law introduced specific benefits for innovative startups: reduced IS rate of 15% (for up to 4 years of profit if the startup remains qualified); deferral of IS for the first two years of profit; reduced contribution rates for the first 3 years; favorable stock option treatment for employees; tax benefits for foreign workers under the Beckham Law (digital nomad and investor routes).
To qualify as a startup under the Startup Law, the company must: be incorporated less than 5 years ago (7 years for biotech and certain sectors); have headquarters in Spain; have innovative character; have annual revenue below €10 million; not be the result of a merger or transformation. The certification by ENISA is the gatekeeper for the startup benefits.
VAT for Spanish businesses
Spanish businesses are subject to VAT (IVA) at the standard rate of 21% (with reduced rates of 10% for some sectors and 4% for others). The VAT system is fully integrated with the EU VAT framework. Businesses with annual revenue above €75,000 must register for VAT and file quarterly returns.
For international businesses with cross-border activities, the VAT treatment depends on the place of supply rules and the nature of the customer (business or consumer). The reverse charge mechanism applies to many B2B cross-border services. The professional VAT advice is essential for businesses with substantial cross-border activities.
Social security for entrepreneurs
Spanish entrepreneurs are subject to the autónomos (self-employed) social security regime. The contribution is based on the entrepreneur’s declared income, with minimum and maximum bases. The standard contribution rate is approximately 30% on the income up to the contribution ceiling.
The Startup Law has introduced reduced contribution rates for new entrepreneurs: €80/month for the first 12 months of activity, reduced rates for an additional 12 months. The reduced rates significantly lower the entry cost of entrepreneurship in Spain. After the initial reduced period, the standard contribution rates apply.
Beckham Law for entrepreneurs
Entrepreneurs relocating to Spain can apply for the Beckham Law if they meet the criteria (5-year non-residence, qualifying entrepreneurial activity). The Beckham Law applies the 24% flat rate to Spanish-source income only, exempting foreign-source income. For entrepreneurs with foreign-source income alongside the Spanish entrepreneurial activity, the regime is favorable.
The interaction of the entrepreneurial activity income with the Beckham regime is complex. The Spanish-source income from the entrepreneurial activity is taxed at 24%. The Beckham regime applies for 6 years. After the regime, the standard IRPF applies. The professional planning of the entrepreneurial structure and the income flows is essential.
Action steps for international entrepreneurs
First: define the business plan and identify the appropriate Spanish business structure. Second: prepare the immigration application (entrepreneur visa, digital nomad visa, or investor visa). Third: incorporate the Spanish company with full professional support. Fourth: register for taxes and social security. Fifth: apply for the Beckham Law if eligible. Sixth: maintain ongoing compliance with corporate, tax, social security, and immigration requirements. Seventh: review the structure periodically for tax efficiency and business needs. For a full consultation, contact our team.
Setting up a business in Spain as an international entrepreneur is now significantly more attractive thanks to the Startup Law and the various visa and tax improvements. Professional support across the multiple disciplines (corporate, immigration, tax, social security) is essential for a successful establishment.