Foreign investors have several options for establishing a company in Spain, depending on the scale, sector, and requirements of their business activity.
This article provides an overview of the most common legal structures and the key steps involved in setting up a business in Spain.
Legal structures for setting up a business in Spain
The most common option is to set up a Private Limited Company, which has its own legal personality and offers limited liability for its shareholders. However, there are other alternatives such as Temporary Joint Ventures (UTEs), Economic Interest Groupings (AIEs), branches, or representative offices. Below is a description of some of the most common structures for establishing a business in Spain:
Self-employed worker (trabajador autónomo)
Requires registration with the Tax Office and Social Security but does not offer limited liability (except for some exceptions). It allows individuals to start an activity without the need to set up a company.
Representative office
For foreign companies wishing to conduct market research, advertising, or local support without direct economic activity in Spain, this can be a suitable option.
This structure allows for a physical presence in Spain and hiring staff but must meet certain requirements to not be considered a permanent establishment for tax purposes. The first step is to obtain a Spanish Tax Identification Number (NIF) for the non-resident company, which requires an authenticated certificate of incorporation and the completion of specific tax forms (form 036).
Non-EU companies must also appoint a tax representative resident in Spain. Representative offices do not have a governing body or their own legal personality, so contracts must be signed by the foreign company. If the office hires staff, Spanish labour legislation applies and the non-resident company must obtain a Social Security number to fulfil its labour obligations.
Participation Accounts (cuenta en participación)
Involve an investor contributing capital to a business in exchange for a variable share in profits and losses. The investor’s liability is limited to their contribution.
These agreements create a profit and loss association without specific formalities, although the parties usually sign a notarial deed as proof.
Temporary Joint Ventures (UTE)
Formed for specific projects or services, allowing several companies to operate jointly without creating an independent legal entity. Members share risks, costs, and resources. The creation of a UTE requires a notarial deed detailing obligations, contributions, and profit distribution.
They have accounting and tax requirements similar to those of limited companies and must register with the Tax Agency to benefit from a special tax regime. The maximum duration of a UTE is 10 years.
Economic Interest Groupings (AIE)
Facilitate collaboration among their members, have their own legal personality, and members are subsidiarily liable. Their activities must be ancillary to those of their members.
Branch
Is an extension of the foreign company in Spain, without its own legal personality.
The foreign parent company is liable for all obligations and debts. The branch must keep its own accounts, submit financial statements, and appoint a local representative. To establish it, the competent body of the parent company must agree, obtain a NIF, and grant a notarial deed to be registered in the Commercial Registry. The branch carries out economic activities and invoices clients independently.
To better understand which figure is most suitable for your business, you can consult this article on the differences between branch, subsidiary, and permanent establishment in Spain.
Limited companies: The preferred option
Most foreign investors choose to set up a limited company. There are two main types:
- Private Limited Company (S.L.).
- Public Limited Company (S.A.).
The S.L. is common among small and medium-sized enterprises, while the S.A. is more suitable for larger corporations, regulated sectors, or companies seeking to raise capital on the stock market.
Differences between a S.L. and a S.A.
Steps to set up a Private Limited Company in Spain
- Obtain the NIE (Foreigner Identification Number) for the shareholders/administrators.
- Obtain the NIF (Tax Identification Number) for the parent company.
- Reserve the company name at the Central Mercantile Registry.
- Make contributions in cash or in kind to the share capital.
- Grant the notarial deed with the articles of association.
- Submit the foreign investment declaration to the Ministry of Industry and Trade.
- Submit the transfer tax declaration.
- Register the notarial deed at the Mercantile Registry.
- Obtain the definitive NIF and, if applicable, and intra-community VAT number.
- Ensure that the administrators in Spain are registered with Social Security.
All steps can be carried out by means of a power of attorney, although the opening of a bank account requires the physical presence of the administrator to comply with anti-money laundering regulations.
If you would like a more detailed explanation of this process, you can consult our guide on several options for establishing a company in Spain
How can we help you at AGM Abogados?
Our business formation experts support foreign investors through every step of setting up a company in Spain. Our multidisciplinary team –specialised in law, taxation, employment, auditing, and accounting– works with official platforms connected to notaries and the Tax Agency to streamline the process and reduce costs.
Are you thinking about starting a business in Spain? Contact AGM Abogados for personalised advice.
