Spain is the fourteenth largest economy in the world and the fourth largest in the Euro-zone. As one of the central members of the European Union (EU), Spain has access to the European market and its 500 million population as well as its high per capita income. Indeed, entrepreneurs and corporations have plenty of opportunities to achieve success in Spain, especially due to its strategic location, a wealth of trade partnerships, an inflow of foreign investment, and excellent infrastructure.
Why Start a Business in Spain
According to the World Bank Group, Spain is the third most attractive country to set up business in Europe in terms of ease of doing business. Spain is an international business and trade hub with easy access to the European, North African, and Middle Eastern markets. It also has strong trade links with Latin America. Additionally, trade is bolstered as Spain holds numerous free trade agreements as the country has been a part of the World Trade Organization and the General Agreements on Tariffs and Trade.
Businesses planning to expand to Spain can look forward to the generous financial and tax incentives available for activities that contribute to the economy.
Legal System in Spain
Spain follows a civil law system based on legal codes and laws rooted in Roman Law. Spanish civil law is applied throughout the entire country, while certain autonomous regions may have their own civil law system.
The supreme law of Spain is the Constitution, which outlines the separation of powers, namely legislative, executive, and judicial. The main sources of law are a combination of statutes, case law, general legal principles and customs.
Public Holidays in Spain
The following are national public holidays in Spain:
- New Year’s Day
- Good Friday
- Labor Day
- Feast of Assumption
- National Day of Spain
- All Saints’ Day
- Constitution Day
- Immaculate Conception Day
- Christmas Day
Note: There are other various public holidays that are specific to various regions of Spain.
Business Entities in Spain
There are six different types of business entities available in Spain. Business can be conducted as a sole trader or through a partnership, limited liability company, public limited company, new enterprise limited company, or a small and medium-sized business. Each entity has its own unique advantages and disadvantages depending on the size of the business and the type of liability owners are willing to take on.
A small and medium-sized business is the most common business entity because it qualifies for grants, incentives, and reduced corporate tax rates. The second most common type of entity is the public limited company because of the exemption of personal liability for its shareholders.
Taxation in Spain
Figuring out a new country’s tax system can be complicated and one of the most intimidating parts of global expansion. This is fortunately not the case in Spain, as the country’s tax system for non-residents and foreign companies is quite straightforward.
Non-resident companies are taxed only on Spanish-sources income and capital gains. The tax rate for non-residents is 25%. Newly created companies are taxed only 15% for their first two tax periods wherein they obtain a profit. Also, Spain has signed double tax treaties with more than 80 countries, including the United States. This means Spain-based companies may be exempt from tax or qualify for reduced rates.
There are three types of Impuestos sobre el Valor Añadido (IVA) or value-added tax (VAT) in Spain.
- IVA Tipo general (Regular VAT rate) at 21% applies to goods and services.
- IVA Tipo reducido (Reduced VAT rate) at 10% applies to passenger transport, health products, and other society-wide services such as rubbish collection.
- IVA superreducido (Highly reduced VAT rate) at 4% applies to essential food, medicine, books, and newspapers.
Working Hours in Spain
Full-time employees in Spain work a maximum of 40 hours per week, calculated on an annual basis. Employees cannot work more than nine hours a day unless there is an agreement between the employee and employer. For any hours worked beyond 40, the employee is entitled to overtime pay of up to 80 hours per year.
Contracted part-time and home-work have no definite working hours. However, the number of daily working hours and the job location should be in the contract. There should also be at least 12 hours between the end of one working day and the beginning of the next.
Vacation Leave in Spain
Paid time off in Spain is generous. Employees enjoy a minimum of 22 business days’ worth of vacation leave annually. It can be divided as one pleases, as long as one of the vacation periods is at least two weeks.
In Spain, employees cannot exchange vacation days for payment. This means that employees need to take the leave or let it accrue.
Sick Leave in Spain
Spain has no standard duration for sick leave. When an employee is temporarily unable to work due to the need for medical assistance, he or she will be paid at least 60% of his or her wages while not reporting to work according to Spain’s labor law. The employer pays for the temporary time off and is later reimbursed by Social Security.
Health Insurance in Spain
The Spanish healthcare system is one of the best in the world. Most residents do not need private insurance to access healthcare because social security payments fund the healthcare system.
Residents of Spain, including EU and non-EU nationals, obtain an individual health card (TSI) that covers care from doctors or hospitals. This also covers at-home treatment. The TSI health card only covers 40 – 60% of the cost of prescription drugs at pharmacies. This is still very positive as the reduction makes the price of prescription drugs in Spain relatively affordable.
The advantage of obtaining private healthcare is that you get to avoid long wait times that are normal in the public healthcare system. You can also work specifically with a doctor who is fluent in English.
INS Global in Spain
As a world-leading global Professional Employer Organization (PEO), INS Global is your partner to a hassle-free expansion in Spain. Our team of experts will be your guide in setting up business operations effectively, efficiently, and fully compliant to Spanish regulations. Our comprehensive suite of services such as recruitment, invoicing, and payroll administration will help free your business from the hassles of administrative and technical processes. Contact us today on and find out how we can simplify your global expansion.