• What steps are necessary for setting up a company in Spain?
• What is needed in order to formalize a valid power of attorney in Spain?
• What documents are required for the granting of a power of attorney?
• What is a NIE?
• Who needs a NIE?
• When can I apply for a NIE?
• What documents are necessary when applying for a NIE?
• Where can I apply for a NIE?
• What are the most usual sorts of company in Spain?
• What documents are necessary for the establishment of a company in Spain?
• How much does it cost...?
• How LONG does it take to...?
• Which is the most appropriate manner for setting up a company according to my business needs?

What steps are necessary for setting up a company in Spain?

The basic requirements for setting up a company in Spain are its constitution before a Notary Public and its entry in the Mercantile Register. Nonetheless, in order to meet these requirements, the following steps must be taken :

• Granting of representative powers by the interested party to the person who will be responsible for setting up the company;
• Application for a NIE (Foreigner’s Identity Number) for this person;
• Application for a certificate to prove that no other company is operating under the same name;
• Application for provisional Fiscal Identity Code for the business;
• Opening of a checking account for transactions and for bank certification;
• Constitution of the company before a Notary Public;
• Payment of Capital Transfer Tax;
• Entry in the Mercantile Register;
• Legalization of Official Trade Books;
• Tax procedures;
• Employment procedures.

What is needed in order to formalize a valid power of attorney in Spain?

A power of attorney may only be granted by someone with relevant authority such as a legal representative or administrator.

a) If power of attorney is granted in Spain, the granter must appear before a Notary Public. Neither the presence nor the acquiescence of the recipient is necessary.

b) If power of attorney is granted outside Spain, the granter must appear before a Notary Public. The power of attorney must then be legalised via the Hague Apostille of 1961 and if it is not granted in Spanish, then it must be translated by a sworn translator unless it is granted in a Spanish Embassy or Consulate.

In both cases, the granter should present the public document which testifies to her/his own representative powers or the position that s/he holds within the company.

What documents are required for the granting of a power of attorney?

The only document that is required in order to grant a power of attorney is proof that the granter is an authorised representative; specifically:

• If the granter is a company representative, the public document which testifies to his authority.
• If the granter is Company Secretary, the public document which states his job title.

What is a NIE?

Foreigners who for financial, professional or business reasons have some connection to Spain will be given a personal, unique and individual number for identification purposes. These are issued in sequential order. This personal number is the alien identification number (NIE in its Spanish acronym), which must appear on all documents issued or submitted, as well as the official stamps on their identity card or passport.

Who needs a NIE?

The NIE is essential in order to carry out any sort of financial transaction within Spain (for example, opening a bank account, setting up a business or completing any government form from a Foreign Nationals’ Office).

Bear in mind that any foreign person who will have power of attorney or hold a position of responsibility within a company in Spain must have a NIE.

When can I apply for a NIE?

The NIE can be applied for before or upon arrival in Spain. However, it is advisable to begin application proceedings before initiating any formalities in connection with constituting a company, branch office or representative office.

What documents are necessary when applying for a NIE?

1. A completed version of Form 790 for payment of the corresponding fee.
2. A completed version of the official application form for a NIE: Form EX14.

The original and a copy of each of the following should be presented with the completed Forms above:

• Passport.
• Documentation proving that the applicant is not currently in Spain illegally.
• Documentation justifying the application for a NIE (eg. company establishment).

Where can I apply for a NIE?

Requesting a N.I.E from Spain: Visit a Foreign Nationals’ Office in person or in the absence of a Foreign Nationals’ office, visit the local police station for the place of residence.

Requesting a N.I.E from outside Spain: Visit the Spanish diplomatic delegation or consular office corresponding to the place of residence in person.

What are the most usual sorts of company in Spain?

The following are the legal forms of company most usually found in Spain:

• Limited Liability Company;
• Public Company;
• European Public Company;
• Civil Company;
• Collective Company;
• Limited Partnership;
• Limited Partnership by shares;
• Co-operative.

Nonetheless, in practice, most companies in Spain are either public companies (S. A.) or limited companies (S. L.), since both limit the liability of the shareholders to the amount that they have invested. Thus, according to statistics from the Central Mercantile Register, 98% of Spanish companies are of limited liability and the remaining 2% are public. The presence of other types of company is negligible.

For more information and for a comparison between public companies and limited companies, see the following (worksheet) ficha práctica.

What documents are necessary for the establishment of a company in Spain?

What documents are necessary for the establishment of a company in Spain?

The following documents are necessary when setting up a business in Spain:

1. Power of attorney.

The founders should grant sufficient power of attorney to the person responsible for setting up a new company in their name in Spain.

2. NIE (Foreigner’s Identification Number).

If the founders wish to appoint a non-resident as their representative, then this person must give power of attorney to someone who can apply for the NIE (Foreigner’s Identity Number) on their behalf.

3. Certificate of availability of company name for registration.

The chosen name of the new company must be submitted to the Central Mercantile Register which will, in turn, confirm the reservation of the same and check to ensure that it is available and may be used by the new company.

In principle, this certification is valid for 3 months and should be renewed if the new company is not founded within that period. Nonetheless, no one else may reserve the same name within the following 3 months so, in practice, the reservation remains valid for 6 months.

4. Bank certificate proving that the relevant payment has been made.

When the new company is set up, the relevant sum is usually paid in cash or transferred to a Spanish bank account in the name of the new company with the words ‘in process of constitution’ added at the end. A certificate of availability of company name for registration (see 3. above) is usually required for the opening of this account.

5. NIF (Fiscal Identification Number).

6. Documents required by the Spanish Notary Public.

In addition to the documents mentioned in the preceding paragraphs, the following will also be necessary:

• Statutes of the new company respecting the minimum requirements stipulated by Spanish law.
• Foreign investment declaration (Form D-1ª) duly completed. This document is compulsory although its purpose is purely informative, and it must be delivered to the Register of Foreign Investments within the first month of the new company’s existence. The Notary Public may take charge of this task if so wished.

7. Official declaration of start of operations.

How much does it cost...?

...to set up a company?

The cost of setting up a company depends, amongst other things, on the share capital of the new company.

TYPE OF COMPANY	Share capital	Taxes	Notary´s fees	Registration fees	Agent´s fees (NIE formalities)	Total
S.L.	€3.006	€30,06	€250	€290	€300	€3.870,06
S.A.	€60.101,21	€601,01	€450	€290	€300	€61.741

This table has been calculated using minimum payments and the costs are approximate. The tax payable will be calculated by applying a percentage between 0.5 and 1.5% to the share capital of the new company. In this example, we have used a figure of 1%, since that is the most widely used percentage in the country.

Bear in mind that share capital is not a cost but a payment that remains available to the company for the pursuit of its business.

...to set up a branch?

A branch is a permanent establishment with no legal identity of its own. It is completely dependent upon and subordinate to its ‘parent’ company and may undertake any activity that features among the stated objectives of its head office.

Branch office	Financial investment	Tax	Notary´s fees	Registration fees	Agent´s fees (NIE formalities)	Total
Branch office	No minimum amount required	€30	€250	€290	€300 (approximate average cost)	€870

This table has been calculated using minimum payments and the costs are approximate. The tax payable will be calculated by applying a percentage between 0.5 and 1.5% to the capital allocation of the new branch.

Bear in mind that the capital allocation is not a cost but a payment that remains available to the company for the pursuit of its business.

...set up a representative office?

A representative office has no legal identity of its own and depends upon its parent company. Representative offices do not have formal management bodies so the official representative must act on behalf of the representative office in accordance with the power of attorney granted to him/her.

Representative offices have limited areas of activity. They may never become involved in financial transactions. As a rule, they limit their activities to co-ordination, co-operation and promotion of the parent company business.

Representative offices are not required to set aside share capital. Start-up costs amount to around 550 Euros.

Representative office	Start-up cost	Tax	Notary public costs	Registration costs	Administrative costs	Total
Representative office	No share capital required	Depends upon share capital	€250	Registration not required	€300 estimated average	€550

This table has been calculated using minimum payments and the costs are approximate. The tax payable will be calculated by applying a percentage between 0.5 and 1.5% to the capital allocation of the new representative office.

How LONG does it take to...?

...establish a company or a branch?

Setting up a company or a branch in Spain takes approximately between one week and a month, which could take longer given the process to obtain an NIE (foreigners identity number), granting powers of attorney and internal decisions of the promoters.

...establish a representative office?


Setting up a representative office in Spain takes approximately one day,. which could take longer given the process for granting powers of attorney and internal decisions of the promoters.

Which is the most appropriate manner for setting up a company according to my business needs?

As a general rule, setting up a business requires the creation of an S.A. or S.L.. Choosing which type of company depends, among other factors, on the strategy for each business and the activities to be carried out in each specific case.

A branch could be more convenient given the fewer legal obligations (for example in the filing annual reports). A representative office will only be used in the event that the activities carried out are merely those of coordination, collaboration and promotion of the head office’s activity.

...S.A. or S.L.?

In general terms, a Sociedad Limitada (limited company) is used because:
1- It requires a smaller outlay of capital;
2- It requires fewer administrative formalities to operate;
3- It offers greater flexibility for agreements between its partners.

A Sociedad Anónima (public limited company) is used in the following circumstances:
1- If the activity is specified by the legislation for public limited companies (such as Banking sector, Pharmaceuticals, Pension Fund Management, Leasing, Insurance among others).
2- If a large volume of capital transaction is expected.
3- If, as a partner who will not have an executive role, you would like there to be formal control measures in corporate activities which could have a greater repercussion in the investment (i.e.: merger, transformation, dissolution, convening an annual general meeting, capital reduction, non-monetary contributions, etc.)

In either case, before making a decision, consulting a legal advisor is recommended.

...branch or subsidiary?

A branch office is not a separate legal entity. It is dependent on the head office and does not require a minimum allocation. This option may be of interest if the head office wishes to have greater control over the branch’s activity. Keep in mind that the parent company will be held accountable with its own capital for the activities of its branch.

A subsidiary, because it is an independent legal entity, generally has greater flexibility of action and shares the risk with its head office.

...branch or representative office?

The representative office will only be useful when no economic activity is to take place in Spain and only coordination, collaboration and promotion of the parent company’s office are handled.

 

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