• 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 “Registro Mercantil” (“Mercantile Register”). Nonetheless, in order to meet these requirements, the following steps must be taken:

• In case of doing it by means of a representative, granting of representative powers by the founder/s to the person who will be responsible for setting up the company;
• Application for a Tax identification Number in the case of a legal entity, or the NIE (Foreigner’s Identity Number) of a natural person, the partners and foreign administrators of the company that is to be established;
• Application for a certificate to prove that no other company is operating under the same name;
• Application for provisional Tax Identification Number for the business;
• Opening of a checking account for transactions and for bank certification;
• Constitution of the company before a Notary Public by means of an act of incorporation;
• Liquidation of the “Impuesto sobre Transmisiones Patrimoniales” –“Capital Transfer Tax”-, currently tax-exempt;
• Entry in the “Registro Mercantil” (“Mercantile Register”);
• Obtaining the final company Tax Identification Number;
• 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 legal authority: either the grantor itself in case of a nature person, or a legal representative or administrator if the Grantor is a legal entity.

a) If power of attorney is granted in Spain, the grantor 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 grantor must appear before a Notary Public of the country where the power is granted. The power of attorney must then be legalized via the Hague Apostille of 1961 if the country where it is being granted is a country member of the Hague Apostille. If the country where the power is being granted is not a member, all the steps of document legalization applicable to each case must be followed. If the power 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 grantor should present the public document which testifies her/his capacity and authentication to grant the power.

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 grantor is an authorized representative; specifically:

• If the grantor is a natural person, a document that testifies his/her identity.
• If the grantor is a company representative, the public document which testifies to his authority.
• If the grantor is Company Secretary, the public document which states his job title.

What is a NIE?

The applicable regulations demands in certain cases that natural persons or legal entities non-resident in Spain obtain a Foreigner’s Identity Number (NIE) in case of natural persons or a Tax Identification Number (NIF) in case of legal entities. This way, 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?

Natural persons or legal entities non-resident in Spain have the obligation of having a Spanish NIE or NIF in the following cases of mercantile practice: when they are partners or administrators of Spanish companies, to grant deeds of incorporation related to rights over properties, to carry out any sort of financial transaction within Spain (for example, opening a bank account) or completing any government form from the Spanish “Oficina de Extranjeros” (“Foreign Nationals’ Office”).

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.

The NIF shall be applied for before carrying out any delivery, provision or purchase of properties or services, receiving amounts or making payments, hiring employees, or developing the business or professional activity. In any case, the application shall be made within the following month after establishing the company in Spain.

What documents are necessary when applying for a NIE?

For requesting the NIE you need:

1. A completed version of Form 790 (issued by the Spanish “Ministerio del Interior” -“the Spanish Home Office”-) for payment of the corresponding fee.
2. Application-document (Form EX14) (issued by the Spanish “Ministerio del Interior” -“the Spanish Home Office”-).
3. Complete passport or travel identification or, when necessary, a valid identity card.
4. Documentation justifying the reasons for the application.
5. Documentation testifying that the applicant is not in Spain in an irregular situation.

The applications submitted in Spain by the representative chosen by the solicitor are accepted, when attaching the following:

1. A completed version of Form 790 (issued by the Spanish “Ministerio del Interior” -“the Spanish Home Office”-) for payment of the corresponding fee.
2. Application-document (Form EX14) (issued by the Spanish “Ministerio del Interior” -“the Spanish Home Office”-).
3. Updated copy of all the pages of the passport, certified by a Notary Public, legalized or apostilled when necessary.
4. Certification regarding the legality of the powers granted to the chosen representative.
5. Documentation justifying the reasons for the application.

When requesting the NIF, the following are necessary:

1. Application-document (Form 036) (issued by the Spanish “Agencia Tributaria” -“the Spanish Tax Agency”-).
2. Copy of the deed of incorporation or true document of the creation of the applicant company.
3. Copy of the articles of association or an equivalent document.
4. Certification of its registration in a public registry when necessary.
5. Choosing a natural person as fiscal representative.

The applications submitted in Spain by the representative chosen by the solicitor are accepted, when attaching the following:

1. Application-document (Form 036) (issued by the Spanish “Agencia Tributaria” -“the Spanish Tax Agency”-).
2. Copy of the deed of incorporation or true document of the creation of the applicant company.
3. Copy of the articles of association or an equivalent document.
4. Certification of its registration in a public registry when needed.
5. Choosing a natural person as fiscal representative.Documentation certifying the representation, that is, the power of attorney to obtain the NIF granted by the authorized representative of the non-resident company, duly notarized before a Notary Public and apostilled or legalized.
   

Where can I apply for a NIE?

Requesting a N.I.E in Spain: contacting the Spanish “Oficina de Extranjeros” -“Foreign Nationals’ Office”- or in the absence of the Spanish “Oficina de Extranjeros” -“Foreign Nationals’ Office”-, visit the local police station of the place of residence of the applicant.

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

Requesting a N.I.F: contacting the Spanish “Administración Tributaria” -“the Spanish Tax Agency”-. Likewise, the Notaries Public will be able to request the temporary NIF by telematic means in certain cases.

What are the most usual sorts of company in Spain?

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

• “Sociedad Limitada” –“Limited Company”-;
• “Sociedad Anónima” –“Public Company”-;
• “Sociedad Anónima europea” –“European Public Company”-;
• “Sociedad Civil” –“Civil Company”-;
• “Sociedad Colectiva” –“Collective Company”-;
• “Sociedad Comanditaria” –“Limited Partnership”-;
• “Sociedad Comanditaria por Acciones” –“Limited Partnership by shares”-;
• “Cooperativa” –“Co-operative”-.

Nonetheless, in practice, most companies in Spain are either “sociedades anónimas” –“public companies (S. A.)”- or “sociedades limitadas” –“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 “Registro Mercantil Central” -“Central Mercantile Register”-, approximately 98% of Spanish companies are “sociedades limitadas” –“limited companies (S. L.)”- and the remaining 2% are “sociedades anónimas” –“public companies (S. A.)”. 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).

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 or NIF of the foreign partners and directors.

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 or NIF (depending on whether the applicant is a natural person or a legal entity) on their behalf.

3. Certificate of availability of company name for registration.

The chosen name of the new company must be submitted to the “Registro Mercantil Central” –“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.
The certificate of availability of the company name can be requested through a telematic way by the Notary Public.

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 “en constitución” –“-in process of constitution-” added at the end. For the opening of this account, the bank will require a document that proves that all the steps to create a company are being taken.

The deed of Incorporation shall include the receipt of the money contribution issued by the bank.

5. NIF (Tax 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:

• By-laws of the new company respecting the minimum requirements stipulated by Spanish law.
• Identificative documents and powers of attorney of the founders that constitute the company.
• Foreign investment declaration (Form D-1A) duly completed (issued by the Spanish “Ministerio de Industria, Turismo y Comercio” – “the Spanish Ministry of Industry, Tourism and Trade” -). This document is compulsory although its purpose is purely informative, and it must be delivered to the “Registro de Inversiones Exteriores” –“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.

Notaries Public shall identify the natural persons (name, surnames, nationality and identification number) that own or control, directly or indirectly, a stake over 25% of the share capital or of the voting rights of a Spanish company or the natural persons that by other means have control, either directly or indirectly, of the management of the aforementioned company. The companies that quote in a regulated market of the European Union or other assimilated countries are exempt of this.

8. Documents needed in the “Registro Mercantil” –“Mercantile Register”-.

The public deed of incorporation of the company shall be submitted.
It can be telematically submitted by the Notary Public.

9. Obtaining the definitive NIF.

10. Census declaration of the start of the activity.

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.

The average cost of creating a “sociedad limitada” –“limited company (S. L.)” is 550 Euros (taking into account a capital of 3.000 Euros) plus the contribution of the aforementioned capital, while the cost of creating a “sociedad anónima” –“public company (S. A.)”- is 750 Euros (taking into account a capital of 60.000 Euros) plus the contribution of the aforementioned capital.

TYPE OF COMPANY	Share capital	Taxes	Notary´s fees	Registration fees	Agent´s fees (NIE formalities)	Total
“Sociedad limitada” –“limited company (S. L.)”-	€3,000	Tax exempt	€150	€100	€300	€3,550
“Sociedad anónima” –“public company (S. A.)”-	€60.101,21	Tax exempt	€300	€150	€300	€60,750

This table has been calculated using minimum payments and the costs are approximate. When the social capital of the “sociedad limitada” –“limited company” (S. L.)- is not higher than 3.100 Euros and some requirements are met, the fixed amount of 60 and 40 Euros respectively will be applied as Notary´s fees and Registry´s fees, respectively.

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.

The branches, unlike the parent companies, do not have share capital, so they do not require a minimum contribution in terms of capital. Notary, administrative and registry average fees amount to approximately 600 Euros. The facultative financial investment wished to be made should be added to this 600 Euros.

Branch office	Financial investment	Tax	Notary´s fees	Registration fees	Agent´s fees (NIE formalities)	Total
Branch office	No financial investment requeried	Tax exempt	€150 (depending on the investment)	€150 (depending on the investment)	€300	€600 plus the investment

This table has been calculated using minimum payments and the costs are approximate.

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 or promotion of the parent company business.

Representative offices are not required to set aside share capital. Start-up costs amount to around 450 Euros.

Representative office	Start-up cost	Tax	Notary public costs	Registration costs	Administrative costs	Total
Representative office	No share capital required	N/A	€150	Registration not required	€300	€450

This table has been calculated using minimum payments and the costs are approximate.

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 a Tax Identification Number and a Foreigner’s Identity Number, granting powers of attorney, gathering other needed documentation 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 to obtain a Tax Identification Number and a Foreigner’s Identity Number, granting powers of attorney, gathering other needed documentation and internal decisions of the founders.

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 a “sociedad anónima” –“public company (S. A.)”- or a “sociedad limitada” –“limited company (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. A representative office will only be used in the event that the activities carried out are merely those of coordination, collaboration or promotion of the head office’s activity.

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

In general terms, a “sociedad limitada” –“limited company (S. L.)”- 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 company (S. A.)”- is used in the following circumstances:

1- If the activity is specified by the legislation for “sociedades anónimas” –“public companies (S. A.)”- (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 or promotion of the parent company’s office are handled.

 

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