Setting up a business in Spain: A guide for start-ups

Mohamed Daya, Manager, Global Business Solutions

12/08/2026

To operate in Spain, the business must choose between setting up a Subsidiary, branch, or Payroll Registration. The setups are different; below are the requirements for setting up a Limited Liability Company, branch, and Payroll Registration.

Choosing the right business structure

Entity

Setting up an entity in Spain typically involves establishing a Limited Liability Company (Sociedad Limitada - SL), this requires a minimum €3,000 share capital and takes approximately 6-10 weeks to complete.

Key steps required when looking to set up an entity in Spain

Obtaining a new company (Newco) Tax Identification Number.
Obtain a certificate of clearance from the Commercial Registry to use the name of the Newco.
Opening a bank account and obtaining a bank certificate in order to prove the origin (€3.000 is the minimum share capital for an S.L.).
Drafting the company’s Bylaws.
Execution of Newco's deed of incorporation before a Spanish Notary Public.
The Notary will require the persons who appear before him to exhibit:
- evidence of their identity
- the power of attorney to represent a third party on whose behalf any of them acts (in this case, power of attorney granted by Newco's parent company)
- evidence of share capital payment
- the name clearance certificate from the Commercial Register and a form required under Spanish Law to subsequently communicate the foreign investment to the Foreign Investment Register
- statement about who the final shareholder or person who directly or indirectly controls the company is, over some percentage of voting rights or other parameters (including both personal and natural individuals)
- bylaws of the company.
Submission of tax form ITPAJD to the competent authority. Despite of the necessity of filling this form, the incorporation of the company is free of taxes. Within a maximum period of 30 days from the act of incorporation, it needs to be declared to the tax authorities. This is necessary for the registration of the public deed in the Commercial Register.
Registration of the Newco in the Commercial Registry.
Registration of the company with Spanish Social Security authorities.

Branch

Key steps required when looking to set up a branch in Spain

Board resolution and draft a formal corporate agreement from the parent company authorising the branch creation, naming a legal representative, and granting them power of attorney.
Appoint a branch representative who can legally represent the company with authority to act on behalf of the foreign company in Spain.
A physical registered address for the branch registration.
Obtaining Certificate of Existence (document must be apostilled with the Hague Apostille).
Obtaining NIF (Branch must register with the Spanish tax agency and obtain a Spanish tax identification number).
Register with the Commercial Registry.
Obtaining a tax digital certificate.
Tax and employment registrations required depending on activities. Key considerations would be VAT, corporate tax and social security registrations.

Payroll, Tax and VAT requirements in Spain

Payroll registration

Key steps required when looking to set up a payroll registration in Spain

POA (power of attorney) in which the parent company empowers the local partner to carry out all the steps required for the non-resident registered office process (including the appointment of the tax and legal representative) and subsequent management of DEH (Electronic Communication System).
POA in which the tax and legal representative empowers the local partner to obtain their Foreign Identification Number (NIE).
Obtaining NIE.
Obtaining Certificate of Existence (document must be apostilled with the Hague Apostille).
Preparing FNMT - this certificate is to be signed by the legal representative, notarised and apostilled (Hague Apostille).
Execution of the non-resident registered office.
Obtaining tax digital certificate.

Payroll and social contributions

New starters: must be registered with the tax and social security office in Spain by the date that employment starts or up to 60 days beforepayroll tax year: 1st January to 31st December.
Social security payment: Last working day of the following month.
Payroll income tax payment: Due by 20 of the month following the quarter (e.g. Q1 would be due on 20th April). Large companies with over €6 million revenue may be required to pay monthly.
Annual employer payroll statement: Due by the 31st of January following the payroll year.
Withholding tax certificates: Due to employees by 31^st March following the payroll year.
Income tax: Tax residents are subject to personal income tax (Impuesto sobre la Renta de las Personas Físicas, IRPF) with progressive rates ranging from 19% to 47%.
Social security contributions: Employers contribute approximately 24.1%–30.57% of gross salary, covering general contingencies (24.1%), unemployment insurance (5.5%), wage guarantee fund (0.2%), and professional training (0.6%). Employees contribute between 4.8% and 6.35%. Contributions are applied to capped monthly earnings ( €5101.20 for 2026), although from 1 January 2025 an additional solidarity contribution is payable on earnings above the cap, with tiers ranging from 1.15% to 1.46% depending on earnings ( the employer pays 83.39% of these solidarity tier rates, and the employee covers 16.61%).
Work accident insurance (Mutua de Accidentes): Employer-only contribution, typically 0.5%–3%, depending on the job’s risk level.

Taxation

Corporate tax rates: The corporate tax rates vary by company type and activity.
Standard rate: 25% on taxable profits for most resident companies.
Concessional rates: 15% for newly established companies in their first two profitable years. 4% for companies in the Canary Islands Special Zone (ZEC). 10% for certain cooperatives and non-profits.
Non-resident companies: Taxed at 25% on Spanish-sourced income, with withholding taxes on dividends (19%), interest (19%), or royalties (24%), reducible under Double Taxation Agreements (DTAs).
Small businesses: Companies with an annual turnover below €10 million may benefit from a 23% rate if they meet specific criteria.

VAT

The standard VAT rate in Spain is 21%, and it applies to most goods and services. The two reduced VAT rates are 10% and 4%. Spain also has some zero-rated goods, the sale of which must be reported on your VAT return, even though no VAT is charged.

The first reduced VAT rate (10%) applies to the purchase of newly built properties and hotels. Restaurants, health products, sports and entertainment activities. The second reduced VAT rate (4%) applies to certain food items, newspapers, magazines, and books.