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

Mohamed Daya, Manager, Global Business Solutions

12/08/2026

Expanding into Spain can present significant opportunities for growing businesses, but understanding the local legal, tax, payroll and regulatory landscape is essential to getting off to the right start.

Whether you are looking to establish a permanent presence, hire employees, or test the market, choosing the most appropriate structure from the outset can help minimise risk and avoid costly compliance issues. This guide outlines the key considerations for businesses entering Spain, from entity and branch registration requirements to payroll, tax and VAT obligations, helping you navigate the process with confidence.

To operate in Spain the business must choose between setting up a Subsidiary, Branch or Non Resident Employer Registration. The set ups are different, below are the requirement for setting up a Limited Liability Company, Branch and Non Resident Employer 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 of new company (Newco) Tax Identification Number.
Obtain certificate of clearance from the Commercial Registry to use the name of the Newco.
Opening a bank account and obtaining of a bank certificate in order to prove funds 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. In 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

Non Resident Employer registration

Key steps required when looking to set up a Non Resident Employer registration in Spain:

Power of Attorney (“POA) in which the parent company empowers 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 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 – Applicable to All Registrations

New starters: Must be registered with the tax and social security office in Spain by the date that employment start 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 20th of the month following quarter (e.g. Q1 would be due on 20th April). Large companies with over €6m 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 31st 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%.
Work accident insurance (Mutua de Accidentes): Employer-only contribution, typically 0.5%–3%, depending on the job’s risk level.

Taxation – Applicable to Subsidiary and Branch

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– Applicable to Subsidiary and Branch

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, hotels. Restaurants, health products, sports and entertainment activities.The second reduced VAT rate (4%) applies to certain food items, newspapers, magazines, books.