Setting up a business in Spain is a real adventure which can be really successful. During the process many issues must be taken in consideration; they can discourage the bravest entrepreneur. Which legal figure is the best for my business? Will I be able to keep on living in my own country? How can I recruit Spanish staff? And so on… In our latest posts we have tried to answer all the questions that are surely hovering over your head. Today we are going to focus on one of the most important issues for any foreign entrepreneur who comes to our country: how to manage and understand foreign business taxation in Spain.
The taxation issue includes all the taxes and fees you must pay in order to do business in Spain. But what you probably do not know is that everything can be much easier than it first appears and that you could even avoid paying certain taxes if you do things right. And one of the most important steps you must take is precisely the one we are going to deal with in this post: to carry out a good diagnosis of the business situation, including its special features and activities. If you want to know how to manage (right) your foreign business taxation in Spain, keep on reading!
How to carry out a diagnosis in order to improve your foreign business taxation in Spain
When you see the doctor, he or she will make a thorough examination of our physical condition and will ask many questions concerning your lifestyle and health status. When talking about businesses, the procedure is similar. In order to “prevent diseases”, first is essential to conduct a complete review of the company and examine its condition deeply. As a foreign entrepreneur wishing to set up a business in Spain, the first step to carry out a reliable diagnosis is hiring a specialized legal and tax consultancy in Spain. Do not forget to make sure that all the professionals who advise you speak good English: the issue of foreign business taxation in Spain is delicate and complex, and it is very important for you to understand all the procedures perfectly.
Secondly, the consultancy will use the gathered information to conduct a previous analysis in order to establish the tax obligations your business will have to pay in our country. As a foreign entrepreneur, you could think that the only way to do business in Spain is having a Permanent Establishment: a branch or a subsidiary company. If you want your business to work under this figure there is no problem, but you will have to pay the VAT to the Spanish Tax Agency. First you will probably have to file this tax quarterly; at the end of the year you will have to file the annual tax return. As for the Corporate Tax, it is a yearly tax and the companies must make three payments on account (in April, October and December).
Watch out! It is no good to be in a hurry: before choosing this figure, get some professional advice. Depending of your business’s activity and modus operandi, there is a chance that you could keep a Non-Permanent Establishment in Spain: this legal figure has some advantages that might be of your interest.
Tax analysis and Double Taxation Conventions
When preparing the tax analysis essential to start doing business in Spain, the consultancy will have to determine the type of establishment you want to operate with. As stated before, foreign business taxation in Spain can be quite different depending on this issue. According to the Spanish Tax Agency, a foreign businessman or woman will be operating under a permanent establishment in our country when he or she has some workplace of any kind in which the whole business activity or part of it is conducted, or operates in such workplace through a duly authorized representative. That is, if your company has a fixed business workspace through which the business activity is conducted.
Once determined this issue, the study of foreign business taxation in Spain will be carried out according to the EEC regulatory standards. On the basis of this study and the Double Taxation Conventions, the experts will conduct an exhaustive analysis aiming to prevent to pay the Corporate Tax in Spain. These conventions are international agreements designed to avoid a double taxation; that means, so your company does not pay taxes twice (in Spain and in your country). You can see the list of countries Spain has agreements with in the Spanish Tax Agency official website.
What happens with the VAT?
As well as the Corporate tax, when talking about foreign business taxation in Spain we must also include another heavyweight: the VAT. If you are a non-resident you have the option of filing the corresponding form (360 or 361) in order to pay the tax in our country and reclaim the input tax later. Mind you, remember that you will have to pay it in your country! On the other hand, this tax is regulated by the Double Taxation Conventions: your advisors will be in charge of requesting information about the percentage you must pay. Maybe you will not have to pay anything; then, it will be enough to inform the authorities about your business activity.
It is always better in good company!
In Spain we have a saying: “Better alone than in bad company”. In this case, the most important thing (given that you are setting up a business in Spain as a foreign entrepreneur) is to be always in the best company. In LEIALTA we put our team on your disposal; they are specialized in assisting foreign entrepreneurs who wish to start new projects in our country. Our professionals are specialized in different areas and we also provide you with cash handling services, a NIF to operate with from the very first moment and constant and fluid communication in English. For us, foreign business taxation in Spain has no secrets: our satisfied customers back us up.
Do you want to know more about foreign business taxation in Spain? Do you have any doubts or comments about the subject? Leave your comment… And do not miss our next posts!
Javier Martinez Partner, LEIALTA