If you’re thinking of starting a business in Spain, you’ll need to be aware of the up-front and ongoing costs of making this dream a reality. The total cost will naturally be affected by the city where you plan to operate, how many staff members you intend to employ, and the nature of your product or service. However, there are some predictable, fixed costs that—sí o sí—will form part of the cost of starting a business in Spain as a foreigner or as a Spanish resident.
Costs for a Sole Trader Business
Setting up as a sole trader (empresa individual) or freelance professional (profesional autónomo) is the cheapest and most straightforward business structure to set up in Spain. All you’ll need to pay for are:
- Your business visa or work permit (if applicable)
- The tools and materials of your trade
- A business premises or commercial office (if relevant)
- Membership with a professional association (if relevant)
- Accounting services if you would like help filing your personal tax return
- Merchant services if you sell products online
After you register as a self-employed person or sole trader, you will then be responsible for paying:
- Personal income tax
- VAT (IVA)—an additional 21% that you will add to each invoice
- Social security contributions
- Professional association fees
Self-Employed Worker Visas
If you are a non-EU citizen, you will need a self-employed worker visa to arrive and start doing trade in Spain. EU citizens can simply arrive and apply for an NIE straight away.
As a self-employed person, you will need to show that you have the relevant qualifications and enough money to start your business. The cost of a self-employed visa costs a little over €200, and the visa is valid for one year.
How to Set Up as a Sole Trader or Freelance Professional
Once you arrive in Spain (or at any time if you are already a legal resident), all you need to do is:
- Get expert legal advice on the different categories of self-employed and partnership business structures (as relevant) to find the one that best suits your needs.
- Go to the local tax office with your valid passport and NIE and fill in a Model 036 or 037 form. You will receive an IRPF tax certificate which you will use to pay your own income tax.
- Visit the local social security authorities and register there as well. You can expect to pay a minimum of €294 per month and a maximum of €1,266.66 per month, depending on your monthly income. If you are 47 or older, your social security contributions will be higher.
Costs of Setting Up a Limited Company
A sociedad limitada (S.L.) or limited liability company is the most common business structure in Spain. To start a limited liability company in Spain, you’ll need a minimum share capital of €3,000 plus another €1,500 – €2,000+ for the various certificates, notary fees, legal fees, and trademarks.
While this cost is significantly higher than the cost of starting a business in Spain as an autónomo, remember that:
- Sole traders are personally liable for company debts, and you could end up losing your personal assets.
- The initial capital investment required for limited companies can be spent on business assets, so it’s in no way “money lost.”
The Breakdown of Costs for a Limited Liability Company
Minimum Capital Investment
The €3,000 minimum share capital must be deposited into a brand-new Spanish bank account before you can register a Spanish business.
To register your business, you will need:
- €150-350 for the notary
- €200 for the Registro Mercantil Central (Central Mercantile Registry), including €39 for the no-name-coincidence certificate for your company name and €10 for postage
- €100-250 to be placed on the business register
- €50 to legalise your accounting books (annually)
- €150 to register a brand name in Spain or €900 to register your brand name throughout Europe (this must be renewed every 10 years)
- €600 plus IVA (21%) to have a legal firm set up your business for you
- €1,000+ for business activity licenses for your business premises
- Funds for additional fees and taxes, including waste collection, property tax (IBI), and the economic activity tax (IAE)
- Your first month of rent plus a bond of 1-2 months’ rent
- The costs to fit out your business premises
- Product development and production costs
- Labour costs for the first few months
- The first month’s subscription for your European merchant account
Registering with the local Spanish tax office and social security office shouldn’t cost you anything but time. However, if you pay someone to complete these steps for you, you’ll need to factor in this cost as well.
If you have a physical location and employees, it’s not unreasonable to expect to have a budget of €50,000 per month for running your business in Spain. A digital business operated from home will cost less and a multi-site operation could cost more.
When calculating your monthly expenses, you will need to take the following costs into account:
- €2,000 per m2/month in rent for a commercial office or shop (in Madrid)
- €100+ for utilities
- VAT payments (IVA) each trimester —this is an additional 21% that you will add to every invoice
- Spanish corporate income tax—set at a fixed 25% of your profits or 15% of your profits in the first year
- €1,000 minimum wage per employee per month, taking into account 14 payments per year
- Income tax withholding (IRPF) for employees on a sliding scale from 19% to 47% depending on their salary
- Social security co-contributions of around €100 per employee, per month
- Social security contributions of around €300 per month for the director if the director also works in the company
- Your monthly subscription for a merchant account and payment gateway in Spain
- Accident insurance, public liability insurance, home and contents insurance (if working from home), and insurance for your commercial property and inventory
How to Cover the Costs of Starting a Business in Spain
Ideally, you have €100,000 hidden under your mattress for covering the cost of starting a business in Spain. However, in reality, most businesses start with a loan.
To calculate how much you’ll need, it’s important to add up your business expenses for the first few months until you’ll have enough cash flow coming in to cover your expenses and start to pay back your debt.
It’s also important to think about how long each of your costs will last. For example, a 20-30-year investment in property makes sense if you anticipate staying open that long. On the other hand, taking out a 20-year loan for product development on a product that will be outdated in a year doesn’t make much economic sense.
To keep their month-to-month costs low, most businesses rent business premises or a commercial office instead of investing in real estate. This is an especially sensible move when you’re only just starting out.
These are the most common ways to finance a new business in Spain:
Most of the big banks in Spain offer business loans (préstamos emprendedores) that provide up to €50,000 for 2-7 years at fixed interest rates between 6% and 10%.
Credit Company Loan
If you are a sole trader or professional freelancer, you may be able to secure a sole-trader loan (préstamo autónomo) from a credit company with less paperwork than a regular business loan.
Borrowing money from family is a fairly common option in Spain. However, you’ll need to think about how the loan will affect your relationships if you can’t pay the money back. You might also consider drawing up a legal contract for the loan and securing the loan with your personal assets.
Registered companies can raise funds by promoting their business idea to investors. To do this, you’ll need a solid business plan and detailed market research. Many investors will feel more confident investing once you already have a loyal customer base and a proven track record.
The initial investment for starting your own company can come from several people rather than just one. Depending on how many shareholders your company will have, each shareholder can provide a percentage of the capital and the ownership share divided accordingly.
Tips for Starting a Business in Spain
Getting Help Pays Off
Novice entrepreneurs might be tempted to reduce the cost of starting a business in Spain by completing every step themselves rather than paying a lawyer or notary to do it for them. However, paying someone else to set up the business for you often ends up being more efficient than doing it yourself.
Companies that offer legal assistance to new businesses know all of the ins and outs of the system, are familiar with the tax authorities and understand how social security works. They will make sure no step is missed and can spend their time waiting in lines while you keep working or get set up.
Shop Around for the Best Deal
That said, you can often save money by shopping around for notaries, accountants, and business advisory companies rather than going with the first one you find. These professionals are usually competing for clients and might be happy to lower their fees if you find a better deal elsewhere.
If you’re not sure how much a service costs, you can ask other business owners and expats in online forums how much you can expect to pay. An existing company may also be able to recommend the services they used.
See Your Startup Costs As an Investment
As you can see, the cost of starting a business in Spain varies greatly from almost nothing for a sole trader business to thousands of Euros for a corporation with a brick-and-mortar store.
As experienced business owners will say, it’s worth getting expert legal advice at the start and investing according to your skills and experience.
As you take advantage of the start-up-friendly business culture and offer a high-quality service, you should soon see a solid return on the cost of starting a business in Spain.