Starting a Business in Spain: What Expats Need to Know

NLV Holders Cannot Work or Run a Business in Spain

The Non-Lucrative Visa (Visado de Residencia No Lucrativa) is specifically designed for people who wish to live in Spain without working. The clue is in the name: "non-lucrative" means you cannot earn an income while in Spain on this visa. Your financial support must come entirely from passive sources — savings, pension income, investment returns, or rental income from property outside Spain.

This prohibition covers:

• Working as an employee for a Spanish company
• Freelancing or consulting for Spanish or foreign clients while based in Spain
• Registering as an autónomo (self-employed worker) with the Spanish social security system
• Being a director or active manager of a Spanish limited company (SL) receiving remuneration
• Operating any business that generates lucrative activity from Spain

The only income streams permitted are genuinely passive: dividends, interest, pension payments, rental income from properties you own, and similar. Even receiving a salary from a foreign employer while living in Spain on an NLV is technically a breach of the visa conditions and increasingly scrutinised by Spanish authorities.

The Right Visa if You Want to Work or Run a Business in Spain

If you want to work in Spain, there are several alternative visa routes depending on your specific situation:

Digital Nomad Visa (Visa para Teletrabajadores de Carácter Internacional)

Introduced in 2023 under Spain's Startup Act, the Digital Nomad Visa is designed for remote workers and freelancers who work for companies or clients based outside Spain. It allows you to live in Spain and work remotely, provided that no more than 20% of your income comes from Spanish clients or employers. This is the most appropriate option for freelancers, consultants, and remote employees wanting to live in Spain. The income threshold is similar to the NLV but you retain the ability to work. You may also benefit from the Beckham Law special tax regime, capping your tax rate at 24% for the first six years.

Self-Employed Visa (Autónomo Visa)

The autónomo visa allows non-EU citizens to live and work in Spain as self-employed professionals. It requires a business plan, proof of professional qualifications, and evidence of sufficient funds to sustain the business. Registration with the Spanish social security system as an autónomo is mandatory, which involves a monthly social security contribution (the minimum is currently around €230/month for new autónomos in their first two years). This is suited to those who will provide services to Spanish clients or run a trade-based business in Spain.

Entrepreneur Visa

The entrepreneur visa (under Spain's Startup Act) is for non-EU nationals who want to develop innovative business projects with economic value in Spain. A favourable report from the relevant Spanish authority (such as ENISA or the Ministry of Industry) is required. If approved, this visa allows you to live in Spain and develop your startup or innovative business.

Business Structures in Spain: An Overview

For those who are on the correct visa or planning to apply for the appropriate work visa, here is how the main business structures in Spain work:

Autónomo (Self-Employed / Sole Trader)

The autónomo is the Spanish equivalent of sole trader or self-employed status. It is the simplest and most common structure for individuals running a small business or offering professional services. Registration is completed at the Spanish Tax Agency (Agencia Tributaria) and the Social Security system. Key characteristics:

• No minimum capital required
• Unlimited personal liability — you are personally responsible for all business debts
• Income taxed under IRPF (personal income tax) at progressive rates up to 47%
• Mandatory social security contributions — currently a minimum of approximately €230/month for new autónomos (reduced rate for first two years)
• Suitable for freelancers, consultants, tradespeople, and small service businesses

Sociedad Limitada (SL) — Limited Company

The SL is the Spanish equivalent of a private limited company and is the most popular structure for businesses with more than one partner or those seeking to limit personal liability. Key characteristics:

• Minimum share capital of €3,000
• Liability limited to capital contributed — personal assets are generally protected
• Corporate tax (Impuesto sobre Sociedades) at 25% (15% for the first two years for newly formed companies)
• Requires a public deed of incorporation before a notary, registration in the Commercial Registry, and an NIF (tax identification number)
• Suitable for growing businesses, those with multiple partners, or those seeking investor funding

Sociedad Anónima (SA) — Public Limited Company

The SA is equivalent to a public limited company (PLC). It requires a minimum capital of €60,000 (at least 25% paid up at incorporation) and is suited to larger businesses or those planning to list shares publicly. Most small to medium-sized foreign-owned businesses in Spain use the SL structure rather than the SA.

Steps to Set Up a Business in Spain

The process varies depending on the structure chosen, but the general steps for forming an SL are:

1. Obtain a company name certificate from the Central Commercial Registry (Registro Mercantil Central) confirming your chosen company name is available
2. Open a bank account and deposit the minimum share capital (€3,000 for an SL)
3. Draft and sign the articles of association before a Spanish notary (notario) — the deed of incorporation
4. Obtain a tax identification number (NIF) for the company from the Agencia Tributaria
5. Register the company in the local Commercial Registry (Registro Mercantil)
6. Register for VAT (IVA) and other relevant taxes with the Tax Agency
7. Register with Social Security if you will employ staff
8. Obtain any required licences from the local municipality (ayuntamiento) for your specific activity

The entire process typically takes four to eight weeks and involves notary fees, registry fees, and professional fees if you use a gestor or lawyer. Total costs are usually €1,500–€3,500.

Tax Implications for Business Owners in Spain

Spanish taxation for business owners is complex and involves multiple obligations:

Corporate Tax (Impuesto sobre Sociedades)

SL companies pay corporate tax at 25% on profits. New companies benefit from a reduced rate of 15% for the first two profitable years. Losses can be carried forward and offset against future profits. Spanish companies must file an annual corporate tax return (Modelo 200) and make quarterly advance payments.

VAT (IVA — Impuesto sobre el Valor Añadido)

The standard VAT rate in Spain is 21%. Reduced rates of 10% apply to certain goods and services (restaurants, tourism, some foods), and a super-reduced rate of 4% applies to staple foods, books, and some medicines. Businesses must file quarterly VAT returns (Modelo 303) and an annual summary (Modelo 390).

Personal Income Tax for Autónomos

Self-employed autónomos pay IRPF (personal income tax) at progressive rates. The marginal rate reaches 47% at higher income levels. Quarterly estimated payments are made throughout the year, with an annual declaration filed by June 30. Autónomos can deduct legitimate business expenses including home office costs, professional subscriptions, travel, and equipment.

Foreign Companies Opening a Branch or Subsidiary in Spain

If you already operate a company in your home country and want to establish a presence in Spain, you have two main options:

Branch Office (Sucursal)

A branch is an extension of the foreign parent company rather than a separate legal entity. It has no independent legal personality, and the parent company is liable for all debts. The branch must appoint a local representative in Spain who is resident and responsible for compliance. Branches file their own Spanish tax returns for Spanish-sourced income.

Subsidiary (Filial)

A subsidiary is an independent Spanish legal entity (usually an SL) that is owned by the foreign parent. It has its own legal personality and the parent company's liability is limited to its share capital in the subsidiary. This is generally the preferred structure for foreign companies establishing a significant Spanish operation.

Is Spain a Good Environment for Business?

Spain has made significant efforts to improve its business environment in recent years. The Startup Act of 2023 introduced meaningful incentives for entrepreneurs and remote workers. Key positive factors include:

• A large domestic market of 47 million people plus access to all EU markets
• A well-educated, multilingual workforce
• World-class infrastructure including high-speed rail and modern airports
• The Beckham Law special tax regime for qualifying workers and digital nomads
• Growing tech and startup ecosystems in Madrid, Barcelona, and Valencia
• High quality of life, which aids talent attraction and retention

Challenges include a relatively high level of bureaucracy, some rigidity in employment law, and regional variations in regulations across Spain's 17 autonomous communities. Working with a local gestor or business adviser from the outset significantly smooths the setup process.