Why and how

The latest growth projections of the IMF shows that Spain will have the highest growth of all the advanced economies in 2017, as was the case in 2016. If we compare growth expectations of the main economies in Europe, there is a significant difference.

https://blogs.imf.org/2017/04/18/global-economy-gaining-momentum-for-now/

Spain’s position is attractive for potential investment wishing to operate inside the Eurozone. There are many reasons that explain why.

According to Eurostat data, the effective tax rate is lower in Spain than other EU countries due to the tax allowances for investments, employment and R&D activities, together with grants and incentives for the same reasons.

The table above shows EU tax revenues as % of GDP (Including Social Security Contributions)

 

Let’s be honest, labour cost is a key factor to establishing an office abroad. Labour costs in Spain have proved to be very stable in the last few years, while at the same time there has been a big increase in real productivity.

But low-cost labour is not enough. If we are talking about R&D, you would need to find skilled and talented employees to ensure a high quality output. Spain occupies the 4th position in the Hays Global Skills Index, 2016, that measures a comprehensive set of macroeconomic and labour market indicators across 31 countries.

From the Hays Global Skills Index, 2016

As a consequence of being a major tourism power, Spain offers companies excellent communication infrastructures. Roads, high-speed railways, ports and airports connect the main cities of the country, the rest of Europe, and the world.

From Invest In Spain

Spain is one of the safest countries in the world, crime rates are very low in all categories. This is not a trend, but a structural characteristic of the Spanish civil society. The example below shows the Eurostat records on theft, according to the international classification of crime for statistical purposes (ICCS):

Theft per hundred thousand inhabitants (link to source)

To find the best location for your company inside Spain you should consider various aspects, and you will not find the best mix of advantages in all areas. You should take into account that in Spain there are 17 autonomous regions (+ 2 autonomous cities in Africa) with their own regional parliaments and some taxes and many tax allowances, grants and incentives vary from one region to another. Business opportunities are different, while living cost and living standards, labour cost, talent and skills available in each area often vary quite a bit.

In many ways Alicante province is an excellent place to locate a branch and, if we are talking of an R&D center, it is superbly suited.

  • The two main cities of the province, Alicante and Elche, create a large area with high level services for people and companies:
  • There is a lot office space, business centers and industrial parks, in particular is Elche’s Industrial/Business Park, situated midway between Alicante and Elche and easily one of the best of Europe:
  • Labour cost of R&D roles in the province is lower than the main cities in Spain, Madrid and Barcelona. So for example if you are thinking of a software development center, to hire a senior developer would cost about 17% less in Alicante than in Madrid, with the difference becoming much wider when comparing other cities in the EU and USA.
  • Quality of life is an important reason to choose Alicante. Weather, culture, nature, gastronomy and the healthy Mediterranean lifestyle make Alicante a privileged location. There are thousands of foreign nationals, mainly EU residents, living all year in the province (millions in summer). If your company was to move someone to an office there, it’s likely to be easier for him/her to adapt and feel comfortable in Alicante than other locations, because of the open-minded multicultural society which is already used to living and working together with people of many different nationalities.

If you have decided to set up a branch in Spain, the first decision to make is what type of business entity is the most favorable for you. Existing options are in keeping with other OECD countries. It is worth noting that in line with the EU legislation, foreign investment restrictions and exchange controls have been virtually eliminated. The most common types are as follows:

* Other types may fit your case better. Visit www.investinspain.org

 

Steps to follow to creating vary a little depending on the type. For the case of a corporation or a limited liability company the general steps are:

  • Obtain a clear name search certificate from the Central Mercantile Registry.
  • Granting of powers of attorney for the incorporation, if applicable.
  • Execution by the future shareholders of an agreement of intent to set up the new company.
  • Obtain a Provisional Tax Identification Number (NIF).
  • Open of a bank account.
  • Obtain a certificate of deposit of initial capital.
  • Determination of the administration body.
  • Draft the company’s bylaws.
  • Identification of the economic activity code describing the activity in accordance with the National Classification of Economic Activities (CNAE).
  • Sign the public deed of incorporation before a notary.
  • File a tax return and pay transfer tax (tax exempt pursuant to Royal Decree Law 3/2010).
  • Register the society at the Mercantile Registry. Not the central one, but the one in the province where the company is going to be created.
  • Obtain a Definitive Tax Identification Number (NIF).
  • Declare the foreign investment at the Foreign Investments Registry, which is attached to the Ministry of Industry, Tourism and Trade (for statistical purposes only).

Although it may seem like a long process, note some things can be done online and many others are managed directly by the Notary office. It is a fairly simple process over all.

Practical tips

  • There is no need to be an expert on international trade or the legal aspects in Spain (or any other country you may think to invest in). Getting the right advice on these matters so that you can make the correct decisions is paramount. There are many international legal advisory companies that can help you, and fortunately some of them have an office in Alicante (PwCKPMGDeloitteBDO… and others).
  • The administrative body, that is usually created for just a single administrator, needs to get a Spanish ID number (NIE). If he/she is not an EU citizen, getting it can delay the full process a lot. Take it into account. Of course, getting the right advice from an experienced local advisory firm is the best option.
  • If your branch is going to be located in Alicante, or in any other province, make sure that the company is registered in the Mercantile Register of the same province. Please note that, if your advisers don’t have an office there, they may try to do the full process in their location, because it is possible to register a company in a different province where the office will actually be. However, if in the future you have to change something or any issues arise, e.g. clarifying something about the annual accounts, it will be easier and cheaper for you if your employees or your advisers are near the Mercantile Register office. Your company, is your company but your advisers may change.
  • In the same vein, although almost all bank processes can be made online, it is better to setup the bank account in a bank office located in same city you setup your company office. For smooth relations with your bank it’s still advisable that a representative of the bank knows your business in-person.
  • When you start operating in a different country, with a different business and living culture, or different public institutions that you are not used to, you may feel uncertainty much like a child in his/her first day at a new school. It is likely you will make mistakes that could have been easily avoided if you had previous experience in the area. Instead of ruining your plans, you can prevent this by simply hiring someone to provide you the experience in how things are done in all the fields. Personal and professional relationships, tax, accountancy and labour processes, institutional relationships, negotiations and anything else. This will allow your company to be experienced from very first moment, so that things are driven by your company and not the other way around.
  • Finally, hire the right people. Yes, this is a general tip, it doesn’t matter if we are talking about your headquarters, a new office in your country or a new office abroad. Finding the right people is always fundamental.

About the Author Pascual Sánchez

I am highly committed, and proud of doing my best at every opportunity. I'm also a very empathetic person, because understanding is the only way to find good solutions. That's my personal seal.

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