Starting a Business in Spain: Legal and Tax Requirements

Posted on Jan 8, 2025 in Law & Jurisprudence

Administrative, Labor, and Tax Procedures for Self-Employed Professionals

This document outlines the necessary steps for establishing a business as a self-employed professional in Spain.

1. Tax Procedures

  • Census Declaration of Tax Registration and High of IAE: Before starting any activity, you must register for tax purposes (VAT and income tax). You must also inform the Tax Administration about the activity you intend to carry out (registration in the IAE – Economic Activities Tax).
  • Deadline: Before starting the activity.
  • Location: Tax Office.

2. Labor Procedures

  • 2.1. Registration in the Special Regime for Self-Employed Workers (RETA): You may need to register in the Special Regime for Self-Employed Workers within the Social Security system. Registration is unique for all activities carried out by the self-employed individual, provided they fall under the same regime.
  • Location: Social Security Treasury.
  • 2.2. Employer Registration and Obtaining an Employer Identification Number: The Social Security Treasury will assign an identification number for each employer within the corresponding Social Security regime. This registration is mandatory before hiring any employees.
  • Workplace Identification Number:
  • Deadline: Before employees begin their activity.
  • Location: Social Security Treasury.
  • 2.3. Employee Affiliation to the General Social Security Scheme: Employers must register their employees within the General Social Security Scheme. The employer identification number is unique for each workplace and valid throughout Spain. The employer is obligated to affiliate all employees covered by the General Scheme. The assigned affiliation number is valid for life.
  • Deadline: Before the employee starts working.
  • 2.4. Coverage for Occupational Accidents and Illnesses: Employers must provide coverage for occupational accidents and illnesses, either through the National Health System or a mutual insurance company.
  • Deadline: Upon employer registration.
  • Location: Social Security Treasury.
  • 2.5. Employment Contracts: Formalize employment contracts with employees.
  • 2.6. Notification of Workplace Opening: The labor authority must be notified of the opening of a new workplace. This also applies to the resumption of activity after alterations or expansions.
  • Required Information: Name, address, phone number, economic activity, number of employees, built area, installed power, and installed machinery or equipment.
  • Deadline: Within 30 calendar days of opening.
  • 2.7. Working Days: Establish working days and schedules.

3. Local Procedures

  • 3.1. Application for Activity License, Municipal Works, and Settlement of Tax on Buildings, Installations, and Works: This is a mandatory procedure prior to starting any business activity in a specific location. The local council and/or the Environmental Department will ensure compliance with regulations.
  • Location: Various municipal planning departments.

4. Registration of Activity in the Industrial Registry

  • The Industrial Registry (REIC) provides essential information on industrial activity, useful for understanding the sector and for making decisions on industrial policies.
  • Deadline: Once the installation is complete and before starting the activity.
  • Location: Unified Management Office.

5. Property Registration (Optional)

  • In certain cases, it may be necessary to register the local building or premises where the activity is carried out in the Land Registry. The purpose of this registration is to record acts and contracts related to the ownership and other real rights over immovable property.
  • Deadline: None.
  • Location: Land Registry.

6. Registration of Patents and Trademarks

  • If applicable, register patents and trademarks to protect intellectual property.
  • Location: Spanish Patent and Trademark Office.

7. Accounting Obligations

  • Understanding the applicable methods for determining income is crucial for individual entrepreneurs.

8. Main Tax Obligations

  • 8.1. Personal Income Tax (IRPF): Income earned from economic activities must be declared in the individual’s annual income tax return.
  • 8.2. Withholding of Personal Income Tax: Invoices issued by self-employed professionals engaged in certain activities are subject to a 15% withholding tax (7% during the first year and the two following years). Business activities under the objective estimation method are subject to a 1% withholding.
  • 8.3. Quarterly Payments on Account: These are advance payments made to the Tax Agency on account of the annual income tax liability.
  • 8.4. Taxes: If not required to keep accounting records under the Commercial Code, there is no obligation to keep parallel VAT records for sales and expenses.