Best way to pay Alibaba suppliers
Looking for the best way to pay Alibaba suppliers? Read our essential guide, covering payment methods, costs, security and more.
With incredible weather, affordable lifestyle, friendly locals, and quite an international community, life in Spain can a nice place to live. However, finding work may get a bit tricky.
Though in recent years the unemployment rate has been going down, it’s still relatively high at 21%. Also, wages tend not to be as high as in other countries across Europe.
Of course, you could always avoid the problem altogether and set up your own business. After all, nothing beats the satisfaction of building your own company and doing your own thing.
This guide will help you figure out how to go about it.
In order to start a business, you must first have the right to live and work in Spain.
If you’re an EU citizen, the principle of free movement automatically gives you this right. However, you’ll still need to obtain your Número de Identificación de Extranjero (NIE).
An NIE is your unique Spanish tax identification number. You’ll need it to pay your taxes and for anything else that requires an official process, including renting or buying property, getting connected to utilities and opening a bank account.
You can apply for your NIE in person once you’re in Spain or, even better, get it ahead of time via the Spanish embassy or consulate in your home country.
If you’re not an EU citizen, you’ll also need to have a valid visa and a valid work permit.
If you need a work permit and plan to start your own business, there are certain rules you must follow.
You have to apply for your permit at the Spanish embassy or consulate in your home country. Besides the application, you’ll also need to provide the following documents:
You’ll have to renew your work permit and prove you still fulfill all these conditions every year. However, after five years you can apply for long-term Spanish resident status.
Certain professions and types of business - lawyers, architects, healthcare professionals and financial services, to name a few - are heavily regulated. You’ll need to make sure you comply with the applicable rules before you can start trading.
Very often, the process will involve getting your qualifications officially accredited or recognised (called homologación ). Depending on your profession or the type of business you want to carry out, you may also need to apply for a licence.
Rules may vary from region to region, so it’s a good idea to check out both national rules and the rules of the region you intend to base your business in ahead of time.
Old-world bank accounts only work properly in one country. They hold money only in one currency. And it gets expensive when you try to use them across borders. Wise's new Borderless accounts solve all of this.
Now you can send, receive and organise your money internationally, without crazy fees or even-crazier exchange rates – just a small, fair charge when your money moves between currencies.
Once your personal legal status is in order, it’s time to decide your business’s legal form. In Spain, you have three main options:
Let’s have a look at what each involves.
Operating as a sole trader is probably the easiest, cheapest and most flexible way to start doing business, especially if you run your business on your own. It’s also the most straightforward business to set up.
In order to start operating as a sole trader in Spain, you’ll need to do three things:
You can register for tax by visiting your nearest tax office with your valid, unexpired passport and your NIE.
You’ll be asked to fill in a form (Modelo 036 or 037, depending on your circumstances) and given a tax certificate, called IRPF, which you should keep in a safe place.
When you register with the Spanish tax authorities, you’ll be asked whether you’re a sole trader ( empresa individual ) or a freelance professional ( profesionales autonomos ). The distinction is important because of the Spanish retention system ( retenciones ).
As a freelance professional, your clients retain a percentage of your invoice (currently set at 18%) and pay it to the tax authorities on your behalf as an advance on your tax payments. These amounts are then credited when you fill in your annual tax return.
The system doesn’t apply if you’re a sole trader.
You must register for social security under the special regime for autonomous workers (RETA) within 30 days of registering with the tax authorities.
In order to register, you’ll need the following:
You’ll also be asked to fill in a form.
If you live and work in Spain and make social security contributions, you’re entitled to free healthcare.
Although, as a self-employed person, you’ll need to join a health insurance fund ( mutua ) via the social security authorities. Your health plan will also cover any dependent family members living at your address.
Whether you’re a sole trader or a freelance professional, you’ll need to file a personal income tax return each year, as well as quarterly returns.
You’ll also need to keep copies of invoices and receipts for all expenses you intend to deduct on your annual return.
Depending on the type of business and the region you live in, you may also have other periodic filing requirements. It’s best to consult with a lawyer or accountant, as failing to comply with these requirements will often result in fines and other penalties (including criminal liability).
If you plan to go into business with one or more people, but you still want your structure to be flexible, you can run your business as a partnership.
Like sole traders, partnerships don’t require a minimum investment to be set up. However, the process is a bit more time-consuming and expensive.
There are two types of partnership in Spain: general partnership ( sociedad general ) and limited partnership ( sociedad comanditaria ).
Each have their own special requirements and come with different rights and responsibilities. Either way, you’ll need to do the following to set one up:
A partnership agreement isn’t strictly required. However, it’s good to have, as it regulates the relationship between you and your business partners and outlines your responsibilities. This is especially helpful if things go wrong, or you have a disagreement.
Out of the three legal forms available, a limited company is the most complex, formal and expensive to set up and run. It also has a number of distinct advantages over the other forms, including limited liability and more favourable taxation (if you earn more than a certain amount). Some types of business must be run as a limited company by law.
In Spain there are six types of limited company you can choose from. The main differences between them are the minimum number of shareholders required and the minimum amount of money you have to invest.
|Sociedad Anonima (SA)||Sociedad limitada Nueva Empresa (SLNE)||Sociedad Limitada (SRL / SL)||Sociedad Laboral Anónima||Sociedad Laboral Limitada||Sociedad Cooperativa|
|Number of Shareholders||1+||Not more than 5||1+||3+||3+||3+|
|Minimum Investment||€60000||€3000 - €120000||€3000||€60000 (workers must own 51% of shares)||€3000 (workers must own 51% of shares)||€1800|
Whichever type of limited company you choose, you’ll need to follow the following steps.
Setting up a company is a complicated process; and Spanish law may differ substantially from the laws of your own country. It’s very important to consult with a professional.
A company lawyer or accountant can help you decide if forming a company is right for you, advise you on the exact requirements and help you throughout the process.
Once you’re sure setting up a company is right for you, you need to check if the name you’ve chosen is available. You’ll also need to obtain a certificate to confirm this from the Mercantile Registry.
On average, it takes three days to get an answer.
A company is a legal person in its own right, so you’ll need a tax identification code that’s specific to it.
You can apply for a CIF by downloading the form from the Agencia Tributaria’s website. You’ll need to return the form at your local tax office in person, together with the original and a copy of your NIE.
Next, you’ll need to open a business bank account in the name of your new company and deposit the minimum investment amount. This will vary depending on the type of company you have chosen.
Once that’s done, ask your bank to give you a certificate that proves you’ve made the payment.
The deed of incorporation is the document that sets up your company. It includes information such as the name of your company, its official address, the nature of your business, names and addresses of all shareholders, names and addresses of its officials (directors, company secretary and key officers) and so on. It will also have information on how the company is run.
The deed must be published by a notary and is accessible to the public. You’ll also need to give the notary originals and copies of your tax forms, certificate of uniqueness, NIE and bank certificate.
In order to register your new company, you’ll need to do three things.
As a director, you’ll need to register with the social security authorities on behalf of the company.
This involves a visit to your local office with originals and copies of your deed of incorporation, NIE, tax forms and form TA0521.
Finally, you’ll need to take care of some other minor formalities. These include:
|Sole Trader||Partnership||Limited Company|
|Deed||Not necessary||Optional but recommended||Obligatory. Must be notarized.|
|Minimum Investment||No||No||Yes. Variable, depending on type of company.|
|Formalities||Low. Quarterly returns. Some additional formalities may apply.||Moderate. Depends on type of partnership chosen.||High. Regular monthly, quarterly and annual filings. Must hold regular meetings and keep minutes.|
Of course, if you run a business, you’ll have to pay taxes. Your tax liability will depend on whether you’re a sole trader, a partnership or a company.
As a sole trader, you pay your taxes in one of two ways, depending on whether you’re an empresa individual or an autonomo.
If you’re an empresa individual, you’ll need to pay tax on a quarterly basis at a rate of 19%. On the other hand, if you’re an autonomo, the retention system (explained previously) applies, and clients will retain a percentage of your invoice and pay it to the tax authorities on your behalf.
Either way, you’ll have to file a tax return at the end of each financial year. This is the same tax return filed by any Spanish citizen or resident. Your return should include all your income for the year (whether from your business or otherwise) and any allowances and deductions.
Personal tax-free allowances include a €5,500 personal allowance and child allowances. You can deduct business expenses if they are entirely business-related, recorded in your accounting books and backed up with invoices or receipts.
Once you complete your return, you’ll either have to pay more tax or qualify for a refund, depending on how much you paid upfront during the year.
Each partner is responsible for paying their own income tax.
You’ll need to declare your partnership income in your personal tax return, and the same allowances and deductions will apply as if you were a sole trader.
Limited companies pay corporation tax. You have to pay Spanish corporate income tax on all the company’s income worldwide.
Tax is due on your company’s net profits, after all allowable deductions are made. These include:
The general rate of tax is 25%. However, newly formed companies pay 15% tax on the first €300,000 and 20% on the remainder for the first two years.
Unless you run a VAT-exempt business (teaching, for example), you’ll need to register for VAT in Spain. This applies whether you’re a sole trader, a partnership or a company; and no matter how little money you make.
In Spain, VAT is charged at 21%. However, some types of goods and services may attract a lower rate of 10% or even 4%.
You’ll need to submit periodic VAT returns, as well as an annual return. You’ll also need to comply with specific accounting and invoicing requirements.
If you’re a sole trader or a member of a partnership, you’ll need to make your own social security contributions. These payments will entitle you to free healthcare. You’ll also get a pension if you pay social security for at least 15 years.
The minimum amount works out at about €265 a month. You can however choose to pay more in exchange for extra benefits, including a higher pension and extra insurance.
You’re exempt from paying social security if you earn less than €9,000 a year. However, if you don’t pay social security you won’t get any benefits, so it’s a good idea to make the payments anyway.
Companies are also obliged to make social security contributions. One director must register with the RETA and make contributions on the company’s behalf.
If you’re an employer, you have to make social security contributions on behalf of your employees. These contributions currently amount to 29.9% of an employee’s gross salary, plus a variable rate to cover occupational hazards.
You’ll also need to deduct taxes and social security contributions from your employees’ salaries.
|Income Tax||Individual - sliding scale. (9.5% - 22.5% national tax + regional taxes)||Individual - sliding scale. (9.5% - 22.5% national tax + regional taxes)||25% corporate tax|
|Social Security||Approx. €265 per month minimum + contribution if employer||Approx. €265 per month minimum + contribution if employer||Director to register on behalf of company + contribution if employer|
|Allowable Deductions||Personal allowances and business expenses||Personal allowances and business expenses||As per company law rules|
While you’re looking to fund your new venture from abroad at the least possible cost, consider using Wise. Not only does Wise use the real mid-market exchange rates to convert your money (which nearly always beat the banks), but because your money is received and sent via local bank transfers in both your home country and in Spain, all those nasty international fees magically disappear. Give it a try.
Looking for the best way to pay Alibaba suppliers? Read our essential guide, covering payment methods, costs, security and more.
Before starting a business or launching your idea as a foreigner in the UK, you need to consider the some steps. Check out our guide to discover how to proceed
Thinking about exploring the US market selling on Amazon US from UK? Check our guide to understand pros, cons and how to save money on your sales.
Is it possible to open a US bank account LLC as a non resident? Find out how to do it and the documents you’ll need in our handy guide.
Check all the up to date information about business travel from the UK to European Union, how to manage travel planning, spending in Euros, visas and documents
Wondering which Eurostar travel class is better for your business trip? Check our comprehensive guide coveting everything you need to know to book your trip