Apart from the many complications with setting up a business in Spain there are a number of ongoing legal and fiscal requirements a business owner has to comply with to be able to run a business in Spain.
In this section you can find information about legal and accounting requirements, taxes in Spain and employment regulations.

Business Obligations in Spain
Legal Requirements in Spain
The majority of the legal requirements to a company and the owners in Spain are related to setting up the company, tax issues, employment regulations and accounting requirements.

Upon setting up the company there are a number requirements such as signing the title deed before a public notary, foreign investment notification, the inscription in the commercial register and there are books and papers that have to be approved before the company can start to do business. (See also Set Up a Company in Spain further information.)

For many sectors in Spain a special license is also needed before the company can start to operate. The owners of the company are responsible for having these licenses up to date and heavy fines or closure of the business can be the result of not having the papers in order. In general (but not exclusively) a license is needed for all types of productions in the industrial sector, financial or insurance services and for many businesses that offers a product or service directly to the public (bars, restaurants, hotels, travel agencies, etc.)

Much of the paperwork involved with setting up a company has to be repeated if there is any change in ownership, administrator or purpose of the company. In this case the change has to be done at a public notary and thereafter the updated title deed has to be registered with the commercial registry.
The commercial registry is the institution responsible for the legal approval required for the books of the company, the deposit and for publication of accounting documents.

Apart from the above issues the directors and management team of a company can become legal responsible (civil or criminal) for the actions of the company under certain circumstances such as failing to pay social security contributions, breaches of health, safety and work regulations, the fraudulent use of subcontractors etc..

Accounting Requirements in Spain
There exist different accounting standards and norms depending on the type of company, turn over, assets and the number of years the company has been in business. Below we will look at the general and most important norms for limited companies in Spain and companies who are entitled to issue an abbreviated balance sheet and therefore do not need the annual accounts to be reviewed by auditors.

These companies include new companies (less than 3 years) or companies which for two consecutive years comply with two of the following criteria:

1. The total assets do not exceed 2.4€ million at the balance sheet date.

2. The annual turnover is less than 4.8€ million.

3. The average number of workers employed during the financial year is not exceeding 50.

Companies in Spain must keep accounting records where all the transactions of the company can be followed in chronological order and the yearly accounts. The yearly accounts has to show the balance sheet of the company, a profit / loss statement and notes. The company must also prepare documentation of periodical listing and valuation of inventories.

According to the EU directive applicable in Spain the yearly accounts have to follow these principles:

- Prudence
- Ongoing concern
- Proper and immediate recording of transactions
- Assets to be accounted for at purchase price
- Accruals
- Matching of income and expenses
- Consistency

The company results must be kept in two books - a book recording trial balances and the annual accounts and a journal - and kept for a period of 6 years.

When setting up a company in Spain an administrator is selected (normally one or all of the owners or a known accountant) who is responsible for signing the yearly accounts and guaranteeing that the content is correct.
When the yearly accounts have been signed by the administrator/s of the company they have to be deposited with the commercial register within 3 months from the end of financial year (which normally is 31st of December).

Taxes in Spain
Corporate Tax
Corporation Tax is paid by all companies with residence in Spain on the total income and on capital gains no matter if the income is obtained in Spain or abroad.

The corporate tax rate is between 30% and 35% where small companies are taxed 30% and larger corporations are taxed 35%. The definition of a small company in this case is a company with a profit below 100,000Eur and total earnings of less than 5million Eur.

The taxable profit is calculated on the total earning less costs for the entire financial year and reduced by losses brought forward the last 10 years. For new companies the period of 10 years starts when the company has made its first profit.

Income and expenses are nearly always billed in the financial year, which they occur no matter of the period in which the cash or other financial flow takes place.
For major expenses like buildings, machines or furniture it is possible to make a depreciation for up to 100 years. To be valid the depreciation has to be registered in the bookkeeping and either use the official rates for depreciation (between 1-3% per year for buildings and up to 10% for furniture and machines) or apply for another rate with the Spanish tax authorities.
Regarding to provisions it is also possible to take some types of provisions into account in the bookkeeping including provisions for bad and doubtful debts but in general a special permission is needed.

The income and expenses are supposed to show a true value of the financial situation of the company. If companies deliberately value transaction differently than the market price for tax reasons the tax authorities can change the valuation. This is especially the case with transactions between connected entities.

In Spain there is a relief for double taxation both within the country and abroad. If a Spanish company earns dividend from another Spanish company that have already been taxed a tax relief of between 50-100% is possible. The same is the case for those countries where Spain has a double taxation treaty.

Apart from the double taxation relieves there are some special tax incentives for Spanish companies who are exporting or spend resources on investigation and protection of the environment, professional education, things of cultural interest and employment for disabled persons.

Indirect Tax
In Spain there are a number of indirect taxes and duties that are payable both by companies and individuals and other where they can by deducted by corporations. Below you can find the most important indirect taxes in Spain.

VAT
The most important indirect tax for companies is the VAT (IVA). This is a tax on the final consumer on both goods and service and can therefore be deducted by companies.

When selling a product or offering a service (to an individual or company) the company is obligated to provide a receipt where it clearly states the VAT and total costs. Companies have to make a VAT declaration four times per year showing incoming and out going VAT.

The standard rate for VAT in Spain is 16% but there are a number of products with a reduced rate of 7% (water, some foodstuff, housing), a further reduced rate of 4% (basic food like bread and milk, medicine, books and news papers) and some services like education which are exempt from VAT at all.

Stamp Duty
The stamp duty in Spain is generally used in cases where VAT is not payable. This tax applies to both companies and individuals and is used for many types of official transfers of goods and rights and on all notarized documents. Companies have to pay stamp duty on official documents related to the formation or changes in a company like when setting up the business, changing the share capital or when buying another company. Apart from this both companies and individual have to pay to stamp duties when buying second hand real estate.

Employment Regulations
In Spain the employment of workers is regulated by the government regarding to minimum wages, working hours, contracts and the social security system. Apart from the regulations the workers have two main rights - the right to join or set up a workers union and the right to go on strike.
Below you can find an introduction to the main points of the employment regulations in Spain.

Working Hours and Wages
In Spain the working hours and wages are regulated by the worker's statute but there exists many cases where collective agreements (normally reached by negotiations between the major workers unions and the companies) have reached different conditions for theirs members. Therefore many of the points below are not always applicable.

- In Spain the working week consists of a maximum of 40 hours, overtime cannot exceed 80 hours per year and the daily work cannot exceed 9 hours. The workers also are entitled to a rest period of at least 12 hours between working days and at least 4 weeks of vacation per year plus local holidays.

- The official minimum wage in Spain is 450Eur per month in 14 payments (12 monthly payments and 2 extra payments in July and December)

Employee Contracts
In Spain there exist a number of different types of contracts that varies both in length, type of payment and other factors.

Temporary Contracts
The use of temporary contracts is very common due to the difficulties and costs involved with firing employees with a fixed contract.
A temporary contract is given for a fixed amount of time (normally 3 or 6 months) or in some cases the contract terminates upon the finishing of a job. When the contract is completed the employer can decide to renovate the contract or not. For some sectors there are a maximum amount of times an employer can renovate a temporary contract with the employee before offering a fixed contract.

Indefinite Contracts
An indefinite contract is a contract the employer cannot terminate unilaterally without paying compensation unless the worker has done a major fault or breach of the contract signed.
In some cases the dismissal of an employee can be declared void (i.e. for discrimination or when basic rights of the employee are infringed) which will result in a compulsory re-employment.
If the employer wants to dismiss an employee a written notice stating the reasons for the dismissal has to be given with a 30 days notice. Depending on the reasons for the dismissal the employer have to pay a compensation equivalent to between 20-45 days pay, per year of service.

Other types of contracts
Part-time contracts (which can both be fixed or temporary) where the employee works a specified number of hours although maximum 30hours per week.

Internships: The use of internees is very common in Spain both because it is a cheap form of labor (the employer do not have to pay although it is normal to pay between 300-1000Eur per month) and because the employer do not have to pay social security for an internee. This type of contract is seen as part of the studies or training of the student and can only be offered up to 4 years after the students has finished their studies. The work done by the internee furthermore has to be relevant to the type of education.

Social Security
When setting up a business the company needs to register both the company and workers (including working owners) at the social security system. The system covers pensions, unemployment benefits and health service.
The monthly social security fee for all workers is paid by both the employer and the employee. The exact amount depends on the how much the employee earns (with a minimum and maximum amount) and on the category of the work performed. The monthly social security fee per employee is approx. 30% of the employee wage, which the employer have to pay and the employee pays approx. 6% of their wage in social security.