Setting up a company in Spain: Why now is the right time

Spain is the 15^th largest economy in the world and the 5^th in Europe. It has around 46 million consumers that live in the country plus around 75 million tourists that visit the country every year. This means a growing market on both sides, for locals and foreign investors.

One of the questions you may ask yourself is where does Spain rank in the world economy. According to The Economist, Spain has been named the top OECD economy. Spain has one of the world’s largest economies and is currently ranked 15th by nominal GDP after Brexit is the fourth largest in the European Union (EU).

In this article, I explain the advantages and challenges of running a business in Spain and why the country is a suitable location for entrepreneurs.

Advantages of setting up a company in Spain

Here are some advantages of doing business in Spain and why setting up a company there is easier than it may seem.

Location. Spain has the best location for all forms of communication. It is an entry gate to the South American market, where the language opens even more opportunities for investment. It shares borders with France and Portugal and has important ports that link to the UK, Europe, Asia and the United States.

Great transport networks. Spain has a great transport network and the largest motorway network in the world, by length, as well as the world’s second-longest high-speed rail network. The World Economic Forum (WEF) awarded Spain 12th position in quality in infrastructure and logistics worldwide.

Culture and climate. The climate is excellent most of the year, and the country is famous around the world for its tourist spots, gastronomy, hospitality industry transport networks. Culturally, Spain is rich in folklore, gastronomy, history and the latest trends related to fashion and design.

Full of opportunities for foreign investors. Opportunities in different industries such as retail, hospitality and tourism, automobile, engineering sector, and the energy sector.

Support from the Spanish government. Foreign companies in the tax system and legal systems can get support from the Spanish government.

The Spanish tax system has become simpler. It makes it easier for foreign entrepreneurs. The paperwork is simplified, and it has fewer tax charges. The Agencia Tributaria’s system (Tax office) is completely computerised, and the majority of transactions are made online.

Challenges of doing business in Spain

Paperwork

When opening a business in Spain, one of the legal requirements is obtaining an NIE (ID for foreigners), which is compulsory, including a tax identification number or CIF, relevant documentation from the local council, business registration with the tax authorities, etc. All these transactions and documents can take time, so be prepared. Another example is the documentation you must have ready before trading across borders.

Unemployment rates still high

In May 2023 the unemployment rate in Spain was 11.9 %, with under-25s the most affected. The most affected groups were families with youngsters still living with their parents because they are not able to find work and hence have less disposable income to spend.

Recently, high numbers of Spanish professionals have been emigrating to the UK, France and Colombia.

Spanish professionals are looking out for opportunities abroad due to the high unemployment rate and low salaries. However, in the fourth quarter of 2024, the unemployment rate dropped below 11% for the first time in 16 years, giving confidence to foreign investors.

Business Culture

Spanish business people build interpersonal relationships on a business level. In some regions, they are used to follow a different timetable and different approach to do business. Read here about how Spanish people do business in Spain.

Ensure your business card is written in Spanish on one of the sides and hand it in when meeting for the first time with a client. Introduce yourself with small talk.

It will be a bonus if you know a little of Business Spanish – don’t expect everyone will be fluent in English. Spanish dress code is formal and it is very common to do business during a long lunch, as retail and hospitality are open until late.

Are you considering doing business or setting up a company in Spain or entering the Spanish Market? Have you considered translating key information documents, such as brochures or business presentations, for your future meetings?

Contact us if you need that extra hand in reaching the Spanish audience.