Doing business in Spain
Spain attracts investors with its diverse economy, including manufacturing, renewable energy and technology sectors and a booming tourism industry. EU membership boosts trade and investment opportunities, and the country’s infrastructure, skilled workforce and strategic location support business operations.
But behind its appeal lie complex compliance and regulatory frameworks that companies must understand to succeed.
Spain, officially the Kingdom of Spain, is Europe’s fourth-largest country by land area and ranked 15th globally by nominal GDP in 2023. With over 48 million residents and a GDP of US$1.58 trillion, Spain has a mature, diverse market.
Key business sectors include aerospace, tourism, automotive, chemicals, life sciences and real estate. Madrid serves as the capital and economic centre, with other key cities like Barcelona, Seville, Valencia, Zaragoza and Málaga contributing significantly to business activities.
Spain is part of numerous international organisations such as the European Union, NATO, OECD and WTO, allowing investors access to an integrated global marketplace. The official currency is the euro (€), and the primary language is Spanish (Castilian).
Advantages of doing business in Spain
Spain is an attractive location for companies seeking to expand into Europe. Its EU membership and strategic location provide easy access to regional markets, and it boasts excellent infrastructure and skilled talent across major sectors. Spain’s longstanding cultural and trade links with Latin America also open the door to the Latam market.
The country benefits from geopolitical stability and an economy that is on an upward trajectory after experiencing some setbacks in recent years. This is mainly due to its historically high unemployment rate, which is more than double the EU average. However, economic growth for 2025 is expected to exceed 2%, indicating a positive prognosis.
Spain’s Mediterranean climate and beautiful coastlines make it a popular tourist destination. This sector is currently experiencing a boom, with the tourism GDP growing by 6% in 2024 and contributing significantly to the country’s economy.
Investors starting a business in Spain will find it operationally cost-effective when compared to many other European countries, while more relaxed business regulations and government incentives are attracting increased foreign direct investment (FDI).
Despite these advantages, certain challenges remain when doing business in Spain. These include complex administrative requirements in the legal and tax environment, and cultural differences that can impact business operations.
Compliance and the regulatory environment in Spain
Companies doing business in Spain should note the complex administrative procedures around company formation. Ongoing compliance also requires careful attention due to strict regulations.
Compliance in Spain is influenced by both national and EU-level regulations. Companies doing business in Spain must adhere to Spanish GAAP or IFRS for financial reporting and file audited financial accounts if they meet certain thresholds. Financial statements must be submitted to the Mercantile Registry within one month of shareholder approval at the annual general meeting.
Spain has adopted international transparency standards such as FATCA, the Common Reporting Standard (CRS) and the OECD’s BEPS recommendations. It also follows EU anti-money laundering directives and has tightened corporate income tax reporting, with new disclosure rules effective from June 2024.
TMF Group’s Global Business Complexity Index ranks Spain among the top 20 most complex jurisdictions in which to do business, highlighting the importance of expert local support to navigate regulations and maintain compliance.
Hiring and employment in Spain
Employment law in Spain is shaped by the Workers’ Statute, which delineates the rights and duties of both employers and employees. The standard workweek is 40 hours, with a planned reduction to 37.5 hours by 2026. Employees are entitled to 30 calendar days of annual paid leave and 14 public holidays. Spain is also the first European country to introduce paid menstrual leave.
Employers are required to register with the social security system and contribute roughly 30% of an employee’s gross salary to cover pensions, healthcare, unemployment and workplace injury insurance. Workers can be hired on payroll directly or through staffing agencies.
Hiring foreign nationals comes with extra prerequisites. While EU/EEA citizens are free to work, non-EEA nationals need to obtain a work and residence permit — a process that can take several months. Spain is also part of the EU Blue Card scheme that helps to attract highly qualified professionals.
The financial and tax environment in Spain
Spain provides a competitive tax environment within the EU. The standard corporate tax rate stands at 25%, but newly established companies enjoy a lower rate of 15% for their first two profitable years. VAT is applied at 21% with reduced rates of 10% (eg hospitality, transport) and 4% (eg basic necessities).
Spanish entities are required to comply with annual corporate income tax filings and, depending on turnover, might file VAT and withholding tax returns either monthly or quarterly. Financial statements must be prepared according to Spanish GAAP or IFRS and may need to be presented in full or abridged versions based on company size.
Spain's tax authorities continue to harmonise domestic regulations with international initiatives, such as the OECD BEPS framework and the EU Anti-Tax Avoidance Directive, resulting in more stringent corporate disclosures.
Starting a business in Spain
Setting up a company in Spain typically takes six to eight weeks and requires a number of administrative steps. The most common business structures for foreign investors are:
- Limited liability company (Sociedad Limitada – SL): ideal for small and medium-sized enterprises (SMEs). Requires a minimum share capital of €3,000, fully paid at incorporation. Must have between one and 12 directors and at least one shareholder.
- Corporation (Sociedad Anónima – SA): suitable for larger businesses. Requires at least €60,000 in capital (25% paid upfront), with a minimum of three directors. Shares can be listed publicly.
- Other legal structures include branches and representative offices, although these are not considered separate legal entities.
Key incorporation procedures include company name reservation, obtaining a provisional tax ID (NIF), opening a corporate bank account, notarising incorporation documents and registering with the Mercantile Registry. Businesses must also notify the tax authorities and register for VAT and social security.
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