Top 10 challenges of doing business in Spain

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Spain is a modern knowledge-based economy with ideal geographic positioning, but whether starting a business or expanding operations, navigating the complex market can be arduous without local help on board.

Foreign investors are drawn to Spain not only for its strong domestic market - which boasts considerable purchasing power - but also for the possibility of operating in third-country markets using Spain as a base. Courtesy of its privileged geostrategic position - it belongs to the European Union and is the gateway to North Africa and Latin America - Spain is an ideal spot for growing businesses internationally, and is now the seventh-largest recipient of foreign direct investment (FDI) in the world.

But Spain is shrouded in bureaucracy and red tape which can stifle private sector investment and make the day-to-day running of a business very complicated. In order to overcome these hurdles, working with people familiar with the local environment can be a real asset.

Starting a Business
Spain ranks 136th in the world for ease of starting a business, according to the World Bank and International Finance Corporation. There are ten procedures to navigate involving several stages which can be quite daunting to international businesses. Obtaining a certification of uniqueness, for example, is a relatively unusual requirement, as is granting a public deed of incorporation before a public notary.

Dealing with Construction Permits
It takes 182 days to get construction permits in Spain, with several certificates and inspections required as part of the process. Companies may also be required to obtain an operating license before the registration of the building can be completed and the property can be made operational with water, electricity and telecommunication capabilities.

Getting Electricity
Companies can incur a rather sizeable cost when getting electricity, largely owing to the high number of procedures required in order to get connected to the national grid. Obtaining the required documentation from the local council can take some time before hiring a private company to do the connection works.

Registering Property and Getting Credit
Registering a property requires five procedures, of which the execution and delivery of the public deed of purchase of the property can be the most complicated. In terms of getting credit, the World Bank and and IFC rank Spain 53rd in the world, which is lower than most of its European counterparts.

Protecting Investors
The Comisión Nacional del Mercado de Valores (CNMV) ensures the transparency of the Spanish market and protects investors. It verifies and licenses the products investors are offered through commercial networks, but still leaves a lot up to the private sector to govern itself. The World Bank and IFC rank spain 100th in the world for the protection it offers investors, far below its European counterparts.

Paying Taxes
Paying taxes can be a time-exhaustive procedure, taking 167 hours a year to deal with eight separate payments. Profit tax is low, but labour tax and contributions are much higher than the OECD average, which means the total tax rate as a percentage of profit is still quite steep.

Trading Across Borders
Cost is the main concern when trading across borders in Spain; importing is around $200 higher than the OECD average per container, and exporting is almost $300 higher. It requires four documents to be prepared before trading across borders, and inland transportation and handling can incur heavy costs.

Enforcing Contracts
Enforcing contracts takes 510 days and 40 procedures. The enforcement of judgement takes a considerable amount of time and the attorney cost of the claim can be quite steep.

Resolving Insolvency
Resolving insolvency takes 1.5 years and costs 11% of the estate. Spain is ranked in a relatively healthy position by the World Bank and IFC in this regard.

Spain is home to a diverse culture, and there is certainly no one-size-fits-all approach to doing business in different locations. Spain’s cultural diversity has created a strong sense of individualism which is seen through strong bonds and a sense of identity within the various cultural groups. There is therefore a strong emphasis placed on interpersonal relationships on a business level, which should be observed when in the country.