Advice on setting up an expat business in Spain

As more Britons decide to change and improve their lives by emigrating, a good number will be planning on starting their own businesses in their chosen country.

Spain is an all-time favourite for British expats, especially with retirees, but also with those who’ve always dreamed about working for themselves. Nowadays, the number of potential start-ups is far higher as younger Brits are leaving the UK ahead of Brexit, hoping to develop their own businesses as well as improving their quality of life. The wheels of Spanish bureaucracy run slowly but, whether you’re looking to set up as a limited company or a sole trader, it can be done with the right legal assistance.

Your first decision is whether to set up as a sole trader or go for limited company status. Sole traders in Spain are referred to as ‘autonomos’, with the majority of new businesses using this option as it’s far less complicated and cheaper as there’s no requirement to lodge 3,000 euros' start-up capital as there is with full private limited company registration. Fiscal obligations relevant to both options include quarterly VAT returns and annual tax returns, whereas limited companies also need to make company tax returns and file yearly accounts with Spain’s Company Register. In addition, limited company rules state the owner must keep back 15 per cent of every invoice received from a sole trader as well as filing a return.

These additional requirements are one reason why maintaining a limited company costs far more than being a sole trader. Social security obligations can also make a hole in your earnings as a sole trader, but the hole's much larger should you set up as a limited company. Monthly contributions to Spain’s social security system cost some 250 euros a month for sole traders, regardless of income, but limited companies must contribute 24 per cent of each employee’s income. Should your company not support employees, you’re forced to register yourself as a sole trader and contribute on your own behalf. Obviously, those contemplating single-person businesses would be far better off financially by simply registering as sole traders. The only disadvantage is that, should the business fail, sole traders’ personal assets are at risk, whilst company owners have limited liability.