Obligations and costs of maintaining and setting up a limited company in Spain 💶
Thinking of setting up a limited company in Spain, but not clear about all the costs? You are not the only one. One of the most frequently asked questions we receive is how much does it cost to set up a limited company? We are not only referring to the costs of incorporating and starting the activity (which are also important) but also the costs incurred during the life of the LLC.
In this post, we intend to explain to you the expenses related to the incorporation, as well as the cost of maintaining a limited liability company.
👉 How much does it cost to set up a limited company?
1️⃣ Let’s start with setting up a limited company.
In our guide on setting up a limited company in Spain, we give you a breakdown of the steps necessary when setting up a limited company in Spain. At the moment, we’ll focus primarily on the expenses.
– Company’s name
Before starting the process you’ll have to request the company name at the Mercantile Registry. The name certificate will cost approximately € 18.19 if you request it online and download it on the computer. If you wish for them to send the certificate on paper, it will cost a bit more (€ 24.45). Receiving the certificate will take from 1-3 business days.
– Share capital (EDITED OCTOBER 2022)
The initial share capital depends on the legal form chosen for the company. Since the recent amendment to the Companies Act, through Law 18/2022 the minimum share capital for incorporation is € 1.* The minimum share capital for incorporation of corporations is € 60,000. Although the share capital is not an “expense/cost” it is always good to keep in mind that when setting up a company in Spain there will be a higher minimum share capital than in other countries.
* The recent amendment to the Companies Act through Law 18/2022 of September 28, on the establishment and growth of companies, which, among other things, approves the incorporation of limited liability companies with a minimum capital of 1 euro. For this purpose, the following must be complied with: Companies with a share capital of less than 3,000 euros, in order to safeguard the interest of creditors, (i) the endowment of a legal reserve of at least 20% of the profit until the amount of the legal reserve and the share capital reaches the amount of 3,000 euros, and (ii) the joint and several liability of the shareholders with the company, up to the difference between the amount of 3,000 euros and the figure of the undersigned share capital if, in the event of liquidation, the company’s assets would be insufficient to meet the payment of the corporate obligations.
– Notary fees & Registration in the mercantile registry
In Spain, you have to sign the incorporation documents before a Notary Public on a public deed. Notary fees will vary depending on the company’s capital stock. The notary must also attest to the articles of incorporation of the company.
The notary fees and those associated with the formalities at the Commercial Registry usually reach figures close to € 500 € or € 800.
The fee may be lower if the share capital does not exceed € 3,100 and if the company’s bylaws are standard or previously approved by the Ministry of Justice.
The registration procedure may take up to 15 business days.
To this, we would have to add the liquidation of the corresponding taxes. At the time, setting up a limited company in Spain is exempt from taxes. However, you do have to submit the corresponding tax 600 form to the tax agency.
– Digital certificate
Companies in Spain are obliged to carry out the procedures telematically. To do so, it will be necessary to obtain a digital certificate. This certificate can be obtained through the Tax Agency or any identity accreditation point. The cost of the certificate will be around € 25-30.
2️⃣ Obligations of having an SL
Once you have incorporated your company, you’ll have to register with the Tax Authorities and social Security. The costs of setting up a limited company and maintaining it associated with these obligations are as follows:
– Social Security contributions
- Company director
The company director has to register at the social security and pay monthly contributions. In this case, the figure to be registered is “autónomo societario”. As “autónomo societario” the minimum base is € 1234,86 (in 2022). What does that mean? It means that you’ll have to pay € 367,84/month.
If it’s the first time you’ll be registered as self-employed you might be able to benefit from a reduced rate of € 60.
The contributions to the National Social Security Institute (INSS) paid by a company for each employee, on a monthly basis, correspond to approximately 30% of the gross salary.
As a general rule, the tax burden for an employee (the cost of an employee), is broken down as follows:
- 70% goes to the salary, i.e., the payroll that is received.
- 20% goes to pay the social insurance that the company pays for each employee to the National Institute of Social Security (INSS), for example, when they become ill and need to take medical leave.
- 10% corresponds to indemnities, social benefits, or training expenses.
A limited liability company is subject to corporate income tax. The tax rate is set at 25% over the profits.
In addition, according to Corporation Tax Law, there are specific deductions for some specific activities. For example, investment incentives, deductions for R&D&I, environmental conservation, etc. It’s very important to determine which will be applicable to you as it may save you some money!
➕➕ Extras to take into consideration
– Office space
An LLC generally operates from a specific location. Most companies choose to rent or buy an establishment that serves as an office. So the cost of renting or buying the business premises must also be taken into account in the costs of starting up as a limited liability company.
In many cases, you can use the services of commercial lawyers, since they are experts in commercial law and can offer advice and help with different procedures such as, for example, the drafting of the company’s bylaws. If you are a foreigner and do not know the Spanish regulations, it is highly recommended to get advice. You can even instruct the lawyers to manage the process on your behalf. At Luxton, we will not only advise you at every stage of the process but we can do it on your behalf.
The fees for the intervention of commercial lawyers in company creation processes usually start from 250 € or € 300 without much intervention and can reach figures close to € 800 or € 1,200 if it includes additional services and legal assistance.
– On-going payroll/tax services
As explained above, companies must comply with formal registration obligations and keep proper management of their accounting. An agency could charge you an average of € 150 – € 400 per month to manage accounting, payroll, and tax issues. It will depend on the services you wish for them to provide.
If you have further questions on the procedure or the costs of maintaining or setting up a limited company in Spain, leave us a comment below! 👇👇 We’ll be happy to assist!