After Brexit and facing the end of the COVID pandemia it might be convenient to reschedule our activity or business for residence and tax purposes by operating through a Spanish Companyinstead as entrepreneurial. The most common vehicle is through the incorporation of a “Sociedad Limitida”, (SL) a Limited Liability Company. It has advantaged from the tax and legal point of view – lower taxation, no Net Wealth Tax, higher deductibility of expenses and limitation liabilities against third parties.
In Spain is quite simple and quick to incorporate an SL as in three or four weeks with a minimum sharecapital of € 3,000 € and other aprox. € 1.500 as additional expenses you can create your own company.
Here we outline the general considerations of the incorporation:
- The S.L. has a separate legal entity from the shareholders
- Shareholders’ liability of an S.L. is limited to its subscribed capital
- Corporate name: The S.L. must obtain clearance from the Central Commercial Registry confirming the availability of the corporate name, adding “S.L. or sociedad limitada” and five names must be requested
- Share capital: The S.L. is subject to a minimum capital of 3000 €
- Corporate governance: the S.L. is governed by the Shareholders’ meeting and its management entrusted to either a board of directors or sole director or two joint or separate directors
- Annual accounts: the S.L. must issue and file its annual accounts with the Commercial Registry
Formalities:
- Clearance from the Central Commercial Registry confirming the availability of the corporate name
- Deed of incorporation which must include the identity of the shareholder/s, the intention to incorporate an S.L. and the By-laws
- Powers of attorney should the shareholder/s not be present at incorporation
- Proof of payment of the minimum paid-up capital (bank statement proving the cash contribution)
- Foreign investment requirements
- Request the company’s tax identification (“CIF”)
- Recording of the Business Tax (“IAE”), levied on business or professional activities
- Filing with the Commercial Registry of the deed of incorporation, and legalisation of the Company’s Books
- Publication of the filing of the deed in the Official Journal of the Commercial Registry (“BORME”)
- Registering with the Social Security (both the S.L., Director and the employees)
Main tax aspects are:
- The company will be taxed under 120.000 € benefit at 25% rate for Corporate Tax on the benefit reflected from the financial statements (income less deductible expenses and depreciation.
- Losses might be carry forward 15 years.
- VAT shall be invoiced at 21% on the services rendered and all the input-VAT is deductible as long as it refers to expenses related to the activity. VAT returns are to submit quarterly and in the last quarter if there is a tax credit and you can choose refund or compensation within the following years. The VAT prescribes in 4 years quarter by quarter.
The company might be financed with loan from the shareholder, direct investment or with the asset as capital.
If you are interested in more information contact us.
Carlos Espinosa
Solicitor & Tax Adviser
+34 627 41 32 01
