1. The first thing to be done is submit possible names for the company to the Mercantile Registry ( Registro Mercantil Central) to check that no other company is registered under the same name. Provided there isn’t, you will receive what’s called a Negative Name Certificate ( Certificado Negativo de Nombre). This may not sound like a very interesting piece of paper, but without it you cannot incorporate your company. The Mercantile Registry has recently simplified the checking procedure so that the process takes only a few days. You can also use the Registry’s website (www.rmc.es – in Spanish only) to consult company names already listed and submit new ones online.
2. The next step is to apply for a provisional company tax identification code ( código de identificación fiscal/CIF) and register for VAT ( IVA). All businesses and self-employed people must register for VAT in Spain. Your CIF will act as your VAT number and allows you to open a bank account in the company’s name and deposit the required amount of capital, which you must do before incorporation can take place (see 3 below). You, or your accountant, can apply for a CIF at the tax office ( agencia tributaria) closest to the registered address of your business. You can apply online (www.aeat.es/agencia/direc ) but only if your Spanish is fluent. To apply for your CIF number, you must provide the following details: the name of your company (and the Negative Name Certificate from the Mercantile Registry), the registered address of the company, and identification in the form of your passport or residence permit (if you have one). The tax office will then issue you with a certificate called an Identificación Fiscal that has your CIF number on it.
3. Once you have a CIF, you can open a bank account in the company’s name and deposit the required amount of capital. The certificate from the tax office states your company name with the addition of the words en constitución, which means that your company is in the process of being incorporated. You will receive another certificate ( Certificado del Desembolso Efectuado) proving that you’ve paid this amount into your business account. You aren’t allowed to withdraw the money you’ve deposited until the company has been formally incorporated, and incorporation cannot take place unless the notario has proof that the money has been deposited, with the above certificate. The certificate is also required to obtain your permanent CIF just before you start trading (see 6 below).
4. The company constitution, or deed of incorporation, can then be prepared and signed before a notario. This act (and the registering of your business with the Mercantile Registry – see below) is what makes your company legal in Spain, so make sure you know exactly what you and any partners are signing before you get to this point. If you aren’t clear about the meaning of anything at all, get the relevant documents translated and, if necessary, raise any queries in good time. The notario’s office is the place for signing and official rubber-stamping and not for raising questions, so you must be happy with all the paperwork by the time you arrive there. Your lawyer, tax consultant or gestor should accompany you to make sure everything goes smoothly. A notario’s office is always very and can be a confusing place for foreigners, so you will need someone with you who not only is a fluent Spanish speaker but also really knows the ropes. Your professional adviser can arrange all the above for you, but you should ensure that one of you brings along the following documentation when you go to sign at the notario’s office:
- The Negative Name Certificate from the Mercantile Registry (see 1 above);
- The company’s provisional CIF (see 2 above);
- The certificate proving that you’ve deposited the required capital (see 3 above);
- Documents to prove the identity of the founding partners.
The notario will also need to see the company bylaws, which should include such details as your corporate name and business purpose, the business address, your capital and the number of shareholders. You will also have to state whether any directors or administrators will be paid and, if so, what the payment arrangements will be. Finally, you must detail your corporate fiscal year, which can be no longer than one calendar year. The fiscal year is from 1st January to 31st December, and it’s simpler if your company’s fiscal year is the same, as your accounting procedures will be even more complicated if you choose a different period. After the signing, your company bank account can be activated and the authorised signatories registered with the bank.
5. Within 30 days of signing the deed of incorporation, there are two things you must do. The first is to pay 1 per cent of the amount of capital deposited to your local tax office; this is a stamp duty (sometimes referred to as transfer tax). You will need to take along your deed of incorporation and your CIF and complete the required form. Second, you must register your company with the Mercantile Registry. For this you will again need your deed of incorporation, along with proof that you’ve paid the stamp duty and your Negative Name Certificate (see 1 above).
6. The final step in this long-winded process is to obtain your permanent CIF from the tax office and register your company for the ‘tax on economic activities’ ( Impuesto sobre Actividades Economicas – IAE) in order to be issued with a business licence. (Confusingly, the licence is also called an IAE, although it’s often referred to by its former name, a licencia fiscal.) For this you will need the certificate showing your provisional CIF, your deed of incorporation and a photocopy of your registration with the Mercantile Registry. If your annual turnover is less than €1 million, you may not be liable to pay business tax. However, you must still register for it because your business or profession must have a tax category.
If you’re running a company as opposed to being a sole trader, you must also register for corporation tax (Impuesto sobre Sociedades) after your company has been incorporated and you have all the relevant paperwork. Take it to the tax office and register your company on the Census of Taxpayers by filling in form 037. It’s advisable to get an experienced firm of accountants ( asesoria fiscal) to help you with this and complete and submit your corporation tax returns.
Below is a checklist of the various numbers and codes you should have before starting business:
- NIE
- CIF
- Social Security Number/ Código Cuenta Cotización
- Tax Category/ Epigrafe
This article is an extract from Making a Living in Spain. Click here to get a copy now.