Employer Of Record in Spain

Spain Country Facts

Spain has a history of being a trade route between north Africa and the rest of Europe and the country’s capital city is Madrid. The prime minister is the president of the government of Spain, but the prime minister recognizes the King or the Queen of Spain as the honorary monarch who represents the chief of state. The main language spoken in Spain is Spanish, but other languages such as Portuguese, Basque, Catalan, and Occitan are also spoken.

Small to mid-size businesses tend to be family owned while bigger businesses seem to follow more global trends. For Spaniards, family relationships and human interactions are more important than professional status and degree. Spaniards value deep relationships and those relationships are developed over time. The speed of business goes at the speed of relationships, which is typically slower than what people will experience in the United States of America.

The Economy

Spain has the 14th largest GDP in the world and the 5th largest in Europe. It is a member of the European Union and the World Trade Organization. Spain has benefited from large exports and low imports at the international trade level in fact exports account for about 33% of the country’s GDP. Private banks have been an important component of Spanish economic stability; they tend to be conservative in their practice rules and to collaborate with the government bank of Spain. Spain is the second biggest investor in Latin America and enjoys first class infrastructures.

Small and Medium Businesses

Small and medium size businesses account for about 63 % of total value added and about 72% of employment. The main industries for those businesses are retail and wholesale, personal services (beauty, household repair, etc.), healthcare, restaurants, entertainment and recreation, and real estate.

Starting a Business

Any person from any nationality may start a business in Spain, but European Union citizens can go through the process more quickly. Others will need to get a work permit to start a business which you can get at your country’s Spanish Embassy. Most people set up a limited liability company, but this can be time consuming. Keep in mind, the Spanish authorities demand a minimum financial requirement to establish a business, also, your personal assets and your business assets are counted as the same, which makes you personally liable. Once complete you will need to register your business name with The Mercantile Registry and open a business account in a Spanish bank with a minimum deposit of 3,000 euros. Finally, you will apply for the deed of incorporation at the Local Government Tax Authority.

Payroll

Tax advantages

Spain requires employees and employers to contribute to social security at a rate of 30% for employers and between 4.8% to 6.4% for employees. The employer also holds back the employee’s income tax; the amount differs depending on the annual gross salary from 0% to about 33%.

Renewable Energy

Spain’s renewable energy (RE) accounts for 18% of its final energy consumption. Its electricity generated by RE is 42.8%; of that percentage, 19.1% comes from wind technology, 11.1% from hydraulic energy, 5.2% from solar power, and 2% from thermal energy. Spain is the world’s 4th largest producer of wind energy. Spain also enjoys a near constant abundance of sunshine and solar technology is developing rapidly.

Business Culture

Spain has a higher level of bureaucracy than the United States, so business is slower.

• Build Relationships
  The business culture of Spain centers around personal relationships and family. Business people also like to slow the speed of business while maintaining a respected professional reputation. For them, a person’s personality may be more important than her credentials; this may also be true in the decision- making hierarchy of a business.
• Unique Meeting Practices
  During meetings, Spaniards may interrupt the conversation and show a high level of energy, but they will seldom give direct criticism at the outset.
• Greetings
  The standard greeting in the workplace is a handshake. Once people get to know each other well, they may hug as a greeting or a departure. When business people first meet, they often exchange business cards. The card should be in Spanish.

Food Culture

Spain enjoys a Mediterranean diet. Spaniards also love to eat meat. The most popular ones are lamb, pork, beef, and chicken. They also eat cured meats like the “Chorizo” sausage and the “Jamon Serrano” ham.

Since Spain enjoys long coastal areas, many enjoy different types of fish and sea foods.

In the north, many cook with lard and in the south with olive oils.

Olives are often used as appetizers. Spaniards also eat beans, lentils, rice, and potatoes.

One of their favorite dishes is called “Paella”, which is cooked with rice, meat, pepper, and spice.

Population

Spain is a country in the southwestern part of Europe. It has a population of 47.35 million and is the 6th most populated country in Europe. Native Spaniards constitute about 88% of the population. But in recent years, Spain has granted citizenship to many persons who came from Ecuador, Colombia, and Morocco. Spain has ties to Mexico and other Latin American countries due to its early colonization and immigration.

Geography

It is the fourth largest country by area in Europe and it holds territory in Europe and Africa. Spain is bordered by Portugal on the west side, by Gibraltar and Morocco on the south side, and has enclaves in Africa. Spain is also bordered by the Pyrenees mountains and the country of France on the northeast side. In fact the Portugal and Spain border is the longest uninterrupted border in Europe.

Spain also owns a series of islands, such as the Balearic Islands and the Canary Islands. There are many mountains, plains, and rivers and as such Spain enjoys a Mediterranean climate with warm and dry summers, oceanic climates on the coasts, and alpine climate in its high-altitude mountains

Madrid & Barcelona

These two cities were voted two of the best cities for start-ups in the entirety of Europe. These cities are especially attractive for business in the technology sector. Madrid is considered a cosmopolitan city and is the capital of Spain. There are plenty of events for those new to Spain to build connections. Whereas Barcelona is the second most populated city in the Iberian Peninsula, and has many major companies with high turnover rates.

General Highlights

What you need to know about employing personal in Spain:

Laws and Agencies that regulate labor relationships

The main employment laws in Spain are the Spanish Civil Code and the Spanish Workers’ Statute. Employment law in Spain is very comprehensive and protects many rights for employees both citizens and non-citizens.

Key Tax and Labor Authorities

Labor Contracts

Annual Taxable Income

There are two income taxes in Spain, Spanish personal income tax (PIT) for residents and Spanish non-residents’ income tax (NRIT), for non-residents who obtain income in Spain. There are two types of income that are taxed also, general taxable income and savings taxable income.

Saving taxable income is:

• Dividends and other income generated from holding interests in companies.
• Income generated from capitalisation transactions and life and disability income insurance.
• Interest and other income generated from transferring the taxpayer’s own capital to third parties. As an exception, when capital transferred to a related company exceeds three times the latter’s equity, the interest corresponding to the excess is taxed as general taxable income.
• Capital gains generated from transfers of assets.

And is taxed the following way:

General taxable income is for:

Capital gains not generated from transfers of assets (such as lottery prizes). Income allocations, or imputations, or attributions, as established by law.

Interest and other income generated from transferring the taxpayer’s own capital to a related company (when it exceeds three times the latter’s equity and for the part corresponding to the excess).

And is taxed the following way:

Non-Resident income tax for non-resisdents who have income that is obtained via a permanent establishment (PE) is taxed the following way. A Permanent Establishment is when an entity or person has an operational unit or site via which it constantly and habitually performs an economic activity within a certain country.

Corporate Tax Rates

According to statistics, in general it is considered that the corporate tax rate for 2022 will be 25%. Of course other rates may apply depending on the type of company.

Public Holidays

The Labor Code provides for public holidays that are observed in Ecuador:

Termination