The changes brought about by Brexit will mean that British expats in Spain will have to make some adjustments, particularly if they’re operating a business. With over 300,000 British expats in Spain, many people have been concerned about what the changes will mean for them, and recent protests have been calling for a referendum. If you’re living in Spain or thinking of moving to Spain, here’s your guide to starting a business there in the wake of Brexit.
Moving to and Living in Spain after Brexit: Everything you Need to Know
The Spanish government’s Royal Decree will mean that British expats in Spain will be protected—in the case of a no-deal Brexit, British expats in Spain will still be considered legal residents for the next 21 months, even if they don’t have documentation. If there is a deal, UK nationals will be able to register as residents under the current rules before the end of the implementation period. British expats in Spain have been advised to register as a resident in Spain, register for health care in Spain, validate their passports, and get a Spanish driver’s license. People who are currently unable to register as a resident in Spain are advised to make sure they have proof of having lived in Spain before Brexit. After Brexit, Brits moving to Spain will have to meet Spanish immigration requirements—if you have a business in Spain, it will also mean having to register your business in Spain as well, and will have implications for charging VAT, as you will no longer be legally treated as if you were a local business.
Business Formation in Spain
In addition to needing to register their businesses in Spain, in the event of a no-deal Brexit, British expats will face more restrictions on doing business with EEA countries. If you are operating a UK-based business in Spain and you’re worried about the implications of Brexit, it’s advisable to seek out a lawyer for advice, and look at government websites or contact the government for more information. There may be some new regulations specific to your line of work, so make sure to look at advice geared towards your industry. If you offer a service that requires a professional credential, you may need to get your credential recognized in Spain as well—for example, if you’re a lawyer, your British credentials will eventually need Spanish recognition after Brexit. Companies may also need to take steps to ensure that personal data shared between UK businesses and EEA companies is in compliance with the General Data Protection Regulation. You’ll need a valid work permit and a foreigner’s tax identification number (an NIE number) or a CIF number if your company is a limited corporation (more on these numbers later).
Types of Businesses in Spain
There are ten types of legal entities for companies in Spain, each with different legal responsibilities. The simplest type of company to set up is a sole trader company or partnership, since they don’t require an initial investment and there won’t be as much admin work involved in setting it up. It’s also possible to set up as a freelance professional, which is a similarly simple way to set up your business if you primarily do freelance work. The sociedad limitada is the most common form of limited company in Spain, although there are many other types as well. While owners of this type of business will have more administrative obligations, such as filing a yearly corporation tax return and VAT returns, along with other deductions, if you plan to employ a lot of staff or have a larger company, this might be your legal entity of choice.
How to Register your Business in Spain
The steps involved in registering your business will vary depending on what type of business you want to register as. In any case, you’ll first need to register for taxes by visiting your local tax office and filling out paperwork—once this is done, you’ll get a tax number for your business that you should keep safe. Foreigners will receive a tax number known as an NIE number. If you’re starting a limited company, you’ll need a public deed of incorporation, which should be stamped by the Mercantile Registry. Confirmation will take approximately 15 days, after which you’ll need to go to a tax office to get your CIF number. While an NIE number is sufficient for sole proprietors or freelancers, the CIF number is a tax requirement for limited corporations, and also serves as your VAT number.
Opening a Bank Account
Opening a bank account in Spain is a wise idea if you intend to stay, since having a foreign account can get expensive, particularly if you’re doing business in Spain. Basic accounts are usually low-cost, but since it’s advisable to set up a business account as well (and necessary if you’re a limited company), it’s important to do your research and compare the fee structures of each bank. Business accounts can have some hidden fees, particularly for larger businesses—so it’s better to know about them upfront than to be surprised by them later. Santander is Spain’s biggest bank, but you can also open an account through an international bank, such as Barclays, Citibank, HSBC, or ING, all of which have branches in Spain. One advantage of international banks is that they are more likely to offer English-speaking services if you’re not confident enough in your Spanish to do banking in the language.
When you’re opening a bank account, it’s best to do it in person—if you need someone who speaks English, ask for an appointment in English, or take someone who can translate. You’ll often need to provide a business address in addition to the standard personal information. For a limited company, you’ll need official documentation of your company along with other requirements. Make sure to check with the bank about what you need to bring them before you go in to open an account, to avoid the hassle of having to make a second appointment.
Anyone living in Spain longer than six months needs to pay Spanish taxes. Even if your clients are overseas, if you’re self-employed, you still need to pay taxes on the income you make while living in Spain. As mentioned above, you need an NIE number—it’s your tax identification number in Spain and tracks all your financial activities involving the Spanish tax office. As in Britain, your business expenses will be factored into your taxable income, so make sure you keep track of them! If you’re a freelancer or self-employed person working in Spain, you have to declare your income every three months in addition to filing your annual return.
Methods for paying taxes can vary depending on what type of business you have. For example, if you’re registered as a freelancer, then your clients are supposed to retain 18% of your invoices and forward it on as tax payments that become tax credits on your return. Whichever type of company you choose, you’ll have to file quarterly returns in addition to annual tax returns and keep invoices and receipts so you can count your expenses against your taxes.
If you charge VAT to EU customers, you won’t be able to use the UK’s VAT Mini One Stop Shop (MOSS) to pay VAT due in EU member states. Final returns for the system will be for the period ending on December 31, 2019, and will need to be submitted by January 20, 2020. However, all of your post-Brexit sales to Spanish customers should be recorded either in a Spanish VAT system or an EU VAT MOSS system. You’ll need to register for VAT individually for each EU member state you sell digital services to if you choose not to use EU VAT MOSS. Registration is due by the 10th day of the month after your first sale to an EU customer—however, you won’t be able to register before Brexit.
If you’re planning to employ staff in Spain, it’s important to look into employment rules, since they’re highly regulated. The standard workweek is 40 hours, and are usually paid monthly, with one extra payment in July and December (14 payments per year). Unless you have a contract, a worker can’t work more than 9 hours per day, and those under 18 can only work 8 hours per day and must get a parent’s approval to work unless they are legally emancipated. Workers under 18 are also can’t work nights or perform work that’s distressing or dangerous. Spanish people are entitled to 30 calendar holiday days, which can’t be replaced with pay. Holiday schedules are fixed, and workers must be made aware of them two months before they start. Additionally, workers in Spain are entitled to a day and a half of rest time per week, with the minimum for under-18 workers set at two consecutive days per week. Although these are some examples of how employment in Spain might work a little differently than you’re used to, it’s not an exhaustive list—so it’s important to do your research about what employees are entitled to, to avoid any legal trouble.
Business Culture in Spain
Although there’s a stereotype about a relaxed approach to business in Spain, business culture is moving away from siestas. Long lunches are still fairly standard, usually involving a trip to a restaurant and socializing with coworkers, and Spanish workers are used to at least a few coffee breaks in addition to a long lunch. This does tend to make the workday longer, and some Spanish employers are shortening lunch breaks to help employees leave earlier—but it’s not uncommon to have a two-hour lunch and leave the office at around 8pm. A strict hierarchy among employees is also not uncommon, although this is changing as younger managers enter the workforce. Business meetings and negotiations are usually less formal, and often deadlines and start times are more relaxed, although new workers in Spain shouldn’t count on this to be true across the board. However, often office dress is more formal, with classic business attire being standard. When in doubt, ask someone you trust, particularly if they’ve travelled and worked in other countries as well.
Where to Get Help and Other Information
This is only a brief guide to give you an idea of the types of things you’ll need to be aware of if you’re a British expat in Spain or thinking of moving to Spain post-Brexit. It’s advisable, though, to make sure you’ve taken a more in-depth look at the topics that will affect you and your business. Here are a few websites to help you get started:
- For general information about British expats in Spain following Brexit, take a look at the Eurocitizens 2020 blog. The UK government’s guide to living in Spain as a British Expat can be found here; you can sign up for email alerts to give you the most recent information about the agreements and changes.
- For more information about business types, you can take a look at the Spanish government’s website.
- You can find out more information about registering for VAT MOSS in EU member states at the European Commission website.
- In addition to searching online, remember that you can always contact the British Embassy in Spain for more information, or call the Spanish government for more information. Keeping on top of the changes you’ll need to make will help you avoid any unexpected roadblocks in these difficult political times.