Editor’s note: This article was first published in February 2012. It describes company formation in Spain as it was then: €3,006 minimum share capital, months of paperwork and a self-employed contribution of at least €180–200 a month. Spain has since added online incorporation and cut the minimum capital for a limited company, so these figures no longer apply.
Take this as constructive criticism of the difficulties an entrepreneur in Spain faces when formally setting up a company. People have often joked that if Steve Jobs had been Spanish, Apple would never have got off the ground. Even Mark Zuckerberg (Facebook) would have got lost among all the red tape and the endless queues at Spain’s various offices and agencies while trying to set up his company.
We call for entrepreneurs, and these days we know how important e-commerce is, since setting up an internet company requires little investment and few expenses in general. But do we really make things easy for entrepreneurs in our country? The answer is a resounding NO, and that has to change if we want to stop Spanish entrepreneurs from registering their startups in another country.
When entrepreneurs set up an internet company, they do so knowing it’s the future: a future of convenience for consumers, who can buy a product or service from the comfort of their own home. And yet the procedure for setting up an internet company is exactly the same as for any other kind of company.
Borja Prieto, author of Desencadenado, explained in an article the differences between setting up a company in Spain and doing so in another European Union country, for example in London. I already knew that setting up a company outside Spain was much quicker, but I was pleasantly surprised to learn that you could set up a company in 3 hours for €71.
The truth is that if we decide to set up a simple online shop in Spain, we have to register our data file with the Data Protection Agency (Agencia de Protección de Datos) and go through the Companies Register (Registro Mercantil). To incorporate the company we have to put up €3,006 in capital (this money has to be paid in, even if it can be withdrawn later), go to an adviser to draw up the deeds and then to a notary, go to the tax office to get a tax ID number (NIF), register as self-employed (autónomo), and so on.
This process can take months, depending on how quickly and seriously we are dealt with at the relevant agencies. Once we have wasted that valuable time going from office to office and from form to form, and have already parted with some of our savings, our company can start operating.
At that point, your shop has to sell no matter what, because even if you don’t sell anything, every month you’ll have to pay your self-employed social security contribution (at least €180–200), file quarterly personal income tax (IRPF) withholdings, and pay corporate income tax even if your annual profit was €50.
In short: pay, pay and pay, on top of wasting time filing the required paperwork with the tax office. Either that, or hire an accountancy firm to take care of it. In other words, before you sell your first product, you’ll probably already have paid out the profit you were going to make in a quarter or half-year (depending on how quickly the business gets going).
Borja Prieto explains that setting up a British company is a matter of three hours: all you have to do is turn on your computer, choose an online company formation agent, choose a domain for the company and pay the €71.22 fee by credit card, which includes a .co.uk domain for two years and a Google AdWords voucher. You fill in 4 or 5 online forms with your company’s details: owners, director, articles of association, etc.
Once that’s done, we go for a coffee. When we come back, there will be an email telling us that our company has been created and is ready to go. Other advantages the author points out: you don’t need to file quarterly income tax returns if you have no employees, you don’t have to pay anything (apart from the €71.22 already paid) because you don’t have to register as self-employed, and you don’t have to set foot in an accountant’s office, a notary or a government agency, or queue in any office.
That’s why a young entrepreneur in London can register 115 internet companies for the same money and time it would take a Spaniard to set up an online shop. Welcome to Spain.
Featured image: Zarateman, CC0 1.0, via Wikimedia Commons.
