How to Set Up an Entity in Spain

Spain gives companies direct access to a large European market, strong transport and trade links across Europe and Latin America, and increasingly business-friendly processes for incorporation and foreign investment. You can form a Spanish limited company (Sociedad Limitada, S.L.) with very low minimum capital (legal minimums can be as low as €1 for some structures), and the CIRCE one-stop online system can dramatically speed up registration when you use standard bylaws.

Benefits of having your own Spanish entity include full operational autonomy, direct hiring of local employees, control over finances, and eligibility for local tax incentives and EU-wide opportunities. Once established, a Spanish entity provides stability, credibility, and the ability to scale on your own terms – an appealing prospect for businesses planning long-term expansion in Spain.

Disclaimer: This content is for informational purposes only and does not constitute legal, tax, or financial advice. Always consult official sources before acting.

What does “opening an entity” mean in Spain?

In Spain, “opening an entity” means legally establishing a local business organization so that it can operate in the country. Typically this involves incorporating a Spanish company – most often a Sociedad de Responsabilidad Limitada (S.L.), which is a private limited company with its own legal personality that can enter contracts, hire employees, and conduct business in Spain. Alternatively, it's possible to register a branch of a foreign company (sucursal), leaving the parent directly liable for the branch’s operations. In either case, the business must be registered with Spanish authorities and obtain a tax identification number in order to be legally operational in Spain.

Entity overview in Spain

Here is a snapshot of key variables for setting up a company in Spain.

Step-by-step guide: How to open an entity in Spain

Step 1: Choose the right structure

For most foreign businesses, a Sociedad de Responsabilidad Limitada (S.L.) is ideal – it’s a private limited company that offers limited liability to shareholders and a relatively straightforward setup. The S.L. can be formed with €1 of capital, though €3,000 is recommended.

A Sociedad Anónima (S.A.), by contrast, is a public limited company suited for larger ventures, especially if you plan to seek public investment or list on a stock exchange. An S.A. requires a minimum capital of €60,000. Shares in an S.A. are typically freely transferable and can be issued publicly.

Another option is establishing a branch office of your foreign company. A branch (sucursal) is not a separate legal entity – it operates in Spain under the name and liability of the foreign parent. This means the parent company is fully liable for the branch’s obligations in Spain. Branches must still register with the Mercantile Registry and obtain a Spanish tax number, but they have no capital requirement.

Step 2: Verify business name availability

Choose a unique name for your company and reserve it with the Spanish commercial registry. Spain requires a certificado negativo de denominación social, a “negative name certificate”, to ensure your company name isn’t already taken. You can search and reserve names through the Central Mercantile Register (Registro Mercantil Central). Names must not be similar to existing entities and must include an appropriate legal form suffix (e.g., “S.L.” for a limited company).

Step 3: Prepare incorporation documents

Next, gather and prepare all required incorporation documents. In Spain, many of these will need to be in Spanish (with official translations if originals are in another language) and some must be notarized. Key documents include:

• Founder identification and tax numbers: Valid identification (passport) for all individual founders and directors, along with a Spanish tax identification number for each. Foreign individuals must obtain a NIE (Número de Identidad de Extranjero), and foreign companies that will be shareholders need a NIF (Número de Identificación Fiscal). All directors (administrators) will need a NIE/NIF, as they will need it to act on behalf of the company.
• Name certificate: The Certificación Negativa de Denominación Social from the Central Mercantile Register.
• Constitution documents (bylaws and deeds): Draft the Articles of Association (Estatutos Sociales) of the company, which outline the company’s purpose, registered address in Spain, share capital, management structure, and governance rules. You will also prepare the Deed of Incorporation (Escritura) – essentially a notarial instrument that includes the company’s details and the founding shareholders’ agreement to form the company. Standard bylaw templates are available, but it’s recommended to have a legal professional tailor them to your needs. These documents must be in Spanish.
• Proof of capital contribution: Typically a bank certificate from a Spanish bank stating that the capital amount has been deposited in a special account opened in the company’s name in formation.
• Additional documents for foreign shareholders: If a shareholder of the new company is a foreign legal entity (such as a parent company), you must provide proof of that entity’s existence and good standing. This usually means an apostilled copy of the parent company’s Certificate of Incorporation and bylaws, along with a sworn translation into Spanish. These documents establish that the foreign company is duly registered in its home country and has authorized the investment in Spain. Also, a resolution from the parent company authorizing the creation of the Spanish entity and appointing a representative for the incorporation may be needed.

Step 4: Register with the Mercantile Authority

Now it’s time to formally incorporate the company by executing the public deed and registering it. This involves a notary public and the Mercantile Registry:

Sign the incorporation deed: All founders (or their appointed representatives via power of attorney) must appear before a Spanish notary to sign the Deed of Incorporation. At this appointment, the notary will verify the identity of the parties and the contents of the deed. You will submit the name certificate, the bylaws, proof of capital deposit, and NIE/NIF documents to the notary. The notary then issues the Escritura Pública (public deed), officially forming the company in the eyes of Spanish law.

File for registration: The notary will submit the notarized deed to the Registro Mercantil (Commercial Registry) of the province where the company’s registered office is located. This filing can be done electronically by the notary. The Mercantile Registry examines the deed and accompanying documents to ensure they comply with the law. Once the registry accepts the filing, your company is officially registered and acquires full legal personality. You will receive an extract (certificación registral) or a simple note as proof of registration.

Step 5: Register for tax and social security

• Tax registration (Agencia Tributaria): File Modelo 036 to activate the company’s tax status, declare the company’s business activity, and register for applicable taxes. You’ll declare the start of business operations (alta censal) and obtain any specific tax identification like a VAT number if needed. Spain’s corporate tax (Impuesto de Sociedades) applies to resident companies on worldwide income, so your company will be on record to file annual corporate tax returns. The Tax Agency (Agencia Estatal de Administración Tributaria or AEAT) will issue a certificate of your tax identification and status. Make sure you also register for Economic Activities Tax (IAE) if applicable – most new or small companies are exempt, but registration (or exemption notification) is needed for formality.
• Social Security registration: If you plan to hire employees in Spain, you must register as an employer with the Tesorería General de la Seguridad Social (TGSS) to obtain a Código de Cuenta de Cotización (CCC), which is the employer contribution account code. In addition, each employee you hire will need to be affiliated with Social Security and assigned to your company’s CCC number. At this stage.
• Municipal licenses: Obtain any local municipal licenses necessary for your business (for example, an opening license if you have a physical premises, or any sector-specific permit). Notify the regional labor authority of the workplace opening for workplace safety regulations as needed.

Step 6: Open a corporate bank account

Operating in Spain will require a local euro-denominated business bank account to handle payments, payroll, and taxes. If you already opened a special account to deposit share capital, you will usually convert that into the company’s regular bank account after incorporation. Spanish banks will require your company’s incorporation documents, identification for the account signatories (passports, NIEs for foreigners), and details on the company’s authorized representatives. Note that banks have stringent Know-Your-Customer (KYC) and anti-money laundering checks. A representative of the company (usually a director) might need to meet the bank in person or provide certified documents. If all shareholders and directors are foreign, banks may ask for extra documentation (such as proof of the business activity, overseas company records, etc.).

Practically, having a Spanish bank account is essential. The company will use it to pay salaries, suppliers, and taxes. For example, many taxes (VAT, social security contributions, etc.) are paid via direct debit or bank transfer from a Spanish account. Likewise, employees in Spain expect salary payments to a Spanish bank account.

Step 7: Set up payroll and employment compliance

If you will be hiring employees in Spain, your newly formed entity needs to set up proper payroll and HR compliance from day one:

• Register with Social Security as an employer. You must also register all employees with Social Security before they start work (usually done via an online system or through your payroll provider, notifying the Seguridad Social of the new hire’s details and start date).
• Provide each employee with a compliant employment contract. Spanish labor law is quite specific about contract terms – there are standard contracts for indefinite (permanent) employment, temporary contracts for specific project or time period, training contracts, etc., each with required clauses. Contracts should be written in Spanish (or bilingual with Spanish as one language) and must comply with at least the minimum requirements of the Spanish Workers’ Statute and any applicable collective bargaining agreement (convenio colectivo) for your industry. It’s common to file a copy of the signed employment contract with the public employment service, especially for certain types of contracts – your HR team or payroll provider typically handles this submission.
• Calculate monthly gross salaries, deductions for income tax (IRPF withholding) and employee social security, and the employer’s social security contributions. Spain’s payroll frequency is usually monthly, with payslips provided each month.
• Remit withheld income taxes to the Tax Agency and the social security contributions to the Social Security Treasury on a monthly basis
• Conduct risk assessments and provide safety training relevant to the job, often through an external prevention service.
• Handle personal data you collect in accordance with GDPR data protection regulations.

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Post-registration obligations

After incorporation, companies in Spain must stay compliant with various ongoing obligations in corporate governance, taxation, and labor law. Typical requirements include:

• Tax and financial reporting: File regular tax returns with the Agencia Estatal de Administración Tributaria (AEAT) (Spanish State Tax Agency) for all applicable taxes. Companies must also prepare and file annual financial statements (balance sheet, profit and loss, etc.) and a management report, which are deposited with the Mercantile Registry each year. Spanish GAAP (Plan General Contable) is the standard for accounting.
• Corporate registers: Maintain up-to-date records of the company’s directors, shareholders, and beneficial owners. Any changes – such as a new director appointment, a transfer of shares, or a change of registered address – must be formalized by a notary and reported to the Mercantile Registry. Spain also requires that companies keep an internal shareholders’ ledger and minutes books for shareholder and board meetings. Significant ownership changes may trigger an update to the beneficial ownership registry (Registro de Titularidades Reales) through the notary/registry system introduced by anti-money laundering laws.
• Compliance tracking: Proactively monitor all tax, legal, and filing deadlines using a compliance calendar or automated reminders.
• Licenses and renewals: Renew any business licenses, permits, or registrations as required by local laws. General business operating licenses (licencia de apertura) from the municipality may need to be kept active
• Recordkeeping: Retain all relevant company records for the minimum periods defined by law. As a general rule, keep accounting books, invoices, contracts, and correspondence for 6 years.
• Employment law compliance: Adhere to all Spanish labor, social security, and data protection regulations on an ongoing basis. Company policies on disciplinary procedures, workplace privacy, or anti-harassment should be consistent with Spanish law. It’s also crucial to stay updated on changes in employment law (for instance, recent reforms in Spain have aimed to reduce misuse of temporary contracts and increase penalties for non-compliance).

Taxes and financial considerations

• Corporate income tax: Spain’s corporate income tax (CIT) rate is a flat 25% on net profits. New small companies may enjoy a reduced rate of 15% for the first two profitable years. Companies generally make advance payments (installments) in April, October, and December each year, calculated based on either the prior year’s tax or current year profits
• VAT (IVA): Spain imposes a Value Added Tax (VAT) on most goods and services. The standard VAT rate is 21%.
• Payroll and social contributions: If your entity has employees, you must handle payroll taxes and social security contributions. Employers in Spain contribute approximately 29%–31% of each employee’s gross salary to social security programs, covering common contingencies (healthcare, maternity, disability), unemployment insurance, and other funds. Employees contribute about 6.35% of their gross wages, which the employer withholds from their paycheck. Note that Spain has a mandatory 13th month pay.
• Accounting standards: Spanish companies are required to maintain their books in accordance with Spanish General Accounting Plan (Plan General de Contabilidad) – which is Spain’s local GAAP.

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Expand internationally with Deel

Whether you’re hiring through an EOR or establishing your own local entity, Deel’s all-in-one platform gives you everything you need to expand into Spain—quickly, compliantly, and with confidence. From market entry to ongoing operations, Deel helps you hire, onboard, and manage teams seamlessly from day one.

With Deel, you can:

• Test new regions using Deel’s local entities through our Employer of Record service—hire employees compliantly, delegate payroll and taxes, and access localized employment contracts.
• Open entities with Deel Entity Setup, where our team manages everything—from incorporation and tax registration to coordination with local experts.
• Centralize your compliance and records with Deel Entity Management, including automated filings, calendar reminders, and visibility across all entities.
• Integrate with Deel Payroll and Deel HR for compliant payments, benefits, and workforce oversight—all in one platform.

For companies transitioning from the EOR model to owned entities, Deel ensures a smooth handover and consistent compliance every step of the way. Enter new markets, onboard talent, and manage your global workforce—all through one unified platform.

FAQs

How long does it take to open an entity in Spain?
On average about 3–6 weeks. Spain’s electronic incorporation system can register a new S.L. in as fast as a few days.

What is the minimum capital required?
For a limited company (S.L.), the minimum share capital is €1 by law.

Can foreign companies own 100% of an entity in Spain?
Yes. Spain allows 100% foreign ownership of Spanish companies in almost all sectors

Do I need a local director or representative?
No, Spain does not require a local resident director for most companies. A foreign person can serve as the sole director or part of the board. The key requirement is that any foreign director must obtain a Spanish NIE (foreigner identification number) for tax and legal purposes.

How much does it cost to register an entity?
The government fees for incorporating an S.L. are relatively low – typically on the order of €700 to €1,400 in total. Find out the setup cost for your situation with our Entity Setup Calculator.

Can I hire employees before the entity is fully registered?
Typically, no. You must have a legal entity and be registered as an employer in Spain before you can hire employees on your own. However, Deel’s Employer of Record (EOR) lets you hire and pay talent immediately while your entity setup is in progress.

Can Deel help me open an entity in Spain?
Yes. Deel Entity Setup manages the end-to-end process — from registration to payroll compliance — in over 100 countries. Deel’s local experts handle documentation, filings, and legal requirements on your behalf.

Does Deel offer ongoing compliance and payroll support?
Yes. Deel offers both managed services and self-service tools to help you stay compliant. If you’re using Deel Entity Management, Maintenance, EOR, or Payroll, our team handles payroll, benefits, filings, and compliance obligations on your behalf. For teams managing their own entities, Deel Compliance Hub makes staying compliant simple by providing real-time regulatory updates, risk alerts, and workforce insights across 150+ countries. Proactively manage compliance with our Compliance Monitor, Workforce Insights, and an AI-powered Worker Classifier, staying ahead of changing employment laws.

Can I switch from Deel EOR to my own entity later?
Yes. Deel supports seamless transitions when you’re ready.