As with operating a business in any country, specific laws and regulations govern corporations in Spain. In this instalment, we will take a look at the political environment, the legal environment, and the business laws that apply to companies operating in Spain. The information below will specifically outline the different political parties prevalent in the country, different judicial processes, and a step-by-step guide to opening a corporation.
Business Law
In 2015, Spain made starting a business easier by introducing an electronic system linking several public agencies. This act simplified business registration. One year before in 2014, the country eliminated the requirements to obtain a municipal license before starting operations, speeding up the process of establishing within the country. The country also improved the efficiency of the commercial registry. In 2012 Spain reduced the cost of starting a business. Naturally, Expatriates in Spain would have to adapt to the laws in the country. Working in Spain will show you that the business environment reflects the attitude of many Spanish people themselves: polite, easygoing, and, sometimes, a bit chaotic. In regards to the business customs, punctuality is expected, closing deals and settling upon negotiations are not usually done quickly (11).
Starting a business on average requires 9.4 procedures, 17 days, 4.2% of income per capita, and a paid-in minimum capital of 13.8% of income per capita (12).
Based on the aggregate rank across the 4 areas analyzed in the 19 regions and cities, it is easier to do business in La Rioja and the Community of Madrid. It is also easier to start a business in Andalusia due to the absence of municipal fees and the high use of an online startup platform known as Business Start-Up Information Center and Network. Obtaining a construction permit in La Rioja is easier than other parts of the country as the construction work license is granted speedily and at a lower cost. There are also few pre-construction requirements in this area. It is easier to obtain electricity in Catalonia because of the simplified authorization process for electrical installations and because it is no longer necessary to obtain project approval from professional associations. Property registration is easier in Ceuta and Melilla, where the tax on property transfers is lowest, given their special tax regimes (13).
In order to acquire legal status and start any economic activity in Spain, the following procedures need to be followed (14):
- Registration of the company name: you must apply for a certificate issued by the Central
Commercial Registry, confirming that the name you intend to use is not already registered. A Spanish company can be registered within 3 weeks with a low minimum paid up share capital of €3,000
- Deposit the capital into a bank account in the company’s name: the amount of capital will depend upon the type of corporation you intend to set up
- File the Single Electronic Document (DUE) and make an appointment with a notary
- Deed of incorporation: The founding partners, when applicable, shall sign the constitution deed for the business before a notary in Spain. The name certification, the C.I.F. and bank receipt justifying that the deposit has been done will be required.
- Payment of the municipal tax urban services: this is paid at the tax office where the company is incorporated. The amount to pay is 1% of the company share.
- Registering the company at the corporate registry: this is done once the transfer tax has been paid.
- A formal Declaration: this is to be filed before the Spanish tax office, recognizing the start of the activities of the company.
It is necessary that your company acquires the “libro de matrícula“. This book will log personnel registration as well as the visits that Labour Inspectors (Inspección de trabajo) pay to the work center. Depending on the kind of company, tax books may be required. Declaration of foreign investments in Spain. Foreign investments assigned to set up a company in Spain shall be declared to the Spanish Investments Register (Registro de Inversiones) of the Tax and Economy Ministry (15).
Spain is the second largest recipient of FDI and the third largest investor in the European Union. The government has a positive view of FDI. The Spanish government applies the principle of free establishment and non-discrimination. Foreign investors can operate any type of business and under the same conditions as a local investor (16). Spanish law 16 allows 100% foreign ownership and guarantees free capital transfers. Thus, FDI is encouraged in Spain (17).
Political Environment
The political system in Spain is very unique in comparison to other countries. The country is run by a constitutional monarchy founded on a parliamentary democracy. There are 17 communitieswithin the country that have independence legislatively, executively and financially because thecontrol is very decentralized. The King is appointed hereditarily and acts as the Head of the State who controls the military. He holds a more traditional role for the country. The Prime Minister, the leader of the political party that receives the majority of the votes, is elected for a 4- year term and he is the governmental head of the country. The parliament consists of two houses: The Senate, which holds 264 seats and the Congress of Deputies that can seat up to 400 deputies. Within the country, there are six main political parties: People’s Party (PP), Spanish Socialist Workers Party (PSOE), Podemos (translates to “We Can”), Convergence and Union (CiU), United Left (IU) and Union, Progress and Democracy (UPyD). Currently, the Spanish Prime Minister is Mariano Rajoy and he is the leader of the People’s Party. He has been in power since December of 2011 implementing centre-right politics. The current King is Felipe VI who has had the throne since June 19th 2014 (1).
Corruption in Spain is a very relevant topic for politicians and businesses in the country. Spain is one of the most corrupt countries in European Union. According to statistics, 63% of the population is affected by corruption in their daily lives (2). Some major Spanish politicians have been involved in many corruption scandals. There are two new political parties arising in the country. The far-left wing Podemos and the centre Citizens (3).
Religion has always played a major role in Spanish history. The political environment has always been dependent on religion seeing as a large majority of the country is Roman Catholic. However, the concept of secularization has also been very evident since the end of the eighteenth century. This is the concept that religion has less of a social and cultural impact over time. Because of this, Spain was one of the first countries to implement Women’s rights and divorce laws. Presently in Spain, there is a dispute between the Catholic Church and government to legalize same sex marriage. To a certain extent, this demonstrates that religion is still an important factor in Spain (4).
Some important regulations and laws in Spain are the labour laws. The constitution of 1978 states that anyone is free to form a union and has the right to strike. The monthly minimum wage for workers is approximately $620 by working a maximum of 40 hours a week. The Ministry of Labour and Social Affairs oblige the minimum age for employment is 16 years old (5).
Political Environment: Interesting Facts
- Dictator General Franco ran Spain until his death in 1975. From there the monarchy was restored (6).
- The two major political parties that haven been in power for the past 32 years are the People’s Party (PP) and the Spanish Socialist Workers Party (PSOE) maintaining over 70% of the votes (7).
Spanish Parliament Building
Legal Environment
In Spain, the legal system follows a civil structure code. This provides separation between public and private sectors, which are sub-divided into sections covering constitutional, criminal, administrative, tax, commercial, labour, and procedural matters. The legal system also follows a hierarchical flow of appeals. Spain is divided “territorially, for judicial purposes, into municipalities, districts, provinces and autonomous communities” (8).
It is no secret that Spain has come to be one of the most corrupt countries in the European Union. Over the past few years over half of the Spanish people have been exposed to corruption in their daily lives. This is due to the fact that the political system in Spain is very much corrupt and unjust at times. Despite the facts that Spain’s government can be seen as less stable the “Legislation establishes mechanisms to solve disputes if they arise. The judicial system is open and transparent, although sometimes slow-moving.” (9) This means that Spanish legal system is independent of the executive; judges alone are in charge of prosecution and criminal investigations. Although if need be the appeals are successive to a higher court, the final court of justice being the European Court of Justice. It is important to be aware of the political corruption between politicians and businesses. While it is quite common for companies to engage in business projects with politicians in Spain, it does not mean that potential legal consequences will be less for either party involved in the dealings. In 2010, the Spanish criminal code was amended to allow corporations to be held criminally liable for their actions. Laws like these have helped to deal with acts of corruption.
The business law in Spain is accommodating to foreign investors because they want to stimulate the economic growth. “The European Union provides incentives primarily to projects that focus on economically depressed regions or that benefit the European Union as a whole” (10). The laws in Spain are modernized for commercial laws and regulations because of it’s entrance into the EU in 1986.Due to the fact that Spain is a part of the EU it is more common than not that foreign companies would get a fair trial if it were to arise.
It is important to note that the Catholic Church has a large influence on the people of Spain. However, in the early 20th century there were uprisings that were anti-clerical and very liberal which created more separation between the church and the State. Although the relation between law and the church may be more separated than other nations it could become conflicting ethically for an expatriate if he/she did not share those beliefs.
Supreme Court of Spain
Works Cited
[3] “Political Stability.” The Economist. The Economist Intelligence Unit. Web. Retreived 30 Oct. 2015 from http://country.eiu.com.proxy.library.carleton.ca/article.aspx?articleid=883590072&Country=Germany&topic=Politics&subtopic=Forecast&subsubtopic=Political+stability
[2] “Germany: Government.” Global Edge. Michigan State University. Web. Retrieved 30 Oct. 2015 from http://globaledge.msu.edu/countries/germany/government
[5] Furstenau, Marcel. “How Corrupt Is German Politics?” DW. Deutsche Welle, 6 Aug. 2012. Web. Retrieved 30 Oct. 2015 from http://www.dw.com/en/how-corrupt-is-german-politics/a-16000890-1
[7] “Germany’s Not-Quite-So-Secular Democracy.” DW. Deutsche Welle, 28 Mar. 2006. Web. Retrieved 30 Oct. 2015 from http://www.dw.com/en/germanys-not-quite-so-secular-democracy/a-1942280
[6] “Influence of Established Religion Still Going Strong in Germany.” Euroathiest. WordPress, 12 Oct. 2012. Web. Retrieved 30 Oct. 2015 from https://euroatheist.wordpress.com/2012/10/12/influence-of-established-religion-still-going-strong-in-germany/
[14] Fleming, Sandra. “German Labour Law and Work Contracts.” Expatica. Expatica Communications. Web. Retreived 30 Oct. 2015 from http://www.expatica.com/de/employment/German-labour-law-and-work-contracts-in-Germany_104474.html
[4] Huggler, Justin. “Angela Merkel’s Conservatives Suffer Worst Election Result since WWII.” The Telegraph. Telegraph Media Group, 15 Feb. 2015. Web. Retrieved 30 Oct. 2015 from http://www.telegraph.co.uk/news/worldnews/europe/germany/11414713/Angela-Merkels-conservatives-suffer-worst-election-result-since-WWII.html
[1] Top ten weird German rules and laws. (n.d.). Retrieved November 1, 2015. http://www.thelocal.de/galleries/lifestyle/top-ten-weird-german-laws-the-local-list/4
[10] Foreign Businesses in Germany. (n.d.). Retrieved November 1, 2015. http://www.gtai.de/GTAI/Navigation/EN/Invest/Investment-guide/The-legal-framework/foreign-businesses-in-germany.html
[11] Germany Working (Employment) Visa – Germany VISA. (n.d.). Retrieved November 1, 2015. http://www.germany-visa.org/work-employment-visa/
[12] Germany Working (Business) Visa – Germany VISA. (n.d.). Retrieved November 1, 2015. http://www.germany-visa.org/business-visa/)
[13] ExpatBriefing.com. (n.d.). Retrieved November 1, 2015. http://www.expatbriefing.com/country/germany/immigration/working-for-expats-in-germany.php
[8] Germany. (n.d.). Retrieved November 1, 2015.https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html
[9] German Business and Commercial Laws: Guide to Translations into English and Select Auxiliary Sources. (n.d.). Retrieved November 1, 2015. http://www.nyulawglobal.org/globalex/Germany_Business.html
[15] Corruption by Country / Territory. (n.d.). Retrieved November 1, 2015. http://www.transparency.org/country/#DEU
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