Spain - Market Entry & Business Opportunities

Spain, with its capital in Madrid, is a diverse country located in southwestern Europe on the Iberian Peninsula. It has a population of approximately 46.8 million people, predominantly Spanish, with regional identities contributing to its multicultural society. The official language is Spanish, and the country uses the Euro as its currency. With a land area of around 505,990 square kilometres, Spain benefits from its strategic location, bordered by Portugal and France, and surrounded by the Atlantic Ocean and the Mediterranean Sea.

Economic Overview

The Spanish economy experienced strong growth in 2022, with a growth rate of 5.5%, driven by increased private consumption and the recovery of the tourism sector. However, price pressures and tightening financial conditions slowed down growth in the latter part of the year. In 2023, the economy is expected to expand by 1.9%, supported by the Recovery and Resilience Plan, resilient labour market, and increased investment. While there are downside risks from tightening financial conditions and high levels of debt, the outlook is positive, with projected acceleration in GDP growth in 2024 driven by domestic demand and increased investment.

Market Overview

Spain, the 14th largest economy globally, has implemented a significant relief package of 20.5% of GDP to address the impact of the COVID-19 pandemic. Despite challenges, its economic growth remains strong compared to other advanced economies. Spain and Hong Kong have a close trading and investment relationship, with Spain being Hong Kong's sixth-largest trading partner in the EU, and vice versa.

Bilateral Relations between India-Spain

• Following a significant interval of 28 years, Prime Minister Shri Narendra Modi embarked on an official bilateral visit to Spain on May 30, 2017.
• Former External Affairs Minister, Ms. Sushma Swaraj, undertook a visit to Spain from February 18 to 19, 2019. Prior to her visit, Spanish Foreign Minister Mr. Josep Borrell had travelled to India on January 8-9, 2019, to participate in the Raisina Dialogue.
• Prior to the commencement of the India Spain Business Roundtable on April 22, 2021, Commerce and Industries Minister of India and Spanish Trade Minister Ms. Reyes Maroto held a brief virtual bilateral meeting.
• During his initial official visit as the Crown Prince, His Majesty Felipe VI, the current King, visited India from November 10 to 12, 2009. As part of this visit, he had the honor of inaugurating the Cervantes Institute in New Delhi.

Taxation and Subsidies offered by Spain

In Spain, there are two types of taxation systems: direct taxes and indirect taxes. There are five types of Direct Taxes:

• Personal Income Tax for Residents: Residents in Spain are subject to Personal Income Tax, which applies to individuals who have resided in the country for at least 183 days and is based on worldwide income.
• Non-Resident Income Tax: Non-residents in Spain are taxed on accrued income without a permanent establishment, with rates of 24% for general income, 19% for EU residents, and varying rates for pensions, capital gains, interest, dividends, and royalties.
• Corporate Tax: Spanish corporate tax applies to companies incorporated, registered, or with their head office in Spain, including those with core business activities or significant assets in tax havens or jurisdictions without taxes.
• Inheritance and Gift Tax: Spanish residents and non-residents may be subject to inheritance and gift tax on acquired assets, with the specific liability based on factors like previous wealth and the relationship to the donor/deceased.
• Wealth Tax: Wealth tax in Spain applies to worldwide assets of residents and assets within Spain for non-residents, with certain exemptions up to €300,000, including antiques and historical heritage.

There are three types of Indirect Taxes –

• Value Added Tax (VAT): Spain's standard VAT rate is 21%, with reduced rates of 10% for certain goods and services and 4% for basic necessities. Some items may be exempt from VAT, and the Canary Islands have a reduced rate of 7%.
• Special Taxes: Certain income, including prizes from games and lotteries, is subject to a special tax rate of 20%. A tax exemption of up to €40,000 applies to games and lotteries organized in Spain.
• Insurance Premium Tax: Spain's insurance premium tax varies by region, with a general rate of 6%. However, certain insurance classes such as life insurance and agricultural risks are exempt from this tax.

Financing Business in Spain

There are several ways of financing a business in Spain. Some of the options are:

• Personal Financing: Use personal savings or borrow from friends and family for small businesses.
• Loans: Accessible to residents and non-residents, with repayment periods ranging from 3 to 15 years and varying payment options.
• Grants: Available at different levels for new and existing businesses, targeting specific sectors and job creation.
• Angel Investors: Private investors offering financial support in exchange for potential returns.
• Lines of Credit: Useful for managing unexpected expenses, with interest charged on borrowed amounts and varying terms.

Top 10 Companies in Spain – 2022

Rank	Company	Industry	Revenue in 2022 (USD)
1	Repsol	Oil and Gas	$ 86.29 B
2	Iberdrola	Electricity	$ 60.11 B
3	Santander	Financial Services	$ 56.43 B
4	Telefònica	Telecommunication	$ 42.53 B
5	Inditex	Retail	$ 33.87 B
6	Banco Bilbao Vizcaya Argentaria	Financial Services	$ 30.48 B
7	International Consolidated Airlines	Transportation	$ 24.05 B
8	Mapre	Financial Services	$ 22.67 B
9	Caixa Bank	Financial Services	$ 13.96 B
10	Logista	Transportation	$ 12.50 B

Most Popular E-Commerce Companies in Spain – 2022

RANK	COMPANY	Headquarter
1	Amazon	USA
2	Milanuncios	Spain
3	El Corte Ingles	Spain
4	Ali Express	China
5	Ebay	USA
6	Carrefour	France
7	Media Markt	Germany
8	PC Componentes	Spain
9	Decathlon	France
10	Leroy Merlin	France

Top 5 Start-Ups in Spain – 2022

RANK	COMPANY	INDUSTRY	FOUNDED IN
1	Hotel Break	Travel	2019
2	Ukio	Hospitality	2020
3	Wenea Mobile Energy	Energy	2018
4	Hundred Rooms	Travel	2014
5	Cobee	Financial Services	2018

Business Clusters in Spain

Spain has several thriving business clusters that contribute significantly to the country's economic growth and innovation.

• Barcelona Technology Park: Technology, innovation, and entrepreneurship hub
• Madrid Financial District: Major hub for finance and banking
• Basque Country Automotive Cluster: Expertise in the automotive industry
• Valencia Innovation Hub: Focus on design, technology, and creativity
• Andalusian Aerospace Cluster: Dedicated to the aerospace industry
• Canary Islands Renewable Energy Cluster: Focus on renewable energy.
• Andalusian Technology Park (PTA): Large technology park in Malaga
• Galicia Food Cluster: Focus on the agri-food industry
• Navarre Energy Cluster: Dedicated to renewable energy
• Catalonia Health and Life Sciences Cluster: Focus on health and life sciences.
• Seville Aerospace Cluster: Prominent in aerospace industry.

How to set up a Business in Spain?

Following steps are to be followed while setting up a business in Spain:

• Get the NIE (Número de Identificación de Extranjero) Number
• Company Name Registration
• Opening a Bank Account
• Establishing Shareholders of your Company
• Going to the Notary to Sign the Public Deed
• Going to the Tax Agency & getting your Tax ID Code
• Social Security Registration

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Best Locations to set up Business in Spain

Spain offers several attractive locations for setting up a business. Here are some of the best locations to consider:

• Madrid: Capital city, major economic hub, excellent infrastructure, strong finance and technology sectors.
• Barcelona: Entrepreneurial ecosystem, tech start-ups, tourism industry, gateway to the Mediterranean market.
• Valencia: Innovation and technology-driven industries, automotive, renewable energy, logistics, international trade fairs.
• Bilbao: Urban and economic transformation, advanced manufacturing, energy, cultural landmarks.
• Seville: Capital of Andalusia, aerospace, biotechnology, renewable energy, trade fairs, good connectivity.
• Malaga: Leading destination for technology and digital businesses, start-up ecosystem, favourable incentives.
• Zaragoza: Strategic location for logistics, transportation, major logistics platform, high-speed rail, agricultural and automotive industries.

Visa and Immigration

There are different types of visas and immigration permits offered by Spain especially for foreign entrepreneurs who want to set up their business in Spain.

• Schengen Business Visa: Allows short-term stays for business activities in Spain and other Schengen countries.
• Work Visa: Enables individuals with a job offer to work and reside legally in Spain.
• Entrepreneur Visa: For individuals establishing or investing in a business in Spain, requiring a viable business plan and sufficient financial resources.

To conclude, Spain offers exciting business opportunities for foreign investors and through its strategic location, Spain act as an entry point for EU and Latin American markets. Thriving sectors such as tourism, renewable energy, manufacturing, technology, healthcare, and finance provide attractive growth prospects. Spain's highly skilled workforce enhances operational efficiency and innovation. The government actively supports foreign investment through incentives and programs like the Investors and Entrepreneurs Act. Spain's rich cultural heritage, quality of life, and favourable climate make it appealing for professionals and their families. However, businesses must navigate challenges such as local competition, regional diversity, and regulatory complexities. Thorough market research, adaptation to the local context, and seeking local partnerships or advice are crucial for success. By seizing the opportunities and tailoring strategies, businesses can establish a strong presence in this dynamic and promising market.

We at India Law Offices have built a strong global presence and formed strategic alliances with premier law firms that enable us to serve our clients from around the world. In Spain, we are working closely with Legalfes S.L., a reputable law firm located in Madrid, Spain that specialize in business and tax laws and provide comprehensive legal support to clients in Spain as well as cater to international clients looking to enter the Spanish market.

If you are from Spain seeking legal assistance in India or an India national or corporate planning to enter the Spanish market, our firm can provide the necessary legal guidance and support you require.


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