Starting a business

Make contact with a good gestoria to advise you on all bureaucratic procedures. Find a good asesor fiscal, tax consultant, to handle your bookkeeping. Consult a lawyer to make sure you understand your contracts. A good adviser in one of these categories will save you time, trouble and money and many of them speak English.

Locate your premises and arrange to purchase, rent or lease. The Spanish lease was formerly called a traspaso and is now called a cesión. It can be bought and sold under certain conditions.

When you buy a going business with a traspaso or cesión for the premises, be aware that the operator of the business who sells you the leasehold may very well not be the actual owner of the premises. The actual owner will have a right to re-negotiate the traspaso when the lease is up. If you lease directly from the owner, you have the right to renewal when the term is up.

Should you wish to sell the lease for the business premises, you must offer it to the landlord first at the same price as your prospective purchaser has offered. The landlord always has first refusal. The whole business of traspasos and cesiones has many ins and outs and you will need expert legal advice to avoid pitfalls.

Keep careful records of your start-up expenses because the costs and the WA that you have paid out will become deductible from the taxes on your business earnings later.

Apply for your Licencia deApertura, your opening licence for the business, which is granted by the town hall. This can cost you as little as €100 for a small shop; €200 for a bar or restaurant, and up to €5,000 if you are opening a plush real estate office. Be prepared for sanitary and technical inspections, and in some localities be ready for long waits as well.

In the city of Málaga, some establishments have waited as long as six months before receiving their licences. Many of them, of course, simply opened without the licence after a time. In fact, in Benalmadena on the Costa del Sol, it was recently discovered that more than 1,000 of the 5,000 businesses operating there had no licence at all. That’s all right for Spaniards, but you as a foreigner will need your licence to apply for your work and residence document.

In addition to the other papers, you may need a food handler’s medical certificate or other document, depending on the business you choose. You will also be assigned your NIE, your foreigner’s tax identification number, which identifies you to the Spanish tax authorities. Spaniards have a number, too. You can obtain this NIE without having a residence permit if you need it for your operations before your final permit is issued.

You need to acquire two more documents at this time. One is your Spanish Social Security card. As a self-employed businessman you will be called a trabajador autónomo (see above). You also need to register yourself as a businessman or professional for the IAE - the Impuesto Sobre Actividades Económicas - the tax on economic activities.

This tax has replaced the former licencia fiscal, the fiscal licence. You register for this tax at your town hall. The tax itself varies widely from business to business. A plumber working on his own pays one rate and a plumbing contractor with a staff of workers pays another rate. A bar or restaurant owner will pay according to the size of his establishment and even its location. A dentist pays a low rate when he is just starting out, but the price for his IAE rises each year he continues to practise, on the theory that he will be earning more money

You or your gestorla will have to determine your own category. You could pay as little as €200 a year or as much as €2,000, depending on your self-employed activity.

If you are employing others, you will find that a worker costs you at least €900 a month. This is based on the low salary of €500, plus Social Security payments of about 30 per cent of that, plus extra payments at Christmas and in the summer, and assorted other expenses. See next section on Employing Others for more details.

There are many complications with hiring workers and making contracts. Remember it is illegal to hire any worker without paying his Social Security. Perhaps you can take advantage of some of the tax breaks offered in 2002 to those who create new jobs for younger or older workers or for workers who have been unemployed for long periods.

Be alert as to how much it will cost you to make the worker redundant if your business fails to prosper.

Keep accurate books of expenses and income, noting all your payments of WA, Spain’s Value Added Tax, plus your expenses for the gestorla, accounting and legal advice, and get ready to make your first quarterly tax payment, your pago fraccionado.

Most small businesses will find that there are two options for paying their business tax, one of which is called modulos, or modules, and the other estimación directa, or direct estimation.

A small business is obliged to start by using the modular system. In the case of bars and restaurants the tax agency itself decides what your income should be, based on a complex analysis of how many tables you have, how many waiters you employ, your location, the square metres of your premises, and other factors.

You will be charged business tax on this assigned amount each quarter. At the end of the year you file your complete return of actual income and take you deductions for business expenses. If the tax agency owes you money in return, and they probably will, you claim the refund.

The only advantage of this system is that you do not have to maintain a detailed set of accounts in order to present your quarterly statements. This is helpful for small operations dealing in hundreds or thousands of little transactions every day Of course, you must present your totals at the end of each year.

Mter the first year, you can decide if you wish to pass to the direct estimation system, which requires complete bookkeeping, with every factura in its place. The advantage, of course, is that you are paying tax on your real business earnings each quarter. If you choose this system, you must continue to use it for three years.

Spain’s company tax is charged at 35 per cent. Again, you can claim return of any overpayment, but Hacienda will have had the use of your money for a year or so. These tax rates apply to professionals as well as to businesses and any other self-employed persons.

It begins to sound as if you definitely need the services of a tax consultant and business specialist here. Very few can handle this paperwork on their own.