When considering expanding your business in Spain, carefully assess several vital factors. When it comes to being an employer in Spain, it’s important to set up a legal entity and have a thorough grasp of the local labour laws and tax obligations. Below are five essential points to consider and insights into how Spanish Employer of Record services can provide valuable assistance. Engaging an Employer of Record (EOR) service in Spain can be advantageous, as it offers specialised knowledge of local regulations.

1. The difficulties and cost

Establishing a new business entity in Spain is valuable for business growth but can be time-consuming and challenging. The process typically involves registering your business with the Spanish commercial register, obtaining necessary permits and licences, and ensuring compliance with local regulations. This step is crucial for gaining the legal status needed to hire employees and conduct business operations within the country. The administrative workload and legal expenses can be significant, particularly for small and medium-sized businesses. Using an EOR allows your company to operate in Spain without setting up a local legal entity, saving considerable time and resources.

A significant challenge when expanding your business to Spain is comprehending and complying with Spanish fiscal policies. Spain operates a tax system that includes various tax bands. Successfully navigating this intricate tax environment demands comprehensive knowledge and meticulous planning to ensure compliance and maximise tax efficiency.

2. The cultural differences

Cultural differences in Spain are prominently reflected in meal times and daily routines. Breakfast is a light affair, typically consisting of coffee and toast, consumed between 8 and 10 AM. Lunch, the day’s largest meal, is enjoyed between 2 and 3:30 PM. This late lunch schedule can be an adjustment for those not used to it. Additionally, an afternoon snack, often favoured by children, provides a bridge between lunch and late dinner, offering some respite. Dinner in Spain is a much later event, usually starting at 10 PM or even later.

An integral part of the Spanish lifestyle is the siesta, a period of rest taken after lunch. This break involves relaxing or napping. Many businesses close during this time, especially in smaller towns and villages, only to reopen later in the evening. Respect for this downtime is crucial; interruptions or planning activities during siesta hours are discouraged.

Spanish culture emphasises taking time, particularly during social interactions and meals. Whether meeting for coffee, dining, or simply catching up, it’s customary to dedicate at least two hours to these activities. Spaniards value leisurely meals and extended conversations with friends and family. Embracing this relaxed approach to meal times can initially feel lengthy, but it often leads to a deeper appreciation for personal connections and a more fulfilling dining experience.

Understanding these cultural nuances will help you better navigate life in Spain and appreciate its prosperous society.

3. The economic and political stability

When expanding your business to Spain, it’s essential to consider the economic and political landscape. Spain maintains a stable and well-established political environment with a strong commitment to democracy and international cooperation. The government addresses unemployment, improves productivity, and fosters economic growth.

Economically, Spain is the 15th largest economy in the world. After a robust recovery post-2020, growth continues, supported by critical industries like tourism, manufacturing, and services. While Spain faces challenges such as youth unemployment and regional disparities, its political stability and strategic initiatives support ongoing growth and resilience.

Partnering with local experts, such as Spanish Employer of Record, provides valuable insights and support in navigating these crucial and constantly changing situations.

4. The financial risks

It’s essential to consider the opportunities and challenges associated with entering a new market when expanding your business. While the Spanish market offers great potential, you must know the financial implications should your product perform differently than expected. Exiting the market can involve terminating leases and contracts, selling off remaining inventory, and complying with local labour laws.

However, there are ways to mitigate these risks and smooth your entry into the Spanish market. Partnering with a Spanish Employer of Record allows you to explore the market without immediately establishing a legal entity. This approach provides flexibility, enabling you to evaluate market potential with minimal financial exposure. If the market is favourable, you can set up your entity. If not, Spanish Employer of Record simplifies the process of discontinuing operations, handling administrative and legal complexities, and reducing overall costs. This strategy ensures a smoother, more cost-effective market entry and exit process.

5. The challenges of establishing

It’s important to remember that opening a new legal entity in Spain for just a few employees can be risky and labour-intensive. The process involves extensive administrative work, such as choosing a company name, registering with the Spanish Companies Registry, appointing directors, and preparing necessary documents like the memorandum and articles of association. Additionally, you must maintain up-to-date company details, file annual accounts, and register for Corporation Tax and potentially VAT. 

This is where Spanish Employer of Record can be highly beneficial when expanding your business to Spain. An EOR with local knowledge can help you avoid many problems and risks. We act as an intermediary, employing individuals on your behalf and taking responsibility for payroll, taxes, and insurance while you maintain your normal working relationship with your employees.

Why partner with Spanish Employer of Record?

Our deep understanding of Spanish laws and local systems allows us to simplify your processes, making your expansion smooth and efficient. We offer a variety of services, including team relocation. Learn how we can assist with your business expansion in Spain, letting us handle the complexities while you focus on growing your business. Contact us today!