Starting a Business in Spain

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Starting a Business in Spain

Spain offers an attractive business environment, a skilled and bilingual workforce and multiple opportunities for companies in key business sectors like manufacturing, automotive, life sciences, the chemical sector, telecommunications or tourism.

Economy of the Spain

The economy of Spain is the world’s thirteenth-largest by nominal GDP as well as one of the largest in the world by purchasing power parity. The country is a member of the European Union, the Organization for Economic Co-operation and Development and the World Trade Organization. Spain has a capitalist mixed economy. The Spanish economy is the sixth-largest in Europe behind Germany, United Kingdom, France, Italy and Russia as well as the fourth-largest in the eurozone based on nominal GDP statistics. In 2012, Spain was the twelfth-largest exporter in the world and the sixteenth-largest importer. Spain is listed 25th in the United Nations Human Development Index and 30th in GDP per capita by the World Bank, therefore it is classified as a high income economy and among the countries of very high human development. According to The Economist, Spain has the world’s 10th highest quality of life.

In 2017, Spain was the second most visited country in the world

Since the 1990s some Spanish companies have gained multinational status, often expanding their activities in culturally close Latin America, Eastern Europe and Asia. Spanish companies invested in fields like biotechnology and pharmaceuticals, or renewable energy (Iberdrola is the world’s largest renewable energy operator), technology companies like Telefónica, Abengoa, Mondragon Corporation, Movistar, Gamesa, Hisdesat, Indra, train manufacturers like CAF and Talgo, global corporations such as the textile company Inditex, petroleum companies like Repsol and infrastructure firms. Six of the ten biggest international construction firms specialising in transport are Spanish, lincluding Ferrovial, Acciona, ACS, OHL and FCC.

Spain is equipped with a solid banking system as well, including two global systemically important banks, Banco Santander and BBVA.

Spain GDP
Spain GDP

Spain Economic Indicators

Spain GDP Growth Rate

Spain is the fourth largest economy in the Euro Zone and the fifth biggest economy in the European Union. The country has a strong and diverse manufacturing industry and is one of the biggest tourist destinations in the world. On the expenditure side, household consumption is the main component of Spain’s GDP (58 percent), followed by gross fixed capital formation (21 percent) and government expenditure (18 percent). Within investments, tangible fixed assets account for 18 percent of GDP, including construction (10 percent) and machinery, equipment and weapon system (7 percent); and intellectual property products account for the remaining 3 percent. Exports of goods and services account for 34 percent of GDP while imports account for 31 percent, adding 3 percent of total GDP.

Spain GDP Growth Rate
Source: National Statistics Institute (INE)
Spain Central Bank Interest Rate

Spain is a member of the European Union which has adopted the euro. Spain’s benchmark interest rate is set by the European Central Bank. The official designation for the rate is main refinancing operation.

Spain Interest Rate
Source: European Central Bank
Spain Inflation Rate

In Spain, the most important categories in the consumer price index are food and non-alcoholic beverages (20 percent of the total weight), transport (15 percent), housing and utilities (13 percent) and hotels, cafés and restaurants (12 percent). The index also includes: Recreation and culture (9 percent); miscellaneous goods and services (7 percent); and clothing and footwear (7 percent). Furnishings, household equipment and routine maintenance of the house; health; communications; alcoholic beverages and tobacco; and education account for the remaining 18 percent of total weight.

Spain Inflation Rate
Source: National Statistics Institute (INE)
Spain Unemployment Rate

In Spain, the unemployment rate measures the number of people actively looking for a job as a percentage of the labour force.

Spain Unemployment Rate
Source: National Statistics Institute (INE)
Spain Government Debt to GDP

Generally, Government debt as a percent of GDP is used by investors to measure a country ability to make future payments on its debt, thus affecting the country borrowing costs and government bond yields. Spain’s debt fell to 95.5 percent of its GDP in 2019 from 97.6 percent in 2018 and below the government’s forecast of 95.9 percent. It was the lowest debt-to-GDP ratio since 2013.

Government Debt to GDP
Source: Bank of Spain
Spain Balance of Trade

Spain runs systemic trade deficits due to high imports of fuel and high added value goods. In 2017, Spain’s trade deficit rose 31.9 percent from the previous year to EUR 25 billion, mainly due to a surge in domestic demand and an increase in energy prices. Within the Autonomous Communities, the biggest exporters were Catalonia (26 percent of total exports), Andalusia, Madrid and Valencia (11 percent each) and the Basque Country (9 percent); while the largest importers were Catalonia (28 percent of total imports), Madrid (20 percent) Andalusia (10 percent) and Valencia (9 percent). The trade surplus with the EU widened to EUR 16 billion from EUR 13 billion in 2016, boosted by an increase in both surpluses with the Eurozone (EUR 9 billion vs EUR 7 billion in 2016) and with the non-euro area countries of the EU (EUR 7 billion vs EUR 6 billion). With regard to non-EU countries, the trade deficit increased to EUR 41 billion from EUR 32 billion in the previous year, as the deficit with Asia rose to EUR 35 billion from EUR 29 billion and that with Africa went up to EUR 6 billion from EUR 4 billion. Also, the gap with Latin America grew to EUR 2 billion from EUR 60 million in 2016, while that with North America was almost unchanged at EUR 1 billion.

Spain Balance of Trade
Source: Ministerio de Industria, Comercio y Turismo
Spain Currency Euro

The euro is the official currency of Spain, which is a member of the European Union.

Spain Currency Euro

Spain Stock Market (IBEX 35)

The IBEX 35 Index is a benchmark stock market index which tracks the performance of 35 most liquid stocks traded on the Continuous market on the Bolsa de Madrid. It is a free-float, capitalization-weighted index. The IBEX 35 index has base value of 3000 as of December 29, 1989.

Spain Stock Market IBEX 35

Spain Ease of Doing Business

Spain is ranked 30 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of Spain remained unchanged at 30 in 2019 from 30 in 2018.

The Ease of doing business index ranks countries against each other based on how the regulatory environment is conducive to business operationstronger protections of property rights. Economies with a high rank (1 to 20) have simpler and more friendly regulations for businesses.

Spain Ease of Doing Business
Source: World Bank
Spain Business Confidence

Spain’s industrial confidence indicator edged up to -9.2 in October of 2020 from a downwardly revised -9.5 in the previous month. It was the highest reading since March but remains well below February’s pre-pandemic levels. There was an improvement in the level of new orders (-25.7 vs -33.2 in September); while the stock of finished products increased (9.4 vs 4.4) and output expectations dropped (7.2 vs 9.2). s

In Spain, the Industrial Confidence Indicator (ICI) measures the level of optimism of entrepreneurs for the future development of industrial activity. The ICI is conducted based on the sample of 2500 enterprises representing different sizes, regions and sectors of Spanish economy. The response rate is around 60 percent. ICI is measured on a scale of -100 (extreme lack of confidence) to +100 (extreme confidence).

Spain Business Confidence
Source: Ministerio de Industria, Energia Y Turismo
Spain Consumer Confidence

Spain’s consumer confidence indicator declined by 1 point from the previous month to 48.5 in October 2020, the lowest since December 2012, as the country has been facing a second wave of coronavirus restrictions, and protests against new restrictive measures. The gauge for consumer expectations fell by 0.9 points to 68.8, and the current situation sub-index decreased by 1 point to 28.2.

In Spain, the Consumer Confidence survey is made by phone and covers 1,000 individuals aged over 16 who are representative of Spanish society as a whole. The questionnaire focuses on current economic and financial situation, savings intention as well as on expected developments regarding general and personal economic situation and major purchases of durable goods. The index shows the difference between the percentage share of persons that are optimistic and the percentage of persons that are pessimistic. The index measures consumer confidence on a scale of 0 to 200, where 0 indicates extreme lack of confidence, 100 neutrality and 200 extreme confidence.

Spain Consumer Confidence
Source: Centro de Investigaciones Sociológicas
Spain Bank Lending Rate

Bank Lending Rate in Spain increased to 1.59 percent in September from 1.47 percent in August of 2020.

In Spain, the bank lending rate is the average rate of interest charged on 1 to 5 year loans by commercial banks to non financial corporations.

Spain Bank Rate on Loans to Non Financial Corporations
Source: Bank of Spain
Spain Corruption Rank

Spain is the 30 least corrupt nation out of 180 countries, according to the 2019 Corruption Perceptions Index reported by Transparency International.

The Corruption Perceptions Index ranks countries and territories based on how corrupt their public sector is perceived to be. A country or territory’s rank indicates its position relative to the other countries and territories in the index.

Spain Corruption Rank
Source: Transparency International
Spain Credit Rating

Standard & Poor’s credit rating for Spain stands at A with negative outlook. Moody’s credit rating for Spain was last set at Baa1 with stable outlook. Fitch’s credit rating for Spain was last reported at A- with stable outlook. DBRS’s credit rating for Spain is A with stable outlook. In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of Spain thus having a big impact on the country’s borrowing costs. This page includes the government debt credit rating for Spain as reported by major credit rating agencies.

Madrid Stock Exchange
Madrid Stock Exchange

Taxation in the Spain

Taxes in Spain are levied by national (central), regional and local governments. Tax revenue in Spain stood at 36.3% of GDP in 2013. A wide range of taxes are levied on different sources, the most important ones being income tax, social security contributions, corporate tax, value added tax; some of them are applied at national level and others at national and regional levels. Other minor taxes like property transfer tax (regional), real estate property tax (local), road tax (local) are collected directly by regional or local administrations.

Corpo-
rate tax
Perso-
nal income tax
VAT or
sales tax
Social Security Rate for Companies Social Security Rate for Employees
19% 0-45% 20% (standard)
5% (home energy
and renovations)
5% (tourism and hospitality sector
for 6 months from
the 8th of July 2020)
0% (life necessities)
13,8% 14%

How to Start a Business in Spain

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