Top 6 Challenges of doing Business in Spain as a Foreigner

Many of the professionals at AvaLanding are or have been entrepreneurs themselves. We speak the language of international business because we have been there and done that. In this article we share some of the most common challenges we have met ourselves and see our international clients facing daily in Spain.

There are some mistakes you need to commit yourself, and many more you can avoid by learning from the experience of others.

1. Getting to know the market

Here is the thing: Spain is not a market. Spain consists of 17 autonomous communities, and the culture, consuming patterns, prices, etc. vary significantly between the different areas. When doing business in Spain, what works in Madrid, doesn’t necessarily work in Barcelona, Marbella or the Balearic Islands.

2. Structuring the business in a tax efficient way

When doing business in Spain; it is important from the tax point of view to have a structure set up correctly from the very beginning. Choosing the right company type and the optimum ways to inject the funds to the company (capital vs. loan vs. participative loan), limiting your liabilities adequately; and drafting the agreements between the partners and shareholders carefully is a good start for conducting successfully business here.

When making the plan, at least the following factors should be considered:

  • Your risk profile as entrepreneur
    • Most of our clients are subject to several national tax regimes, each of them with their own rules and interpretations, sometimes in conflict with each other. The international tax system has the black and the white ways of doing things, but you also find numerous shades of gray in how to interpret the laws, regulations and international treaties. If you tax advisors know what they are doing, they can explain to you all the colors, so that you can make informed decisions, always staying strictly within the limits of legality, of course.
  • Geographical factors:
    • The exact municipalities and autonomous communities where you will have activities (the taxes vary locally in Spain).
    • The double taxation treaties, if any, between Spain and other relevant countries.
    • Other international rules regarding taxation in your case.
  • The business plan:
    • Total amount of investment
    • Duration of the investment (timings; repatriation vs. investing further in the business)
    • Object of the investment.
    • Use and need for financing internationally or in Spain from banks or third parties.

3. Recruitment of talent

It may be challenging to find and retain talent anywhere in the world, and so it is in Spain. It is worth investing time and money in the recruitment process.

However, Spain has certain benefits specifically in when it comes to hiring international talent, highly qualified professionals, IT skills, millennials and professionals of the generation Z. What is it? The quality of life – sun, sea, culture, gastronomy – that Spain is internationally known for.

Many international studies show that directors and highly qualified employees are willing to accept less salary if they are transferred from London or Paris, to Madrid or Barcelona. In the old days the talent followed the companies, now the companies – big and small – follow the talent. Amazon, facebook and hundreds of other companies have moved their businesses lately to Spain to be where the talent wants to be: under the sun.

If you are planning the strategy of hiring locally or internationally workers to Spain, you may be interested in reading our articles: “How to bring non-EU world-class talent to Spain? Secrets of the fast track.” and “Corporate strategy: When to hire locally and when to import non-EU talent (while surviving the immigration bureaucracy)?”.

4. Finding the right local partners

For doing business in Spain, you will need trustworthy partners, advisors and providers. The cultural and language differences make the selection process more difficult and can lead to misunderstandings. According to our empiric studies among our clients, most of the international businesses that fail in Spain do not fail for economical unviability or legal matters, but because of the (erroneous) expectations, cultural differences and disagreements between shareholders (of this latter, you may want to read our article: “Why do you need a shareholder’s agreement and what should it contain?”.

Even if you would understand the words, the meaning of terms like “agreement”, “immediately”, or “quality” may not mean the same thing in different cultures. The best way to choose who to deal with is to ask recommendations and referrals. The international community in Spain knows who and which companies have done well in the past and whose track record is more dubious.

5. Tackling the bureaucracy

The Spanish administration is digitalizing quickly, but there are still numerous bureaucratic hurdles for setting up and doing business in Spain. Nothing difficult, just a lot of paperwork and stamps we need to gather in the right order from the right authorities. A subsidiary set-up by a foreign company for example takes normally 4 to 6 weeks and involves 14 different entities in the process between the country of origin and Spain.

6. Understanding the concept of time

Spain is still sometimes referred as the country of “mañana” (tomorrow), which is a bit unfair, since the society has changed a lot over the last decades, becoming continuously more efficient and competitive from the international business perspective. Still, things take their time, probably more than you were expecting, and there is nothing you can do about it. If you have strict time constraints in your business plan, you should start the preparations well ahead in time.

How Can AvaLanding Help You?

AvaLanding assists international clients in starting and doing business in Spain. If you are doing business in Spain, we can help you overcome the above and other challenges by:

  • Helping you to find the business opportunities and the right location/market for your company.
  • Choosing the right corporate structure for your business so it is tax efficient.
  • Advising and assisting you in negotiating and communicating with locals.
  • Helping you recruit the very best, and handling the immigration matters of your workers.
  • Tackling the bureaucracy and timing issues
  • Assisting you in day-to-day matters such as legal consultation, accountancy & payroll.

Spain is a great place to do business and the challenges are easy to overcome – if you know what to expect.

Shall we start the journey together?