Employing in Spain

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Expanding into
Spain

Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all of the registration procedures that needs to be done and documentation required.

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Expanding to countries such as Spain – which is characterized by an innovative and highly-skilled workforce, multifaceted employment and tax laws, a strategic infrastructure network linking to the rest of Europe, with leading sectors such as tourism, agriculture, manufacturing, ICT, and energy – can bring both excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigorous legal structures and laws.

Ensuring compliance without the sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.

Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of an International Professional Employer Organization (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework.

This can be best utilized when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.

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Country EOR Guide - Bradford Jacobs

Download our Guide to Spain

Learn all about expanding into Spain and see what we can do to make your expansion easier.

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Download our Guide to Spain

Learn all about expanding into Spain and see what we can do to make your expansion easier.

Country EOR Guide - Bradford Jacobs
DOWNLOAD GUIDE

Hiring Staff
in Spain

The economy of Spain is a highly developed social market economy. It is the world’s fourteenth largest by nominal GDP and the fifth largest in Europe. Spain is the 13th recipient of foreign investments in the world, with more than 14,600 foreign firms having set up their business in the country. 70 out of 100 top companies in Forbes Global 2000 operate in Spain.

The Spanish market comprises 46 million inhabitants and over 82 million visitors in 2019. Any business looking to invest in Spain will be presented with unrestricted access to the European market with its more than 500 million consumers and world’s highest purchasing power.

In 2019, Spain was the fifteenth-largest exporter in the world and the fourteenth-largest importer. Foreign multinationals established in Spain are responsible for approximately 44.5% of Spain’s total worldwide exports.

Spain is listed 25th in the United Nations Human Development Index and 32nd in GDP per capita by the World Bank. According to the Quality-of-Life Index (2016), Spain had the world’s 10th highest quality of life, especially concerning health and well-being. Some of the main areas of economic activity are the automotive industry, medical technology, chemicals, shipbuilding, tourism, and the textile industry.

Spain is a member of the United Nations (UN), the European Union (EU), the Eurozone, the Council of Europe (CoE), the Organization of Ibero-American States (OEI), the Union for the Mediterranean, the North Atlantic Treaty Organization (NATO), the Organization for Economic Co-operation and Development (OECD), Organization for Security and Co-operation in Europe (OSCE), the World Trade Organization (WTO) and many other international organizations.

SMEs play a major role in Spain’s ‘non-financial business economy’. According to the Spanish National Statistics Institute (INE), 99.7% of all non-financial corporations (NFCs) were SMEs in December 2019, employing 62.6% of the business labor force. Of these, 89.1% were micro-enterprises, 9.0% small enterprises and 1.6% medium-sized enterprises.

Micro firms are particularly important to the Spanish labor market, accounting for 38.7% of total employment. This is significantly higher than the EU average of 29.7%. On average, Spanish SMEs employ 3.1 people, fewer than the EU average of 3.9. Annual SME productivity, calculated as value added per person employed, is €35,900, equivalent to 80.6% of average SME productivity in the EU.

SMEs in Spain have not yet recovered from the 2008 crisis, unlike large firms, which have already surpassed their pre-crisis levels. In 2018, SME value added and employment were still 16%, 14.7% below their 2008 levels. Nonetheless, SMEs in the ‘non-financial business economy’ have made significant progress since 2013, when value added and employment were hit hardest by the crisis.

SMEs in wholesale and retail trade, the biggest SME sector in Spain, have generated consistent value-added growth in recent years.

Country:
Spain (The Kingdom of Spain)
Local Currency:
Euro (EUR)
Time Zone:
Central European Time (GMT+2)
Country Dial Code:
+34
Tax Year:
1 January – 31 December (calendar year)
VAT:
21%
National Minimum Wage (2023):
EUR 1,000 per month
Taxpayer Identification Numbers:
Spanish National ID (DNI) or Foreigners’ Identity Number (NIE)
Identification Number (NIE)
Company ID Number (CIF)
VAT number (Número IVA)
Main trading partners (2021):
Germany, France, China, Italy, Netherlands, Portugal, the United Kingdom, and the United States.

Hiring Staff
in Spain

The economy of Spain is a highly developed social market economy. It is the world’s fourteenth largest by nominal GDP and the fifth largest in Europe. Spain is the 13th recipient of foreign investments in the world, with more than 14,600 foreign firms having set up their business in the country. 70 out of 100 top companies in Forbes Global 2000 operate in Spain.

The Spanish market comprises 46 million inhabitants and over 82 million visitors in 2019. Any business looking to invest in Spain will be presented with unrestricted access to the European market with its more than 500 million consumers and world’s highest purchasing power.

In 2019, Spain was the fifteenth-largest exporter in the world and the fourteenth-largest importer. Foreign multinationals established in Spain are responsible for approximately 44.5% of Spain’s total worldwide exports.

Spain is listed 25th in the United Nations Human Development Index and 32nd in GDP per capita by the World Bank. According to the Quality-of-Life Index (2016), Spain had the world’s 10th highest quality of life, especially concerning health and well-being. Some of the main areas of economic activity are the automotive industry, medical technology, chemicals, shipbuilding, tourism, and the textile industry.

Spain is a member of the United Nations (UN), the European Union (EU), the Eurozone, the Council of Europe (CoE), the Organization of Ibero-American States (OEI), the Union for the Mediterranean, the North Atlantic Treaty Organization (NATO), the Organization for Economic Co-operation and Development (OECD), Organization for Security and Co-operation in Europe (OSCE), the World Trade Organization (WTO) and many other international organizations.

SMEs play a major role in Spain’s ‘non-financial business economy’. According to the Spanish National Statistics Institute (INE), 99.7% of all non-financial corporations (NFCs) were SMEs in December 2019, employing 62.6% of the business labor force. Of these, 89.1% were micro-enterprises, 9.0% small enterprises and 1.6% medium-sized enterprises.

Micro firms are particularly important to the Spanish labor market, accounting for 38.7% of total employment. This is significantly higher than the EU average of 29.7%. On average, Spanish SMEs employ 3.1 people, fewer than the EU average of 3.9. Annual SME productivity, calculated as value added per person employed, is €35,900, equivalent to 80.6% of average SME productivity in the EU.

SMEs in Spain have not yet recovered from the 2008 crisis, unlike large firms, which have already surpassed their pre-crisis levels. In 2018, SME value added and employment were still 16%, 14.7% below their 2008 levels. Nonetheless, SMEs in the ‘non-financial business economy’ have made significant progress since 2013, when value added and employment were hit hardest by the crisis.

SMEs in wholesale and retail trade, the biggest SME sector in Spain, have generated consistent value-added growth in recent years.

Country:
Spain (The Kingdom of Spain)
Local Currency:
Euro (EUR)
Time Zone:
Central European Time (GMT+2)
Country Dial Code:
+34
Tax Year:
1 January – 31 December (calendar year)
VAT:
21%
National Minimum Wage (2023):
EUR 1,000 per month
Taxpayer Identification Numbers:
Spanish National ID (DNI) or Foreigners’ Identity Number (NIE)
Identification Number (NIE)
Company ID Number (CIF)
VAT number (Número IVA)
Main trading partners (2021):
Germany, France, China, Italy, Netherlands, Portugal, the United Kingdom, and the United States.

The Main Sectors of the Spanish Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

Tourism

The tourism industry is an important economic driver in the country, currently accounting for around 5.4% of the nation’s annual GDP. As the world’s third-most popular tourist destination, Spain receives more than 75 million tourists each year, who come to sample its wide range of attractions.

The tourism industry is an important engine of the Spanish economy and employment (creating around 2.3 million jobs).

Pharmaceuticals and automobiles are the primary export commodities from Spain’s manufacturing industry. The pharmaceutical market in the country is valued at an estimated $25 billion. The automobile sector is among Spain’s primary economic drivers.

With an annual vehicle production of more than 2.8 million units, the country is Europe’s second-largest automobile manufacturer, and eight-largest in the world. As much as 80% of the vehicles manufactured in Spain are destined for export. The sector accounts for about 18% of Spain’s annual exports and about 10% of the country’s GDP.

Spain is home to 13 automobile manufacturing establishments, with PSA and SEAT being the country’s two largest automobile producers. Many global automobile-manufacturing giants have operations in Spain, and these include Daimler AG, Ford, General Motors, Renault, and Nissan.

With revenue of over €129 bn (2.7% of GDP) and employing around 500,000 people, the Spanish agri-food industry is the country’s main manufacturing activity.

Spain is the fourth agri-food power in Europe and tenth in the world. Due to the quality of its products and its extensive range of items, the Spanish agri-food industry is highly regarded internationally.

Spanish agri-food exports have shown twelve continuous years of surplus and represents almost 20% of the country’s total exports – these conditions have made the industry the fourth-ranked European exporter and the seventh worldwide in these products.

More than 30,000 companies in the industry currently export food and drink from Spain, with internationalization being one of the main pillars of its strong position and growth.

Another critical industry in Spain is the country’s energy industry. The country is heavily reliant on fossil fuels in its energy consumption. Of the energy consumed in Spain, 42% is sourced from oil, 19.8% from natural gas, and 11% from coal. The country has to source most of the fossil fuels from external markets, as the country has few proven oil reserves while its coal is of poor quality.

The total electricity produced annually in Spain is more than 276.8 TWh, the majority of which is consumed locally. Only 3% of the electricity produced is exported. Renewable sources such as nuclear, hydropower, geothermal, wind and solar are important in electricity generation, as a result of Spain’s heavy investment in the sector.

Audiovisual

The audiovisual industry plays a key role in the Spanish economy. Spain ranks sixth in the European Union in the number of titles produced (behind Germany, France, the United Kingdom, Holland, and Italy) and fifth in production hours (behind Germany, the United Kingdom, France, and Italy). According to data from the European Audiovisual Observatory, in its “Yearbook 2019-2020 Key Trends” report, Spain is amongst the five main countries exporting pay-per-view films (TVOD or PPV), along with the United Kingdom, Germany, France and Italy.

For the Spanish Government, the industry is strategic due to its global scope, ability to create employment and its potential for modernization with digitization. According to the PWC study, the opportunity of fiction content in Spain, the potential market for fiction series productions will generate revenues of almost 4.3 billion euros between 2020 and 2021, contribute 811.9 million to the GDP, produce as many as 72 series, create 18,443 jobs (13,944 direct) and give rise to tax revenues of almost 264 million euros.

Spain stands out worldwide for its world-class network of air, land, rail and maritime infrastructures and the quality of its services. This sector represents 7.9% of Spain’s GDP – a figure that rises to 10% if we add the activities of a logistics nature carried out by industrial, commercial, and service companies.

The annual turnover of the sector reaches 111,000 million euros. The sector generates almost one million jobs. There is also a high business concentration with around 197,000 companies linked to the sector.

The Spanish chemical sector is a strategic industry in the country’s economy and an important generator of wealth and employment, as it comprises over 3,072 companies, with a turnover of €66.4 bn in 2019, and provides 697,000 direct and indirect jobs.

With an accumulated 34% growth in revenue in the period between 2007 and 2019, this industry represents 13.4% of Spain’s Gross Industrial Product and 5.8% of its GDP.

It is also the second most important export category, with €38.474 bn exported to international markets in 2019. 57.9% of Spain’s chemical production is exported.

Employment created by the chemical industry is stable – 94% of contracts are permanent – and it is one of the industries with the highest level of productivity per employee.

The Main Sectors of the Spanish Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

The Palau Nacional, Spain

Tourism

The tourism industry is an important economic driver in the country, currently accounting for around 5.4% of the nation’s annual GDP. As the world’s third-most popular tourist destination, Spain receives more than 75 million tourists each year, who come to sample its wide range of attractions.

The tourism industry is an important engine of the Spanish economy and employment (creating around 2.3 million jobs).

Pharmaceuticals and automobiles are the primary export commodities from Spain’s manufacturing industry. The pharmaceutical market in the country is valued at an estimated $25 billion. The automobile sector is among Spain’s primary economic drivers.

With an annual vehicle production of more than 2.8 million units, the country is Europe’s second-largest automobile manufacturer, and eight-largest in the world. As much as 80% of the vehicles manufactured in Spain are destined for export. The sector accounts for about 18% of Spain’s annual exports and about 10% of the country’s GDP.

Spain is home to 13 automobile manufacturing establishments, with PSA and SEAT being the country’s two largest automobile producers. Many global automobile-manufacturing giants have operations in Spain, and these include Daimler AG, Ford, General Motors, Renault, and Nissan.

With revenue of over €129 bn (2.7% of GDP) and employing around 500,000 people, the Spanish agri-food industry is the country’s main manufacturing activity.

Spain is the fourth agri-food power in Europe and tenth in the world. Due to the quality of its products and its extensive range of items, the Spanish agri-food industry is highly regarded internationally.

Spanish agri-food exports have shown twelve continuous years of surplus and represents almost 20% of the country’s total exports – these conditions have made the industry the fourth-ranked European exporter and the seventh worldwide in these products.

More than 30,000 companies in the industry currently export food and drink from Spain, with internationalization being one of the main pillars of its strong position and growth.

Another critical industry in Spain is the country’s energy industry. The country is heavily reliant on fossil fuels in its energy consumption. Of the energy consumed in Spain, 42% is sourced from oil, 19.8% from natural gas, and 11% from coal. The country has to source most of the fossil fuels from external markets, as the country has few proven oil reserves while its coal is of poor quality.

The total electricity produced annually in Spain is more than 276.8 TWh, the majority of which is consumed locally. Only 3% of the electricity produced is exported. Renewable sources such as nuclear, hydropower, geothermal, wind and solar are important in electricity generation, as a result of Spain’s heavy investment in the sector.

Audiovisual

The audiovisual industry plays a key role in the Spanish economy. Spain ranks sixth in the European Union in the number of titles produced (behind Germany, France, the United Kingdom, Holland, and Italy) and fifth in production hours (behind Germany, the United Kingdom, France, and Italy). According to data from the European Audiovisual Observatory, in its “Yearbook 2019-2020 Key Trends” report, Spain is amongst the five main countries exporting pay-per-view films (TVOD or PPV), along with the United Kingdom, Germany, France and Italy.

For the Spanish Government, the industry is strategic due to its global scope, ability to create employment and its potential for modernization with digitization. According to the PWC study, the opportunity of fiction content in Spain, the potential market for fiction series productions will generate revenues of almost 4.3 billion euros between 2020 and 2021, contribute 811.9 million to the GDP, produce as many as 72 series, create 18,443 jobs (13,944 direct) and give rise to tax revenues of almost 264 million euros.

Spain stands out worldwide for its world-class network of air, land, rail and maritime infrastructures and the quality of its services. This sector represents 7.9% of Spain’s GDP – a figure that rises to 10% if we add the activities of a logistics nature carried out by industrial, commercial, and service companies.

The annual turnover of the sector reaches 111,000 million euros. The sector generates almost one million jobs. There is also a high business concentration with around 197,000 companies linked to the sector.

The Spanish chemical sector is a strategic industry in the country’s economy and an important generator of wealth and employment, as it comprises over 3,072 companies, with a turnover of €66.4 bn in 2019, and provides 697,000 direct and indirect jobs.

With an accumulated 34% growth in revenue in the period between 2007 and 2019, this industry represents 13.4% of Spain’s Gross Industrial Product and 5.8% of its GDP.

It is also the second most important export category, with €38.474 bn exported to international markets in 2019. 57.9% of Spain’s chemical production is exported.

Employment created by the chemical industry is stable – 94% of contracts are permanent – and it is one of the industries with the highest level of productivity per employee.

Commercial Laws in
Spain

Compliance Highlights

  • The Spanish Tax Administration Agency (Agencia Tributaria, AEAT) – the revenue service of the Kingdom of Spain. The agency is responsible for the effective application of the national tax and customs systems and for those resources of other Public Administrations and the European Union whose management is entrusted to it by law or agreement.

The function of the Agencia Tributaria occurs in a wide range of activities, among which include:

  • The management, inspection and collection of the taxes that belong to the state (Personal Income Tax, Corporation Income Tax, Income Tax for Non-Residents, Value Added Tax and Excise Duties).
    • The performance of important functions in relation to the income of the Autonomous Communities and Autonomous Cities, not only concerning the management of the Income Tax, but also the collection of other income from these Communities, whether by legal regulation or by the relevant collaboration agreements.
    • The collection of revenue on behalf of the European Union.
    • The management of customs and the repression of smuggling.
    • The collection of taxes due to the State Public Sector in the voluntary payment period.
    • The collection, through enforcement, of public revenue due to the State General Administration and associated or dependent Public Bodies.
    • Participation in the persecution of certain offences, including offences against the Public Treasury and offences related to contraband goods.
  • Labor and Social Security Inspectorate (ITSS) – a Spanish autonomous agency in charge of the control of the compliance with labor and social security legislation. It also offers technical advice and, where appropriate, conciliation, mediation, and arbitration in these matters. The ITSS is the apex of the Labor and Social Security Inspection System.

Employment contracts (copia basica) in Spain must be lodged with the Public Employment Office. Seasonal contracts must be drawn up on a template provided by the employment office. Royal Decree 28/2020 defined remote working as comprising 30% of regular working hours undertaken from home or any remote location. Working from home cannot be unilaterally applied by either the employer or employee.

The main contract types/agreements that affect employment in Spain include:

  • Indefinite Employment Contracts (Contrato indefinido): These are identified from the start of the relationship by having no end date or time limit. In the absence of any other formal contract, an employee is deemed to be on an open-ended, indefinite contract.
  • Fixed-term or Temporary Employment Contracts (Contrato temporal): These apply to certain circumstances, such as:
    • Specific task, project or service that takes an indefinite time. If the project lasts more than 12 months, 15 days’ notice must be given
    • To deal with a short-term employment market or seasonal work
    • To temporarily replace a full-time employee, whose role must be specified in the contract
  • Probationary Contracts:  If no limits apply from a collective agreement, the terms are normally six months for qualified employees, two months for unqualified and three months for companies with fewer than 25 staff.

For more information on labour contracts law in Spain Download our Spain Country Guide…

Income Tax: Spanish tax residents are liable to pay income tax on their worldwide income once personal allowances have been considered. However, a non-resident of Spain is required to pay tax only on any Spanish income.

Under Spanish tax regulations income is split into two main categories, income from work and income from savings. The total is classed as the base from which deductions and allowances are calculated. Taxable savings includes income from interest on savings, dividends, life insurance, annuities, disposal, or transfer of assets.

Health and Social Insurance: All employees working in Spain, regardless of nationality, must be registered with the Spanish social security system and the employer must make the corresponding contribution for both employer and employee. These contributions depend on the category of each employee and cannot exceed certain limits. In 2022, they are set at 29.9% from the employer and 6.35% from employees for a total of 36.25%, plus a percentage to cover accidents and illness, usually around a further 1.5%.

For more information on tax contributions and benefits in Spain Download our Spain Country Guide…

Commercial Laws in
Spain

Bridge that crosses the Bilbao estuary in Spain

Compliance Highlights

  • The Spanish Tax Administration Agency (Agencia Tributaria, AEAT) – the revenue service of the Kingdom of Spain. The agency is responsible for the effective application of the national tax and customs systems and for those resources of other Public Administrations and the European Union whose management is entrusted to it by law or agreement.

The function of the Agencia Tributaria occurs in a wide range of activities, among which include:

  • The management, inspection and collection of the taxes that belong to the state (Personal Income Tax, Corporation Income Tax, Income Tax for Non-Residents, Value Added Tax and Excise Duties).
    • The performance of important functions in relation to the income of the Autonomous Communities and Autonomous Cities, not only concerning the management of the Income Tax, but also the collection of other income from these Communities, whether by legal regulation or by the relevant collaboration agreements.
    • The collection of revenue on behalf of the European Union.
    • The management of customs and the repression of smuggling.
    • The collection of taxes due to the State Public Sector in the voluntary payment period.
    • The collection, through enforcement, of public revenue due to the State General Administration and associated or dependent Public Bodies.
    • Participation in the persecution of certain offences, including offences against the Public Treasury and offences related to contraband goods.
  • Labor and Social Security Inspectorate (ITSS) – a Spanish autonomous agency in charge of the control of the compliance with labor and social security legislation. It also offers technical advice and, where appropriate, conciliation, mediation, and arbitration in these matters. The ITSS is the apex of the Labor and Social Security Inspection System.

Employment contracts (copia basica) in Spain must be lodged with the Public Employment Office. Seasonal contracts must be drawn up on a template provided by the employment office. Royal Decree 28/2020 defined remote working as comprising 30% of regular working hours undertaken from home or any remote location. Working from home cannot be unilaterally applied by either the employer or employee.

The main contract types/agreements that affect employment in Spain include:

  • Indefinite Employment Contracts (Contrato indefinido): These are identified from the start of the relationship by having no end date or time limit. In the absence of any other formal contract, an employee is deemed to be on an open-ended, indefinite contract.
  • Fixed-term or Temporary Employment Contracts (Contrato temporal): These apply to certain circumstances, such as:
    • Specific task, project or service that takes an indefinite time. If the project lasts more than 12 months, 15 days’ notice must be given
    • To deal with a short-term employment market or seasonal work
    • To temporarily replace a full-time employee, whose role must be specified in the contract
  • Probationary Contracts:  If no limits apply from a collective agreement, the terms are normally six months for qualified employees, two months for unqualified and three months for companies with fewer than 25 staff.

For more information on labour contracts law in Spain Download our Spain Country Guide…

Income Tax: Spanish tax residents are liable to pay income tax on their worldwide income once personal allowances have been considered. However, a non-resident of Spain is required to pay tax only on any Spanish income.

Under Spanish tax regulations income is split into two main categories, income from work and income from savings. The total is classed as the base from which deductions and allowances are calculated. Taxable savings includes income from interest on savings, dividends, life insurance, annuities, disposal, or transfer of assets.

Health and Social Insurance: All employees working in Spain, regardless of nationality, must be registered with the Spanish social security system and the employer must make the corresponding contribution for both employer and employee. These contributions depend on the category of each employee and cannot exceed certain limits. In 2022, they are set at 29.9% from the employer and 6.35% from employees for a total of 36.25%, plus a percentage to cover accidents and illness, usually around a further 1.5%.

For more information on tax contributions and benefits in Spain Download our Spain Country Guide…

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