Legalmondo & Internacionalize
The Internationalize portal, alongside Legalmondo, launches the Brazilians around the world series, which will address the main legal aspects of each country, analyzed from the points of view: immigration, tax, succession and business. This edition covers Spain.
1. The main work visas in Spain
In Spain there are several types of work visas, the two most common being the residence and self-employment visa and the residence and work visa for employees.
The self-employed work visa entitles the applicant over the age of 18 to reside temporarily in Spain for a period of more than 90 days and less than 5 years and to carry out a lucrative, labour or professional activity on a self-employed basis. In order to obtain the visa, it is first necessary to apply for a residence and self-employment authorization.
On the other hand, the employed work visa entitles the applicant over 16 years old to reside temporarily in Spain for a period of more than 90 days and less than 5 years and to carry out a lucrative, working or professional activity as an employed person. In that case, it is also necessary to apply in advance for a residence and work permit for employees, but this must be requested by the employer for the worker.
In both cases, apart from the usual documentation (application form, valid passport, etc.), applicants for the visa will need a medical certificate stating that the applicant does not suffer from any of the diseases that may have serious public health repercussions in accordance with the provisions of the International Health Regulations of 2005, as well as a certificate of criminal record issued by the authorities of the country or countries in which he has resided during the last five years and which must not include convictions for offences existing in Spanish law.
2. Investment-related visas in Spain
Spain has a special visa colloquially known as the "Golden Visa". This visa can be obtained in two ways:
1.- Make an investment in Spain of at least
(a) EUR 500,000 in real estate
(b) EUR 1 million in shares or holdings in a Spanish company;
(c) EUR 1 million in various investment funds;
(d) EUR 1 million in bank deposits in Spanish financial institutions;
(e) EUR 2 million in Spanish public debt.
2.- Start a project in Spain, which is considered to be of general interest for the country.
This visa type will be sufficient to reside in Spain for one year. In the event that investors are interested in residing for a period of more than one year, they may apply for a residence permit for investors, which will have a duration of two years. Once this period has expired, those foreign investors who are interested in residing in Spain for a longer period may request the renewal of the residence permit for successive periods of five years, as long as the conditions that generated the right are maintained.
The numerous detailed requirements for granting this visa type and the specific administrative procedure are not further explained here, due to their extension.
3. Special types of visa in Spain
In Spain there is the so-called family reunification visa. This type of visa allows its holder (a family member of a foreign citizen legally residing in Spain) to reside in Spain for a period of more than 90 days. There is also a specific family reunification visa for family members of citizens of the EU, Iceland, Liechtenstein, Norway or Switzerland.
4. How to obtain Spanish citizenship
Apart from acquiring Spanish nationality by "option" (adoption by Spaniards, determination of filiation, etc.) most immigrants acquire the Spanish nationality by "residence":
· Five years: Granting of Spanish nationality to those who have obtained a refugee status.
· Two years: In case of nationals of Latin American countries, Andorra, the Philippines, Equatorial Guinea, Portugal or persons of Sephardic origin.
· One year:
Ø For those born in Spanish territory.
Ø The one who did not duly exercise his/her right to acquire Spanish nationality by option.
Ø Those who have been legally subject to the tutelage (under the supervision of a tutor), custody or foster care (the foster care that allows the reduction of legal residence to one year, i.e. there is a resolution from the public entity, existing in each territory for the protection of minors and the foster care, with corresponding judicially recognition) of a Spanish citizen or institution for two consecutive years, even if they continue in this situation at the time of the application.
Ø Anyone who, at the time of application, has been married to a Spanish citizen for one year and is not legally or in fact separated.
Ø The widow or widower of a Spanish man or woman, if at the time of the spouse's death they were not legally or in fact separated.
Ø The person born outside Spain to a father or mother (also born outside Spain), grandfather or grandmother, provided that they were all originally Spanish.
1. Individual Income Tax in Spain
The Spanish Income Tax for Spanish residents and nationals taxes the worldwide obtained income, i.e. all income obtained anywhere in the world must be declared in Spain. On the other hand, non-residents will only be taxed on income obtained in Spain.
Tax rates are divided into national and autonomous community tax rates. National tax rates do not vary, while autonomous community tax rates vary from one autonomous community to another. For example in Catalonia the regional scale ranges from 12% for income up to EUR 17,707.20 to 25.50% for income over EUR 175,000.20. It is important to note that both tax rates, i.e. the national tax quota and the regional tax quota, must be taken into account when calculating the total tax burden, as part of the tax is received by the Spanish State, while the other part is received by the corresponding autonomous community.
When the taxpayer's income includes income or capital gains obtained and taxed abroad, the lower of the following amounts will be deducted:
a) The effective amount of what is paid abroad on income or capital gains that are taxed by Spanish personal income tax.
b) The result of applying the average effective tax rate to the part of the taxable base taxed abroad. The average effective tax rate will be the result of multiplying by 100 the quotient obtained by dividing the total liquid quota by the net base.
2. Wealth Taxation in Spain
Both lifetime gifts and transfers upon death are taxed in Spain through inheritance and gift tax. The tax is regulated by a national law but deductions and reductions are regulated differently in each autonomous community. Deductions and reductions under inheritance tax are generally more generous than under gift tax.
In Spain there exists also a wealth tax. However, there is a minimum exemption which for residents will vary depending on the autonomous community (for example in Catalonia it is EUR 500,000, while for non-residents it has been established at EUR 700,000). It is important to note that in the Autonomous Community of Madrid there is a 100% deduction at this moment.
The wealth tax has been discussed in Spain for a long time, especially in relation to the different types of deductions that have been established by the autonomous communities. The Spanish government has recently increased this tax for assets of more than EUR 10 million. On the other hand, there are also proposals to create a new tax that replaces the current wealth tax and that affects assets over EUR 1 million, ranging from 2% for assets over EUR 1 million to 3.5% for assets over EUR 100 million.
3. How Spain views Tax Havens
Spain does not differentiate between a black list and a grey list as the European Union does, but rather establishes a list of those countries that it considers to be tax havens. This list of tax havens can also be modified on the basis of the following criteria:
a) The existence with that country or territory of an international convention for the avoidance of double taxation with an exchange of information clause, an agreement for the exchange of information on tax matters or the OECD and Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by Protocol 2010, which is applicable.
(b) There is no effective exchange of tax information.
c) The results of the inter parties evaluations carried out by the Global Forum on Transparency and Exchange of Information for Tax Purposes.
A new Spanish draft law for the prevention and measures against tax fraud has recently been approved, which extends the concept of tax havens to include those territories
(i) which are facilitating the existence of offshore companies to attract profits with no real economic activity;
(ii) where there is opacity and lack of transparency or territories with which there is no effective exchange of information on the actual holder of the goods or rights;
(iii) where there is low or non-taxation situation;
(iv) with preferential tax regimes that are “harmful” with the intention of giving non-residents favourable treatment over residents.
4. Treaties to avoid double taxation in Spain
Spain is part of the OECD.
Spain has currently signed a total of 103 agreements to avoid double taxation. There are 96 in force and the remaining 7 are in various stages of processing. The vast majority of these treaties involve the income tax of residents, non-residents and companies, as well as the wealth tax. In addition, the double taxation treaties signed in recent years (mainly since 2015) contain a limitation on benefits clause.
1. Probate in Spain
The will granted in Spain must be made before a notary, with no other requirement than the presence of the testator. The execution of said will is communicated to a Ministry of Justice dependent general registry, which in the event of the death of the testator, will prove the last will granted, the date and the notary before which it was granted.
When a will has been granted and an executor and/or splitting accountant has been appointed in it, they will be in charge of carrying it out and awarding the inheritance as provided by the testator.
In the absence of a will, a judicial declaration of heirs must be made before a notary public or before the court of the deceased person's domicile.
The will can and should involve all assets, including those located in other jurisdictions.
2. Trusts and Foundations under Spanish Law
Spanish law does not recognize trusts, or the Private Foundations established for the benefit of a family group. Private Foundations in Spain are non-profit entities that serve social interest purposes. The figure of the Private Foundation for the distribution of an inheritance is not contemplated in Spanish legislation.
3. Other relevant aspects
The will must respect the so-called "legitimate or natural portion" of the heirs, which is an inalienable portion of one or two thirds of the value of the deceased's estate that is reserved by law to the family of the deceased. In Spain, the law grants the “legitimate or natural portion” of the heirs and therefore considers forced heirs (in a certain proportion according to the coexistence of heirs or not) to:
(i) The offspring and descendants of the deceased; they will receive 2/3 of the heir as “legitimate or natural portion”.
(ii) In the absence of offspring, ascendants of the deceased will be forced heirs of their offspring and descendants, receiving 1/2 of the heir as “legitimate or natural portion” if there is no widower and 1/3 if there is a widower.
(iii) The widower in the use and enjoyment of the so-called "improvement third" of the heir. This means that: (i) in case the deceased have offspring, the widower will receive the usufruct over 1/3 of the heir for the rest of the widower´s life; (ii) in case the deceased has no offspring but have ascendants, the widower will receive the usufruct over 1/2 of the heir for the rest of the widower´s life; and (iii) in case the deceased has neither offspring nor ascendants, the widower will receive the usufruct over 2/3 of the heir for the rest of the widower´s life.
Regarding the applicable law, the European Regulation regarding this matter, provides that the Spanish legislation is applicable to the will granted in Spain if the last residence of the deceased has been in Spain. In case of residents in Spain with other nationalities apart from the Spanish, if they want to apply their national legislation to their will, they must expressly state so in the will.
In addition, if there is only one heir, and there is a will that grants it, the mortgage law provides for the possibility of going to the property registry with an instance to register the real estate in the name of the successor.
1. Setting up and running a business entity in Spain
The easiness to set up an entity in Spain depends on the type of entity we want to establish (Sociedad Anónima, Sociedad de Responsabilidad Limitada or Foreign company branch) and, if the shareholders belong to a European country or not.
Once the entity is incorporated before a Notary Public, duly registered at the Companies Registrar and obtains the Tax Identification Number, it can start to run his activity.
No matter the business entity type we choose, the formalities to follow are:
1st: We need to choose a name for the new company and check its availability with the Register of Commerce. Term to obtain the certificate of reservation of name: between 3-5 days.
2nd. Open a bank account on behalf of the new company to be incorporated (“Newco”), this procedure can me made online, the bank will only require the certificate of reservation of name and the Spanish ID or NIE of the person or legal entity who is stablishing the Newco.
3rd.-The shareholder/s of the Newco will have to transfer the money of the initial company share capital to this new account, and obtain the transfer certificates from the bank.
4th- Draft the company by-laws
5th Appear before the public Notary Public (or grant a power of attorney for somebody to appear before the Notary Public) with the documents explained in the previous steps in order to incorporate the Newco; if everything is correct, the Notary Public will authorize the incorporation of the company and we will be able to apply for a provisional Tax identification number for the Newco.
6th After the authorization for incorporation is granted by the Notary Public, we must take the public deed to the Companies Registrar and before the Tax Authorities in order to properly register the Newco, after we finish this step the company can initiate its activity.
The shareholders of the Newco whether they are legal entities or natural persons, if they are not a Spanish nationals or residents, must obtain previously a NIE (Spanish number of foreign identification) if they want to incorporate a company in Spain and/or if they want to legally represent a Spanish company (this formality can take two or three weeks because you need to grant a power of attorney to someone who is physically in Spain to fulfill such formality on your behalf).
2. Entity types in Spain
You can conduct business in Spain through four main means: (i) Incorporating a new Spanish company, (ii) Incorporating a Spanish Subsidiary fully owned by a foreign company, (iii) stablishing a Branch of a foreign company in Spain, or (iv) operating through a Permanent Instalment.
The main types of limited liability companies in Spain, valid for the options (i) and (ii) above, are:
· Sociedad limitada (S.L.) minimum capital : 3.000 Euros.
· Sociedad anónima (S.A.) minimum capital 60.00 Euros.
The options (iii) and (iv) will not need to incorporate a Company in Spain, they will just need to sign in the specific tax registry and get a NIE.
3. Entity holders
You can incorporate a company in Spain with a single shareholder, and Branches or Permanent Establishments can only have one owner.
The administrator/manager/director does not have to be a Spanish citizen, or be a Spanish resident; it will only need to have a NIE.
It is important to bear in mind that in case the administrator of a Spanish Company is resident in another country, or in case the entire Board of Director is resident in another country; the Spanish tax authorities could stablish that the effective residence of the Company is the country of residence of the Administrator or the Board Members.
5. Opening a bank account in Spain
We must take into consideration that in order to incorporate a new Spanish company or subsidiary, we would need to open a bank account as a previous step, where the shareholder/s will have to transfer the initial share capital of the new Spanish company or Subsidiary.
We would not need a Spanish bank account in order to incorporate a Branch in Spain or in order to operate in Spain through a Permanent Establishment, but it would be needed to effectively operate.
Opening a bank account in Spain by a Spanish entity (newly created or not) takes only a couple of days, which is the time that the bank takes to comply with the typical formalities of the international bank system, including: (i) KYC (Know your customer) documentation, and (ii) UBO (Ultimate Beneficial Owner) statement.
Prepared by Nils Döhler and Javier Gaspar.