Doing Business in Spain

Doing business in Spain is an enticing prospect. It is a large market (46 million people) and a trillion dollar economy. It has a very large expat population and over 75 million tourists per year, which opens a number of unique opportunities. So how do you do business in Spain?

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This guide covers…

This guide offers tips for doing business in Spain. It describes, in particular, how to do business in the area of Andalusia/Andalucía – which contains the Costa del Sol. See a map here. Please note that certain aspects of the law in Spain vary from one “autonomous community” (comunidad autónomalightbulb image - click here for more information on this subject to another.

It is aimed, mainly, at those who wish to do business in Spain without having a physical presence there; for example, by selling goods they make in the US to the Spanish market. However, much of it also applies to businesses established in Spain.

It does not cover the main problems or issues associated with doing business in Spain – for that, see our Guide to Business Issues in Spain.

It does not talk about the legal steps involved in starting a business, nor does it look at business or company structures in any detail. For this information, see our Guide to Starting a Business in Spain and our Guide to Setting up a Company in Spain.

Introduction

Spain, like every country in the world, has its own business culture and ‘insider tips’ for doing well in it.

Spain is an old society, and one that – despite its recent influx of foreigners – is still rather set in its ways. Simply conducting your business in the same way you would ‘back home’ is a risky tactic. You are more likely to succeed if you learn about Spanish business culture.

Yet Spain is, in many ways, at the forefront of the development of businesses and business services in Europe. In particular, its public administration has made rapid strides in the modernisation and simplification of its systems and it is now way easier to do business in Spain than it was when I started in 1985.

There are, of course, a lot of things to think about before you do business in any foreign country – see our Global Guide to Doing Business.

Video guide to doing business in Spain

You can get a quick overview of doing business in Spain by watching this video interview (below) with Spanish legal expert Noelia Luque. Learn more by scrolling down and reading the detailed guide she has written with us.

Choose the right business structure

This is one of the first things you need to think about. Getting it wrong could cost you a great deal of time and money.

This is particularly so if you think your business and its needs are likely to grow. In this case it can be much cheaper to set up an appropriate long-term structure at the outset. However, setting up complex structures at the outset can also waste money if your requirements do not change and so many people follow the wise advice of KISS – “keep it simple, stupid”. If your business becomes a huge success it can afford to pay for the structures it then needs and you can save your precious money at this sage.

The Spanish tax system makes some business structures much cheaper than others. Make sure that you don’t end up paying tax you don’t have to!

Furthermore, some business structures work on a more complex level – some demand more regular tax returns and other filing, for example – which can further increase your costs. some require little of nothing at the Spanish end.

There are several options here: see our Guide to Starting a Business in Spain for details.

Seek professional advice from an accountant or a lawyer to choose the best business structure. It will not always be obvious.

Some of the issues you will want to think about if you want to do business in Spain are:

Using commercial agents in Spain

There is a lot of confusion over the use of commercial agents.

What is a commercial agent?

A commercial agent is a professional responsible for promoting and/or selling goods and services on behalf of one or several companies. The responsibility is usually limited to a particular area: e.g. the within province of Málaga.

They are paid a fee for their work: either commission only or a flat fee plus commission. They will also often have an allowance for advertising or other promotional expenses.

Most agents specialise in a particular type of product or services.

In the performance of his duties, the commercial agent can (within the limits laid down in the law and his contract) bind the company on whose behalf he acts.  The agent does not acquire ownership of the goods sold unless the agent becomes a distributor of the company’s products.

It is important to understand that commercial agents are not employees. They are independent professionals with self-employed status, linked to the employer through a contract. Their clients are their clients, not those of the company.

Your liabilities in Spain if you use a commercial agent

If you sell only through commercial agents, you do not have a physical presence in Spain. You do not have employees in Spain. You do not have a business in Spain.

You will have (you hope!) many customers and be responsible to them for any faults in the goods.

You will be making money in Spain and have tax liabilities in Spain and/or ‘back home’ See our tax guides for more details.

Legal regulation of commercial agents in Spain

In Spain, the legal regulation on commercial agents is established in Law 12/1992. This was prompted by EC Directive 86/653 relating to the coordination of the rights of Member States relating to independent commercial agents.

The legal definition of a commercial agent is “a self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (the principal), or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that principal

The agency contract should specify:

  • A description of the power and authority of the commercial agent
  • The agent’s responsibilities and tasks
  • The area in which the agent shall be permitted to operate
  • The duration of the contract
  • The legal system to have jurisdiction in the case of disputes and the law to be applied. This would usually be the law and courts of Spain (where the agent is based and most of the activity will take place) or the law and courts of your country.

Under the Spanish Commercial Code, an agency agreement should be registered in the commercial register to be effective against third parties. This is important for both parties: the agent and the company.

Commercial agents represent a very effective and economical way to enter the Spanish market.

Responsibilities of the commercial agent in Spain

Above all, the commercial agent must act in the interests of the company or companies he represents.

More specifically, they will usually be responsible for all or some of the following functions:

  • Reporting to the company about market
  • Reporting to the company about its customers and their activities
  • Promoting the companies products
  • Dealing as a first point of contact  with any claims that arise
  • Keeping proper accounts

The precise functions will be set out in the agency contract.

Licensing of commercial agents in Spain

In Spain, a commercial agent (of whatever nationality) representing a foreign company (of whatever nationality) cannot practice until he registers with the chartered institute of agents for the province in which he lives.

Finding commercial agents in Spain

Various websites can help you start your search for a suitable commercial agent. For example, here and here.

Cost of a commercial agent in Spain

The cost of employing an agent is freely agreed between the agent and the company.

It will depend upon the scope of the tasks to be performed and the agent’s assessment of likely sales volumes.

As is so often the case, cheap is not always best.

Using distributors in Spain

Distributors are, superficially, similar to commercial agents but there are important differences between them. Both effectively outsource part of the selling function of your company’s business.

The key difference is that a distributor buys goods on his own account from a manufacturer or intermediary (the supplier) and resells them to customers. He takes the risk. He holds the stock. He pays any import duties etc. The commercial agent merely introduces potential buyers.

The distributor is responsible for claims and after-sales support.

Distributors usually cost you more than commercial agents.

It doesn’t matter much whether your contract is labelled “Agency Agreement” or “Distributor Agreement”. The courts, in Spain or elsewhere, will look at the substance of the agreement, not its title.

Your liabilities in Spain if you use distributors

If you sell only through a single distributor, you do not have a physical presence in Spain. You do not have employees in Spain. You do not have a business in Spain.

You will have only one customer. You will not, in most cases, be responsible to the ultimate buyer for any faults in the goods – but you will have responsibility to the distributor.

You will be making money in Spain and have tax liabilities in Spain and/or ‘back home’. You will have fewer tax headaches in Spain if you use a distributor. See our tax guides for more details.

Finding distributors in Spain

The same websites can help you start your search for a suitable distributor. For example, here and here.

Recommendations are better.

Representative offices in Spain

A representative office is your window on Spain. It is often a step up from using commercial agents or distributors but is also used by companies just starting to do business in Spain.

A representative office is not a separate legal entity from its parent company.

The parent company is responsible for paying its staff and its debts.

In principle, a representative office cannot trade and its business activities are essentially coordination, assistance, market research, marketing etc. Any customers introduced will be processed and invoiced via the parent company.

For tax purposes, a representative office is understood to be a fixed place of business, established by a nonresident company, that pursues purely marketing or informational activities relating to commercial, financial and economic matters but does not conduct any actual business. Therefore there is no tax generated by its activities in Spain, though (of course) any sales made to spain by the head office will be taxes in spain and/or it its own country.

Get to know other business people in Spain

Networking is incredibly important in Spain – more so than in most countries. Many local people and businesses will be wary of doing business with you until you are a ‘known face’.

There are a few ways to make yourself well known and, therefore, well trusted in Spain.

If you’ve got the money, there are ways to ‘fast track’ the process. You could hold events for the influential, become involved with local charities or even sponsor one of the local sports teams. You can also advertise.

Less expensive, but still pricey, is the option of joining one or more of the ‘elite’ social clubs in the areas of Spain where you want to do business. You’re likely to bump into the higher echelons of Spanish business at a golf club, or at one of the other private clubs in the area or even at any of the many local marinas.

A slower and much cheaper, but eventually just as effective, approach is the ‘softly, softly’ method:

  • Join the Chamber of Commerce and attend its networking events
  • Make friends with other local business owners
  • Use Spanish services for your day-to-day needs (shopping, haircuts, a quick beer after work), rather than relying only on businesses targeted towards expats. This is particularly important if your business is, itself, not aimed exclusively at expats.
  • Consider doing joint promotions (such as a discounted drink at your beach bar after a customer has had a surfing lesson)
  • Use local suppliers for your business and always pay on time
  • Check sites like meetup.com for relevant meetups between business people (e.g. this one, in Marbella).

Even this may still be too much for you. You might simply want to sell the surfboards you make in England to shops in Spain.  Even in this case, though, some personal contact – getting to know people and getting known – will help a lot. If you appoint a distributor or agent, visit them – several times. If you want to appoint your own representative – to run a “representative office”, that is even more important.

Above all, learn the language. Many Spanish speak very good English, but you will find that social barriers break down much more quickly if you speak even a little Spanish. Luckily, all of the tips outlined above are great ways to brush up on your language skills.

Hire local staff in Spain

This is another good way to get to know the locals – and it comes with other advantages.

Having Spanish staff (or, perhaps, a Spanish business partner) helps greatly with the language barrier. Local employees will also be able to help with cultural differences: knowing which businesses are likely to operate the ‘siesta’ system of opening hours; reminding you when a national holiday or staff-member’s saint day is coming up; and knowing the correct approach to take to get the best out of contractors and suppliers.

Importantly, it will also give you credibility within the community. You will make Spanish contacts faster and you will be seen as a job creator – a valuable label in a society with such high unemployment.

If you are thinking of opening a representative office to develop your business, it is usually better to employ a local person or people in that office than it is to parachute somebody in from your head office. Of course, this means that they will need to be properly trained and – usually – that they will need to travel to your country to see your operation.

Choose the right premises for your Spanish business

Most major cities in Spain have what expats call the ‘old town’ or a commercial area, where many traditional businesses of a certain type tend to cluster together. You will find streets full of lawyers and squares full of restaurants.

While an outstandingly good building for a great price might be worth breaking away from the crowd for, as a rule it is better to be where the Spanish will expect you to be! This will increase foot traffic and make your suppliers happy. It also means you can learn from other, similar businesses as you go along.

However, if you are simply selling things you have produced ‘back home’, you may well not need premises at all.

Don’t spend too much on advertising in Spain

This may seem counter-intuitive, but it’s important if you’re looking to attract a Spanish clientele.

Spanish people are suspicious of businesses that spend lots of money on flashy marketing campaigns. Your face on a billboard is likely to convince locals that you’re a con-man rather than a high-powered business wiz. They are much more likely to use your services if they hear of you through a friend or associate. Yet another reason why making contacts is so important!

Once you are well known. advertising can keep things on the boil.

Of course, to start building up word of mouth exposure you need to get your name out there in the first place. A low-key campaign over social media and a few newspaper advertisements is generally the best way to go. Social media is cheap, targeted and the Spanish, especially the younger generation, spend a great deal of time on Twitter and Facebook!

If you’re mainly targeting tourists or expats, of course, this will not be an issue. Tailor your marketing to suit the group you want to attract.

If you are selling via an agent or your own representative, make sure that you both clearly understand and agree the advertising policy. An agent is likely to want some advertising spend to back up his efforts.

Conclusion

Becoming a respected business in Spain will take time but, once you’ve got there, you’ll find that the locals and other business owners are friendly and helpful. Just bear in mind that things will work very differently here than they will ‘back home’.

You may also want to read:

Doing business in Spain: etiquette tips for the traveller – Some handy tips from Strong Abogados

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