In recent years, we’ve seen founders, startups and innovators flocking to Barcelona to start their businesses here. The city was recently rated among the top four startup and innovation hubs of Europe. According to Atomico’s recent State of European Tech report, Barcelona was ranked fifth for investment in startups in 2017. The report also named our sunny city as the third most popular European choice for entrepreneurs founding a new startup, falling behind London and Berlin only. Invest Europe also labelled Barcelona the leading Tech City in Southern Europe in their recent examination of entrepreneurial hubs with a focus on the mobile telecoms, e-commerce, gaming and software industries.
While Barcelona still isn’t the next Silicon Valley, we’re seeing a surge in founders coming to Barcelona to kickstart their business, and indeed a life here. So much so that Barcelona Tech City recently estimated that Barcelona-based firms working in digital and tech business have a turnover of 6.7 billion euros and employ some 15,000 workers. That’s astonishing for a city that ten years ago lagged well behind the traditional European commerce and innovation hubs such as London.
This rush to set up home in Barcelona might come as no surprise. A sunny climate, beaches, mountains and tapas make for a stellar quality of life that it seems everyone wants a piece of. But what’s the attraction for particularly foreign founders of setting up shop in Barcelona? Firstly, as an entrepreneur from, for example, the US, Barcelona opens doors to Europe. As home to events such as Mobile World Congress, 4YFN and Smart City Expo, the city’s connections can provide the perfect starting point for founders to access the European market. In addition, it’s proving a popular incubator due to slightly lower levels of competition than, for example, Silicon Valley, New York or London. It’s easier to put your product in front of the people that matter in a smaller startup ecosystem.
A further pull to Barcelona’s shores is the cost saving for founders. Though rates of living have risen in recent years, in comparison to other innovation hubs, the cost advantages of basing yourself in Barcelona to start your business could be staggering. Talent acquisition rates are comparatively low which is great if you’re looking to build a sizable and talented tech workforce from scratch, as are rental prices for both accommodation and office space. This means you can often maximize ROI as you’re bootstrapping and growing your business, and divert funds into getting the word out about your game-changing product. Add to that the groundswell of resources to support young startups, such as cutting-edge coworking spaces, business angels, incubators, VCs, and it might look like a dream recipe for setting up your business in Barcelona.
However - it’s not all plain sailing! As anyone who has set up a business in Barcelona will tell you, the administrative process of starting a business in this city (and Spain in general) can lengthy, complex and expensive. Though we know you’ll be heading into the process with big dreams, energy and high aspirations, the bureaucracy of legally establishing your business can present tough challenges. But don’t worry - you’re not on your own. To help you navigate the world of Spanish bureaucracy we’ve talked to some Barcelona founders to bring you some key tips to bear in mind before starting your business in Barcelona.
So here we go - the step by step of what you need to consider to start a business in Barcelona:
1. Get Your Personal Documents in Order First!
Before even thinking about starting your business, you’ll need to set yourself up on a personal level. First up, you’ll need a NIE number. This is simply a personal identification number that allows you to work as a foreigner in Spain.
You’ll need a NIE to set up a bank account, get a phone contract, set up your home WiFi and a number of vital tasks before even thinking about registering with social security and setting up your business. To obtain your NIE, you’ll need to book a cita previa here (Select Barcelona, and then Certificados EU). If you’re an EU National, you’ll need to bring along to your cita the following:
- The Modelo EX-15 form, which you can download here.
- Your passport, with two photocopies.
- Your empadronamiento, which shows you have a Spanish address.
- Proof of why you need the NIE, which could mean an employment contract with a registered Spanish employer; proof of enrollment in a Spanish university; a company ownership certificate or proof of sufficient funds to live in Spain without working
Note that all these documents will need to be translated into Spanish or Catalan to be presented. You’ll then need to pay a small fee of around 10 euros to the bank, and return the proof of this payment to the police. And there you have it! You’ll be given a signed, stamped piece of paper with your NIE number. There’s no use starting the process of setting up your business until you’ve registered personally, so be sure to take care of that first.
2. Do I Even Need to Register for a Limited Business in Spain?
Setting up a Limited Company in Spain comes with a complex process and high tax rates (more on this later). Before you embark on this journey it’s important to ask yourself whether you absolutely need to base your company in Spain. You have a number of alternative options available to you:
- Go Autonomo. In many cases, it can be simpler and cheaper to keep the HQ of your business outside Spain. In particular, if you’re not based in Spain all year round, or if your employees are spread internationally you might choose to register your company elsewhere. This would mean registering in Barcelona as an autonomo or freelancer. That means your clients retain a percentage of your invoices and pay directly to the Spanish tax authorities on your behalf.
- Sole Trader. As a Sole Trader, you have unlimited liability for your business, though there’s no need to deposit and minimum share capital or have an initial investment. It can be a great option if you’re a one-man band, or if you only employ freelancers in Spain.
- Partnership. A partnership allows you to add structure to a business agreement between multiple parties, without the restriction of a full limited business. It’s not absolutely necessary to do business in Spain, but can protect you in the event of disputes, sale, or renegotiation.
3. Do I Have a Market in Spain?
Before setting up shop in Barcelona, it’s vital to do your homework about whether your product, service or business is actually viable here. Scope out your key competitors, and the state of the industry here in Barcelona. It might be that you need an operating license to set up your business in Spain, or that your industry is heavily saturated here in comparison to elsewhere. Understand how to differentiate your startup from others in your market and stand out from the crowd. Pinpoint the reasons why your business would be a success within Barcelona’s business landscape - this will help you with your marketing efforts down the line too.
4. Wrap Your Head Around Taxes!
Full disclaimer: corporate taxes in Spain are high. In particular in comparison to the rest of Europe. Before you jump in and set up your business here, you need to be prepared for a high rate of taxation on your company’s income worldwide. A breakdown:
The general tax rate is 25%. Young companies pay only 15% on their first €300,000 and 20% on the remainder for their first two years in existence though.
VAT is charged at 21%. Some services may attract a lower rate, and some businesses may be VAT-exempt.
As a full-time employer, you’ll also need to pay a social security contribution on behalf of each of your employees. This equates to about 29.9% of an employee’s gross salary.
Capital gains tax, applied to any profits from the sale of property or investments, is charged at 23% for €50,000 and above, and at 21% from €6,000 to €50,000.
This means it’s crucial to gain a full understanding of your business’ taxation requirements before establishing your business. You wouldn’t want to complete the process and be left asking: should I have done it somewhere else? Indeed, many companies choose to establish their EU corporation in countries with lower tax rates such as Ireland. Therefore, when founding your startup in Barcelona, get to know the tax system and make sure it works for your business before getting the ball rolling.
5. You’re Not Alone!
By this stage, you might be feeling daunted by the prospect of opening your enterprise in Spain. However, one of the key benefits of this vibrant startup ecosystem is that you’re not alone. There are a number of resources and organisations here to help you make your business a success. For instance, Barcelona Activa is the go-to reference point for international and local entrepreneurs in Catalunya, offering vital resources and support for startups. This includes business funding, talent recruitment, business consultation and information, a Technology Park and many more.
Furthermore, to support you in your entrepreneurial journey you’ll need to hire a trusted gestor to help you get your business on its feet. In particular, if you’re not a confident Spanish speaker your gestor will help you gain your initial cita at the notary, get your documentation in order, and help you manage employment and taxation in the long term. OneCoWork’s in-house law firm, Lexidy offer English-speaking legal advice to help you manage the apparently never-ending bureaucracy of founding your business in Barcelona. Get in touch for exclusive rates on their professional services.
Conclusion: A Recipe For Success
So there you have it… our insider tips to think about before founding your business in Barcelona. Ready to take the plunge? Stay tuned for our Recipe for Success - an easy-to-digest, coming soon to help guide you through the process.
If you liked this article, you'll also like this one, by Hubbub Labs' Director of Operations Dan Shepherd. 6 Things to Know Before Starting A Business in Barcelona