Located off the east coast of Spain, Ibiza, known locally as Eivissa, is the third largest of the Balearic Islands after Majorca and Minorca and covers an area of 225 square miles. Ibiza’s beautiful beaches and reputation as a party destination for young sun-worshippers mean that every summer thousands of tourists from all over Europe descend on the small island. The majority of business opportunities in Ibiza are linked to the tourist and services industries, so if you plan to start a business in Ibiza, you must be realistic about opportunities and remember that your business may be seasonal. It’s important to do as much research as possible before you make any decisions and have plenty of money to support yourself until your business begins to make a profit. Reliable information in English specifically about Ibiza is hard to find so it’s vital to understand as much Spanish as possible both before you begin your research and once you begin to set up your business in Ibiza.
Become a member of the American Chamber of Commerce in Spain or the British Chamber of Commerce in Spain, which will give you advice and support in English about doing business in Spain and can direct you to information sources about starting a business in the Balearic Islands and Ibiza. The American Chamber of Commerce also has several useful publications that you can download from its website, including one called “Doing Business in Spain.”
Learn Spanish if you don’t already speak it. Although English and German are widely spoken in resort areas of Ibiza, the language used in business is Spanish, often referred to as castellano, and it will also help considerably if you understand the local Catalan dialect called ibicenco. Don’t let anyone persuade you that you won’t need to speak Spanish. Once you begin to set up your business, you’ll need to deal with the local officials, suppliers, customers and staff and you won’t be able to do this effectively unless your Spanish is fairly fluent.
Go to Ibiza, rent a property there and stay for at least a year to research the business climate in detail and make valuable business contacts. It can be useful to get a temporary part-time job in a business similar to one you’re thinking of setting up. This will also help you to practice your Spanish in a business context and find out what the business is like on a daily basis. A year may sound like a long time, but, because Ibiza is primarily a vacation destination, this will give you a realistic year-round picture of your chosen business sector. A place that is crowded with customers in July, at the height of the tourist season, may be deserted in November.
Apply for a Foreigner’s Identification Number, known in Spain as a Número de Identificación de Extranjero (NIE). This number identifies you to the Spanish tax authorities and is needed for all official transactions and procedures in Spain. Apply for an NIE as soon as possible after arriving in Ibiza because you’ll need it regularly as you go through the process of setting up and running your business. You can go to any national police station and complete an application form. You must bring your passport and proof of residence, such as a rental or sales contract. Your NIE will usually take two to four weeks to process and you should collect it from the police station. Staff will advise you about the collection date.
Find independent professionals who can advise you during the setting up and running of your business in Spain. The country is infamous for its bureaucracy and it’s your responsibility to obtain all the correct licenses to run your business and to ensure you pay the right taxes at the right time. There are two types of adviser that are essential if you’re setting up a business in Ibiza: a lawyer who understands the local business climate and a tax adviser who will deal with your company and your personal finances. Get recommendations from someone you trust within your chosen business sector, but don’t use a lawyer or any professional recommended by anyone with a financial interest in selling you a business. The American Chamber of Commerce and your embassy in Spain can provide lists of independent lawyers, but they won’t usually make recommendations.
Decide on the best business structure for your company. The most popular business structures in Spain are sole trader, limited liability company and public limited company. The simplest legal business entity and one that doesn’t require a minimum investment is a sole trader, known as an empresario individual, but this can be risky because you are personally liable for all company debts. The most common type of business structure, especially for small- and medium-sized businesses, is a limited liability company. This is called a Sociedad de Responsabilidad Limitada (SL) and requires a fairly small minimum investment of just over €3,000 and your liability is limited. A public limited company is known as a Sociedad Anónima (SA) and is similar in structure to an American corporation, but requires a much larger investment of just over €60,000. This is usually the choice of larger businesses who want to make a significant investment in Spain.
Look for suitable business premises. They are known as locales in Spain and although you will see many signs advertising premises privately, you should use the services of a reputable commercial agent or a real estate agent who deals in commercial properties. If you spend some time on Ibiza, you will become familiar with the more reliable and efficient commercial agents. The most common way of acquiring business premises in Spain is on a leasehold basis. You buy the lease with a one-off payment and then pay rent on a regular basis, but you can sell the lease if you wish. Always take independent legal advice about the terms of the lease before parting with any money.
Incorporating Your Company
Choose a name for your business, check that it is not already in use and submit it to the Mercantile Registry. You can do this on their website or at the nearest Mercantile Registry office, which is in Palma, Majorca. Your lawyer can do this on your behalf. If no other company is registered under the same name, you will receive a Negative Name Certificate, which you will need to incorporate your company.
Apply for a provisional company tax identification code, which is known as a CIF, and register for VAT, known as IVA in Spain. You or your financial advisor can do this at the tax office that is nearest to your registered address. Any business or self-employed person in Spain must register for VAT.
Open a company bank account and deposit the required amount of capital. You will need your CIF and your VAT number to do this. Once you have deposited the capital, you will receive a certificate proving that you’ve paid the money into the account. You can’t withdraw this money until the company has been fully incorporated.
Your lawyer will then prepare the deed of incorporation, which must be signed in front of a notary. Ensure that you bring identification for all shareholders with you. Once the deed of incorporation is signed, your company is a legal business entity. Take advice from your lawyer and make sure you understand what you are signing well in advance of this point.
Before You Begin Trading
Visit your town hall to ask about permissions and licenses that are required before you can start trading. You lawyer will be able to advise you on the necessary permissions and obtain them on your behalf, but you should allow plenty of time for officials to examine your application, carry out inspections and give you the licenses. You will need the following permissions to start most businesses in Spain: a health and safety certificate; a building license if you plan to make any structural alterations to the premises; a first occupation license if you’re the first business to occupy the premises; a food handler’s certificate for all your staff if you plan to serve food and, finally, an opening license. You can’t get your opening license until you have all the other required licenses. Procedures are complicated and requirements change regularly, so always use the services of a lawyer who is familiar with procedures in Ibiza.
Pay 1 percent of the share capital in transfer tax and stamp duty (ITP and AJD). This must be paid within 30 days of incorporation and you will need your CIF, your deed of incorporation and a copy of your registration with the Mercantile Registry. Your lawyer can arrange this for you. Then register your company on the Census of Taxpayers. You will need to provide information about your business, the premises you will trade from and the tax system you have chosen. Your lawyer and financial adviser can help you with these steps and complete registration on your behalf.
Register for Business Tax, which is known as IAE. Your financial advisor can do this on your behalf and, although you will not have to pay IAE if your annual turnover is less than €1 million, you must still register. Once you have done this, you must register for Social Security within 30 days of your Business Tax registration and before you start trading. You will have to pay social security contributions for yourself and your employees. Await the arrival of your opening license and begin trading.
Enlist the help of a trusted Spanish-speaking friend to help you through the early days of research and setting up your business.
Beware of rogue commercial agents and those selling businesses over the Internet. Always wait until you are in Ibiza and are familiar with the business community and business opportunities before you commit yourself.
If you take on an established business, be aware that you also take on its debts, its staff and contractual obligations, as well as any ongoing disputes.
Don't sign anything until you have taken independent legal and financial advice.
- "Making a Living in Spain"; Anne Hall; 2005
- "Living and Working in Spain: A Survival Handbook; David Hampshire; 2009
- Invest in Balearics
- Teufelsinsel-2 image by wiko from Fotolia.com