Monday, 23rd September 2019
LEGAL Article
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This Month's Magazine
Buying a business in Spain

Buying a business in Spain

The success or failure of running a business in Spain depends on getting it right from the start.

Each year thousands of foreigners will buy a bar or restaurant in Spain with varying degrees of success and the reason why a lot of these small businesses go to the wall is due to the lack of or total disregard for the necessity to adhere to legal requirements. The whole process can be emotionally and financially ruinous, all for the sake of ignorance or irresponsibility.

Reputable estate agents will have valuable knowledge of the local area and of the viable and successful businesses available, but tend to be passed over by naïve and ill informed buyers, purely for the sake of saving a few hundred Euros and, more often then not, falling prey of unscrupulous middle men.

Potential buyers should always keep in mind that the laws in Spain are very different from those in England.

The choice of bars and restaurants ranges from small back street watering holes to full venues or huge 100+ covers restaurants and come with a price range to match, starting from just tens of thousands right through to millions of Euros.

By using local agents and adhering to the laws, there are many opportunities to make a good living and, like running a decent public house at home, by realising that the rewards only come with hard work and long hours. If however you go into your new business venture like an extended holiday, then the blame for any failures will firmly be at your own feet.

Location is very important, if you intend to serve a tourist market, the right location will provide not only seasonal trade but the chance to tap into the huge foreign resident market.

Size is another consideration, the bigger the bar, the bigger the expense, more staff, higher rates and electricity plus the higher risk of staff pilferage. You can’t have eyes at the back of your head; therefore you should only buy a business that you can comfortably run yourself with just the people you trust.

Every bar in Spain must have a licence, by attempting to run a bar or restaurant without one you are In effect breaking the law and if found out you will almost certainly be closed down immediately, the police are very strict on this and non compliance could cost you everything.

Among other little known facts, to stage live music in a bar in Spain you must have a music license, these are rare and difficult to obtain, the EEC regulations for such venues are strict and complex, so much so that a large number of English run bars turn a blind eye to the law and are therefore running a very real risk of prosecution.

 


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If you employ staff on a cash basis, you also stand the chance of being prosecuted, the Spanish Authorities are far more aware of the large non tax paying and often illegal staff that tend to make up the majority of those employed by British bar owners then is generally thought; it is imperative therefore that you should seek advice on contracting staff from your “Lawyer” and bear in mind at all times that workers under Spanish Law, whether English or Spanish, are very well protected. Non Spanish nationals without a NIE number working for cash in hand are illegal, this does include British citizens.

Leasehold properties are the most popular choice as they are easy to buy and sell on. Most Spanish legal leases are for a 25 years duration, giving you a real chance to make a go of the business, without the threat of constant impending eviction hanging over you.
The rent agreed on take over of a leasehold business can only be increased once a year by an amount equal to the rise in cost of living (R.P.I.), as set out by the Spanish statistical bureau. Normally the price asked for the lease will include goodwill, fixtures and fittings.
When initially purchasing, the buyer must pay at least one month rent in advance as a refundable deposit (or fianza). Almost always the lease will contain reference to “Participation”, this means that the landlord can claim a percentage of a (traspaso) sale as a going concern of the business, this is normal practice and the percentage can vary. Typically “Participation” will amount to about 15% of the transfer (sale) price.

All business in Spain are required to submit annual accounts, it is important to ensure that a suitably qualified book keeper or accountant is employed to look after this important side of the business. There are two levels at which a business must be registered in Spain for taxation, las tasas de licencia at local level with the Town Hall to obtain an opening licence (licencia de apetrura), which will clearly define your business and the way in which it will trade and at national level with Hacienda, which is the equivalent of the Inland Revenue. You will need to be fluent in Spanish to undertake the form filling yourself; otherwise the services of a “Gestoria” will prove invaluable if not essential.

Finally, whether you are resident in Spain or not, if you have an income here you are liable for tax payments and a company implying people will also have to pay social security on their behalf.

By sticking to the rules and getting it right from the start, running a business in Spain can be both enjoyable and profitable, but by cutting corners you could be breaking the law.

Please note that this information os given for guidance only. You must always consult a lawyer or adequate professional to examine your own particular case.  



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