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    Tenerife Business » Useful Information » Buying a Business in Tenerife » Buying a Tenerife Business in the New Spanish Economy
Updated: 11-02-2014

Buying a Tenerife Business in the New Spanish Economy


It’s certainly no secret that Spain’s economy has had a rough few years; but with every cloud comes a silver lining, and a new area of opportunity. Over the past few years the government has undertaken a series of radical labour reforms which now directly benefit new business owners and investors in Spain.

 

Various incentives, such as tax breaks, social security deductions, and updated labour laws, are helping to encourage the government’s new vision of an integrated and updated economic model by helping newly self employed people and small businesses stimulate job growth. The aim is to integrate Spain within EU economic guidelines more efficiently by encouraging entrepreneurship – especially from foreign nationals and Spanish youths.

 

Easy to apply for Visas into Spain

 

This means that it has also become easier for eligible Non-EU nationals to apply for residency permits and visas into Spain. International entrepreneurs (those undertaking ‘innovative activities’ with special economic interest surrounding job creation) may apply for a 1 year visa, and then afterwards apply for a business visa. Investors (with sufficient investment capital) may first apply for an extended stay visa lasting 1 year, and then apply for an investor’s residency permit, which is renewable thereafter. It has also become easier for Spanish companies to hire highly educated or qualified non-EU nationals.

 

New Legal Structures when you Buy a Business

 

So which new ways can help you personally save money when you buy a business in Tenerife? The incentives that you or your employees may qualify for vary depending on whether you are self employed or a company and what you or your employees may qualify for. The government has also added two new legal structures ensuring added protection and cost cuts for both self employed and small businesses respectively: Emprendedor de Responsabilidad Limitada and Sociedad Limitada de Formación Sucesiva (SLFS).


Those who choose to be an Emprendedor de Responsabilidad Limitada (which translates as Limited Liability Entrepreneur) are protected, under certain circumstances, from their business debts affecting their permanent residence. SLFS companies are handled much in the same way as S.L.s, except that they have no minimum start up capital (S.L.s cost a minimum of 3000 €) and there are extra measures to protect third parties– partners and directors of an SLFS may be jointly liable for the minimum share capital in the event of dissolution, meaning you may have to pay more than an S.L. if your business fails.

 

Incentives for New Autonomos

 

When you first set up or take over a business and decide on its legal structure, it is also a good idea to declare yourself as a new autonomo (self-employed), as well. Even if you buy an existing business, in the eyes of the system you will be newly registered, and so therefore the following benefits may be applicable to you:

 

Social Security Deductions and Bonuses for Young Autonomos:

  • All men younger than 30, and all women younger than 35, qualify for a 30% reduction in social security for 15 months, and then a 30% bonus for 15 months after the reduction.
  • If you are younger than 30 and you haven’t registered for social security as an autonomo, or if you have not been registered as self employed for the past 5 years, you are entitled to a reduction of 80% for the first 6 months, then a reduction of 50% for another 6 months, followed by a reduction of 30% for 3 months, with a final bonus of 30% for 15 more months afterwards.
  • If you are disabled and it is your first time paying social security as an autonomo, you are entitled to an 80% bonus in the first 6 months and a 50% bonus for the next 54 months.
  • If you are less than 35, disabled, and either haven’t registered for social security as an autonomo, or haven’t been self employed for the past 5 years, then you are eligible for an 80% reduction in social security payments for the first year, and then a 50% bonus for 4 months thereafter.

Social Security Deductions and Bonuses for Autonomos that are 30 years or older:

  • If you are 30 years old or older and you haven’t registered for social security as an autonomo, or if you have not been registered as self employed for the past 5 years, you qualify for a reduction of 80% for the first 6 months, then a reduction of 50% for another 6 months, followed by a final reduction of 30% for 6 more months.
  • If you are 65 with 38.5 years worth of social security paid, or 67 with 37 years of social security paid, then you are entitled to 100% off your social security payments until the day you stop being self employed (however this doesn't’t apply if you work in IT)

Other Social Security Deductions available for Autonomos:

  • If you are in part time employment as well as newly self employed, you are eligible for a 30% social security bonus for 18 months, and then a 15% bonus for another 18 months.
  • If you are in full time employment as well as newly self employed, then you qualify for a 50% bonus for the first 18 months, and then a 25% bonus for the next 18 months.
  • New autonomos who collaborate with family member may also be entitled to a social security bonus of 50% for 18 months.

It is worth noting that these reductions are only valid for autonomos who do not have any employees.

 

Incentives for Buying a Business in Spain

 

Once both you and your business are set up, there are even more ways your company can take advantage of extra employment incentives; these will be covered in next month’s article about new possible ways you can save money whilst running a business in Tenerife. For now, however, there are still a number of new tax incentives to take into account before starting your Tenerife business. A particularly notable tax incentive stipulates that all companies with a turnover of less than 10 000 000 Euros may apply for a corporate income tax deduction of 10%, as long as these profits are reinvested.

 

As well as encouraging foreign investment and job creation, the government has also set in motion plans to encourage the areas of industry which it believes are vital for Spain’s future growth. Tax deductions related to research, development and technological innovation, or information communication technologies (RDI deductions) have been changed so that the tax payer, under certain circumstances, will be able to recover all RDI deductions in their tax returns.

 

Why Choose to Buy a Business in Tenerife?

 

Spain’s labour reforms reflect the government’s aspiration to usher in new talent from Europe and the rest of the world while encouraging its own labour force into various forms of job-creation and production. Tenerife in particular is at the forefront of change; for years now Tenerife’s government has been successfully edging towards catering for richer tourists with more spending power – new types of tourists need new attractions, and new attractions need new kinds of entrepreneurs.

 

It’s working, too. Foreign tourist spending throughout the Canary Islands is at an all time high, representing one fifth of all tourist spending in Spain for 2013, with an impressive rise of 10.1% since 2012. Official statistics contradict the rumours whispered among defeated locals; spending by tourists staying in hotels has risen more than any other – and tourism around the Canary Islands has actually had a record-breaking year with 10 591 260 inbound international flights; that’s a rise of almost 5% since 2012. These figures, among countless others, show that the old styles of business are failing because the tourists in Tenerife are no longer looking for watered-down alcohol and cheap thrills, but are instead spending their money on fine dining, spa trips and champagne.

 

Spain really is updating itself into a viable economy that investors and small businesses can excel in, and Tenerife offers a unique hotspot of opportunity, especially for those looking to use these incentives to enter the tourism industry at the lowest comparative cost for such a high potential return.

By Emelia Beeson


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