Spain is an attractive market for Dutch companies. It is a large country, with more than 49 million inhabitants, a strategic location and plenty of opportunities for companies seeking international growth.

However, anyone who thinks that doing business in Spain simply means transferring the Dutch business model to a sunnier country may be in for some surprises.

Doing business in Spain requires more than knowledge of Spanish laws and regulations. You also need to understand how business is conducted in Spain.

First question: how should you enter the Spanish market?
One of the first questions when expanding into Spain is which legal structure is most suitable.

Should a Spanish company be incorporated immediately? Would a branch of the Dutch company be more suitable? Will you initially work with a local commercial partner or agent? Or can you start from the Netherlands and establish a Spanish structure at a later stage?

There is no standard answer that applies to every business.

The most suitable structure depends, among other things, on the nature and duration of the activities in Spain, the desired level of presence, the hiring of staff, liability risks and the tax consequences of the activities.

The Sociedad Limitada (S.L.), broadly comparable to a Dutch B.V., is a commonly used corporate form. However, that does not automatically mean it is the best solution from day one for every foreign company.

It is therefore worthwhile determining the structure before expanding and only then proceeding with incorporation, recruitment and contracting. In certain situations, other structures may better meet the company’s needs during the initial phase.

Incorporating an S.L. is only the beginning
When the decision is made to incorporate a Spanish company, various formalities must be completed. These include obtaining Spanish tax identification numbers, executing the deed of incorporation before a notary, registration with the Spanish Commercial Registry, tax registration and, depending on the circumstances, registration with the Spanish Social Security system.

Those formalities can be arranged.

Things become more interesting once the company actually starts operating. At that point, Spanish rules in areas such as employment law, taxation, commercial contracts and corporate law come into play.

And this is precisely where we often see foreign companies relying on their own frame of reference for too long: they continue using documents, procedures or structures designed for their home country without adapting them sufficiently to the Spanish legal framework.

For example, translating a Dutch employment contract into Spanish does not automatically turn it into an employment contract that complies with Spanish employment law.

The same applies to general terms and conditions, commercial contracts and agreements with representatives and distributors.

Translation is not the same as adaptation to Spanish legal and business reality.

Spanish culture also plays a role
A sound legal structure is essential, but understanding how business is conducted in Spain can also make a real difference. Dutch people are generally quite direct. We get to the point quickly, want clarity about where we stand and believe that an agreement is an agreement. In Spain, the path towards that agreement may be different.

Personal relationships often play a greater role. Taking time to get to know each other, build trust and invest in a business relationship is not necessarily inefficient. It may be part of the process itself.

A Dutch person may regard a clear discussion or a direct “no” as efficient. In Spain, the same directness may sometimes come across more harshly than intended.

Moreover, a positive response during a conversation does not always mean that the deal has already been finalised. Decision-making may take more time and may work differently within organisations than you are used to.

This does not mean that there is one single Spanish way of doing business. Negotiating with an international technology company in Madrid is different from doing business with a family-owned company in Andalusia or an international company based in Barcelona.

However, understanding these cultural differences helps you interpret negotiations more effectively, manage expectations and avoid misunderstandings.

Not everything has to be done “the Spanish way”
Adapting does not mean that a Dutch company has to abandon its own way of working. Quite the opposite.

Dutch companies are often valued precisely for their structure, reliability, planning and clear communication. The key is to retain those strengths without assuming that the Spanish market works in the same way as the Dutch market.

This is also important when hiring staff.
Are you hiring staff in Spain? You will not only have to deal with different employment rules, but also with different expectations in the workplace. These may relate to hierarchy, communication, working hours and the relationship between employer and employee.

A successful expansion therefore requires more than simply incorporating a company correctly.

The classic pitfall: start operating first and arrange the legal structure later
We regularly see companies launch their commercial activities first and then try to straighten out the legal structure afterwards.

The first employee has already been hired. A local representative has started work. Office space has been rented. Contracts have been signed. The first invoices have been issued.

And only then does the question arise: have we actually structured our activities in Spain correctly?

Sometimes the situation can still be resolved without major problems. In other cases, tax, employment, corporate or contractual consequences have already arisen that could have been avoided with proper preparation or managed differently.

For that reason, it is advisable to answer a number of questions before actually commencing activities in Spain:

• What exactly are we going to do in Spain?
• Do we need a Spanish company for this?

• Where does the tax presence arise? Could there be a permanent establishment or other tax obligations in Spain?

• Are we going to hire local staff?

• Who may represent the company and sign contracts on its behalf?

• Are our existing contracts suitable for Spain?
• Which licences, registrations or sector-specific rules apply?
• How should cooperation with agents, distributors or commercial partners be structured?
• And perhaps just as importantly: do we know the market we are entering?

Spain offers many opportunities, but preparation is essential
Spain is an attractive market for Dutch companies and foreign investors. Foreign companies cite its geographical location, market size, access to other markets and infrastructure among their reasons for establishing themselves in Spain.

However, international expansion also means entering a new legal and business reality.

Our advice is therefore simple: do not just know the rules; understand the country and the market as well.

Anyone who understands how the Spanish legal system works and how business is conducted locally starts with a considerable advantage.

And that first cup of coffee before discussing the contract?

Perhaps it is not wasted time at all. It may be part of doing business.

About OTIS Legal Group
OTIS Legal Group assists Dutch and international companies with their activities in Spain. Our services range from establishing the appropriate legal structure and incorporating a Spanish company to employment law, contracts, taxation and ongoing legal support for businesses in Spain.

We combine knowledge of Spanish law with an understanding of the Dutch way of doing business. Because cross-border business is not only about rules. It is also about understanding one another. Meet our team here.

With OTIS, you are better informed in Spain.