Starting a company in Spain is a challenge that entails various responsibilities, especially in the tax field. Making mistakes in this area can lead to sanctions and legal complications that affect the viability of the business. The tax mistakes most commonly made when starting a company and strategies to avoid them are detailed below.
1. Not choosing the right legal structure
Choosing the legal form of the company is fundamental, as it determines the tax obligations and legal responsibility of the partners. Opting for an inappropriate structure can result in a higher tax burden or unforeseen personal responsibilities.
How to avoid it:
- Analyse the available options: In Spain, the most common legal forms are the self-employed, the limited company (SL) and the public limited company (SA). Each one has different tax and legal implications.
- Consult a legal and tax advisor: A professional will be able to advise on the most suitable structure according to the characteristics and objectives of the business.
2. Ignorance of tax obligations
Many start-ups underestimate the complexity of the Spanish tax system. Not being aware of tax obligations can result in penalties and surcharges.
How to avoid it:
- Find out about applicable taxes: It is essential to be familiar with taxes such as Value Added Tax (VAT), Corporate Tax and Personal Income Tax withholdings.
- Establish a tax calendar: Keeping track of tax filing and payment dates helps to avoid delays and penalties.
3. Not separating personal and business finances
Mixing personal and business accounts makes financial management difficult and can lead to problems with the tax authorities.
How to avoid it:
- Open a bank account exclusively for the business: This makes it easier to keep track of income and expenses, and provides clarity in case of audits.
- Keep orderly accounts: Record all the company’s financial transactions in detail.
4. Errors in invoicing
Issuing incorrect or incomplete invoices is a common mistake that can affect the deductibility of expenses and generate tax problems.
How to avoid it:
- Include all mandatory information on invoices: Name and tax ID of the issuer and recipient, date, invoice number, description of services or products, taxable amount, VAT rate applied and total.
- Use reliable invoicing software: These tools help automate the process and reduce errors.
5. Not taking advantage of tax deductions and allowances
There are various deductions and allowances designed to encourage investment and entrepreneurship. Not taking advantage of them means an unnecessarily high tax burden.
How to avoid it:
- Find out about the tax incentives available: For example, deductions for investment in R&D&I, for job creation or for employee training.
- Seek advice from a tax expert: A professional can identify the applicable deductions and how to benefit from them.
6. Not keeping proper accounts
Disorganised or incomplete accounting can lead to incorrect tax returns and penalties.
How to avoid it:
- Implement an efficient accounting system: Either through specialised software or by hiring a professional accountant.
- Perform regular bank reconciliations: This ensures that accounting records match bank movements.
7. Ignorance of local and sectoral regulations
In addition to general tax laws, there may be specific regulations depending on the geographical location or sector of activity.
How to avoid it:
- Research applicable regulations: Consult with local and sectoral authorities to understand specific obligations.
- Stay up to date on legislative changes: Laws can change; it is vital to stay informed to ensure compliance.
8. Not planning for the long term in tax terms
Focusing solely on the short term can lead to inefficient tax decisions that affect future profitability.
How to avoid it:
- Develop a long-term tax strategy: Consider how current decisions will impact future tax burdens.
- Periodically review the company’s tax situation: This allows the strategy to be adjusted according to the evolution of the business and changes in legislation.
Conclusion
Tax management is a fundamental pillar in the success of a company. Avoiding the aforementioned mistakes and adopting proactive tax practices not only prevents penalties, but also optimises the tax burden and contributes to the sustainability of the business. Having professional advice and staying informed are key to successfully navigating the complex Spanish tax landscape.
At Gutiérrez Pujadas & Partners, we have a team specialising in tax advice for entrepreneurs and SMEs, who will help you avoid the most common tax mistakes and comply with all your tax obligations from day one. We know that every company is unique, which is why we offer a personalised service tailored to your needs, so that you can focus on growing your business without worrying about penalties, surcharges or non-compliance. If you are thinking of setting up a company or need to review your current tax situation, contact us today and request an initial consultation with no obligation. We will help you build a solid tax foundation and make the most of the advantages offered by Spanish legislation. Avoid costly tax mistakes: leave your taxes in the hands of experts.