Small and medium-sized enterprises(Pequeñas Y Medianas Empresas, or PYMEs for short) generated around 90% of total economic output in Spain in 2015. The vast majority of these were in the legal form of Sociedad Limitada (Spanish limited liability company). There were over 1.1 million Sociedades Limitadas compared to only around 90,000 Sociedades Anónimas (Spanish public limited companies), and only just under 4,000 of these public limited companies were so-called large companies with over 250 employees.
Due to its prevalence and importance, it is therefore fair to say that the Sociedad Limitada dominates the Spanish business landscape alongside the sole trader.
The limited liability, the low share capital of EUR 3,000 and the manageable administrative costs of the Sociedad Limitada are the main reasons for its popularity.
Despite its simplicity, the scope of the obligations should not be underestimated.
The following list is intended to provide a brief overview:
Accounting obligations of the Sociedad Limitada
A Sociedad Limitada is obliged to keep the following accounts:
- Stock and annual report book.
The detailed opening balance sheet of the company is presented at the beginning of this book. The corresponding amounts and balances are shown at least quarterly, and the balance sheet at the time of the annual financial statements and the income statement are presented.
2. account journal
The movements that occur are recorded every day. Instead of on a daily basis, entries can also be made at longer intervals of up to one month, as long as these movements are noted in other books.
3. protocol book
The shareholders’ meetings and the matters discussed and resolutions passed at these meetings must be documented in this book, which must be signed in an appropriate manner.
4. shareholder register
All shareholders and the shareholdings held by them must be recorded in this book.
5. contract book
If it is a one-person company, i.e. there is a single shareholder (regardless of whether it is a natural person or a legal entity), all contracts between the company and its sole shareholder must be recorded.
The books described must be kept for at least six years, counted from the last entry, although it is advisable to keep the entire documentation for at least 15 years, as liability constellations in particular can arise in which the possibility of falling back on these documents would be decisive. In view of the ease with which even sheets printed on both sides can be archived as a PDF file in minutes using the cheapest document scanners (200 – 300 euros), no important document should be destroyed, at any time, without at least having made a digital copy first.
Obligations towards the commercial register
Every Sociedad Limitada must keep its accounts in an orderly manner. In addition to the obligation to keep accounts, as we have seen above, it is particularly obliged to keep a minute book and a list of shareholders. These must be certified by the local commercial register. In the past, this meant that the books had to be submitted there in physical form, but nowadays this can also be done electronically.
Within one month (Article 279.1 of the Law on Capital Companies [in Spanish: Ley de Sociedades de Capital]) after the annual accounts have been approved, the company or the director is obliged to submit the following documents to the Commercial Registry:
- Signed application from the legal representative.
- Certificate from the body responsible for approving the annual financial statements.
- The general data sheet for identification.
- Annual report of the company
- Balance sheet
- Profit and loss account
- Statement of changes in equity.
- Report on the impact of business activities on the environment.
- Report on own investments.
- Auditor’s report
- Management report
- Cash flow statement
The last three documents are of course only relevant if an auditor’s report is to be submitted.
If the documents submitted are complete and do not contain any contradictory anomalies, the commercial registrar will then carry out a rough check within a period of 15 days. If no recognizable errors are found, the registrar will proceed with the entry. Otherwise, the documents will be returned with details of the errors so that they can be corrected.
Tax obligations
- Corporation tax(Impuesto de Sociedades, IS for short)
The general rate is 25%. However, depending on the company’s registered office and other special features, the rate may be 1, 10, 15, 20, 28 or 30 % instead of 25 %.
- Value added tax(Impuesto sobre el Valor Añadido, short: IVA)
A VAT return must be submitted every quarter (and an annual VAT return), which reflects the VAT collected on invoices issued and the VAT paid on invoices paid by the company.
As VAT is a tax to be borne by the end consumer, the company compares the VAT it has paid with the VAT it has collected. If it has collected more VAT than it has paid itself, it pays the difference to the tax office.
- pay legally required tax withholdings to service providers or landlords to the tax office (part of the invoice amount of individual service providers is not paid to the service provider – as shown in their invoice – but directly to the tax office; in this way, the service provider can deduct the payments already made to the tax office from its tax liability or, if the total is lower, reclaim it; in this way, the tax office has more precise control over the turnover of the service providers; the state receives part of the tax revenue upstream).
Obligations towards social insurance
- As a rule, the managing director must be registered with the social security (Seguridad Social) and the corresponding contributions must be paid.
- If the company has employees, it must register with the social security authorities.
- Social insurance must be notified of every hiring, termination or contract amendment relevant to social insurance.
- Social security contributions must be paid on time. If there is a delay and the accumulated debts reach a corresponding amount (50,000 euros), this can even lead to criminal liability.
