Ireland’s open economy is relatively easy for small and medium-sized businesses to navigate. As a result, it can be surprising for Irish firms aiming to expand into the Iberian markets of Spain and Portugal when they encounter more red tape and business administrative costs than they are used to.
While exporters planning to use agents or distributors to set-up in the market must be aware of requirements, they are manageable. At Enterprise Ireland’s Ambition Spain & Portugal conference, attendees received advice from experts with first-hand knowledge of what to expect.
Essentials for setting up in Spain
‘’Forget about a shelf company,” said Mr. Rocco Caira, Ireland’s Honorary Consul to Spain, “It’s not going to be straightforward. You need to know what you are dealing with and how long it’s going to take.” Everything takes time, he added. Shareholders setting up a limited company require a Spanish tax number and the appointment for that can be up to a month, he said. All company documents must be signed in person in Spain – or by someone appointed with the power of attorney. Companies can be sole member shareholdings, making them ideal as wholly-owned Irish subsidiaries, and the minimum shareholding capital requirement lodged in a Spanish bank is €3,000.
Get your paperwork right for Portugal
While Portugal requires a similar amount of paperwork, the system is highly streamlined. A limited company could be up and running within a day, according to Aoife Healy, chair of the Ireland Portugal Business Network. Simply registering your company, acquiring a company number and bank account will smooth the way to a Certidao Permanente or tax cert, allowing the company to begin trading almost immediately.
Dealing with distributors
The route to market for Spain may see companies start with a commercial agent or distributor, rather than setting up a wholly-owned subsidiary. Caira advised exporters to be familiar with the rights and indemnities agents are entitled to.
“It’s tempting to enter a market with a commercial agent due to low start-up costs and big commissions. But you can be hit with big indemnities if you cancel your arrangement and it’s no fault of the agent,” said Caira. Spanish law requires one month’s notice per year of contract. Commission is payable on deals whether a company is paid or not, with compensation reaching a year’s salary or more in some cases.
“You really have to choose the right agent, so give it serious consideration,” Caira advised. Other tips included:
- Make an agent contract subject to Irish Law, in the first instance.
- Clearly define the product territory, customer base and whether or not exclusivity applies.
- Make sure a sales objective is defined.
Whichever route to market you choose, it’s worth remembering that payroll will factor costs in direct employer tax liabilities and administrative burden.
How Zartis fared in Spain and Portugal
Specialised recruitment firm Zartis established its office in Madrid in 2015. “As Irish people we had to adjust our mindset to the level of bureaucracy. Everything is codified, particularly outsourcing.’’
One payroll quirk to be mindful of is that there are 14 payments in a payroll year as standard in Portugal, something that should be considered when salary expectations are presented as monthly when hiring.
Both markets offer a highly skilled pool of talent from which to draw. Spain is particularly blessed with high quality talent in coding and software development, with high internal mobility in the market.
Padraig Coffey, CEO of Zartis, advised: “We found that the management style in Spain is quite ‘old school’, which means that Irish companies with a progressive company culture and style have great opportunities for not only recruitment but retention.”
If you’re interested in taking the step into the Eurozone read how Enterprise Ireland can support your growth.