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WORKING IN SPAIN

Which startups succeed in Spain (and which ones fail)?

Foreigners thinking of setting up a startup in Spain should keep in mind that one in five new companies here doesn't last longer than 12 months. Here's what the data available says about the businesses that find success and those that don't.

Published: 22 November 2022 17:29 CET
Updated: 26 November 2022 14:02 CET
spain success startups
When it comes to startups specifically, nine out ten startups don’t make it past the three-year mark in Spain. Photo: Justin Sullivan/Getty Images via AFP

There are various interpretations about the differences between a startup and a company but, broadly speaking, a startup is a company in its early stages that’s looking for an attractive and innovative business model, whereas a company already has a pre-existing business model and is focused on executing it successfully.

According to a study by the Spanish Tech Ecosystem, Spain has 10,500 startups and more than 300 scaleups, innovative and more established companies that are already growing.

The introduction of Spain’s new Startups Law in early 2023 promises to make the country far more attractive for foreign entrepreneurs, investors and digital nomads.

READ MORE: Spain’s new law for startups and digital nomads – 15 things you need to know

But the road to success isn’t just guaranteed by less bureaucracy, tax cuts and special visas.

Twenty-three percent of new companies set up in Spain don’t survive past a year, according to the country’s National Statistics Institute (INE). 

Of those that do make it past the first 12 months, 45 percent are not in business after five years. 

When it comes to startups specifically, nine out ten startups don’t make it past the three-year mark, according to the Map of Entrepreneurship drafted by Spain Startups, but they do grow at faster rates than SMEs. 

Although these figures may not seem very promising for anyone considering setting up shop in Spain, the Iberian nation isn’t last on the list when it comes to the longevity of startups in the EU.

Lithuania, Denmark, Latvia, Estonia, Malta and Portugal all have lower rates of success than Spain, according to Eurostat data. 

Spain also lost 311,000 SMEs in 2020 as a result of the Covid-19 pandemic, so authorities are now keen to breathe new life into all types of sectors with foreign talent drawn in by the new startups legislation. 

Spain is also the fifth country with the most so-called ‘unicorns’ companies with a market value above €1 billion.

READ ALSO: What do the experts think of Spain’ new startups law?

Which startups and companies find the most success in Spain?

Insurance companies, reinsurance groups and pension funds are those with the companies with the highest survival rate, as 82.6 percent are still operational in Spain five years after their creation, INE data reveals. 

They’re followed by new companies involved in the supply of electricity, gas and air conditioning (80 percent survival) and those in the tobacco industry (75 percent).

Companies that offer financial services, assistance in residential matters, legal and accounting companies, pharmaceutical manufacturers and those that deal with the extraction of metals and minerals also have a good life expectancy in Spain.

That’s not to say that if you have a business idea in a different sector or that your startup is completely innovative you should get discouraged. 

According to industry specialists Meetwork, among the 50 biggest growing startups in Spain in 2022 are a travel management company, a copyright protection business, a language app for kids, a digital platform for freight transport, a vegetable-based meat manufacturer and other businesses from a wide variety of sectors.

The same applies to most highly valued startups in recent years in Spain; many are companies focused on innovation or the improvement of pre-existing ideas.

Self-employment and entrepreneurship website autonomosyemprendedor.es reported that the ten Spanish startups which have found the most success in Spain and abroad are Brooklyn Fitboxing International (gyms), Freepik (image downloads), Bigbuy (dropshipping), El Tenedor (restaurant bookings), Heura Foods (vegan food), eDreams (flight and holiday bookings), Clicars (online vehicle sales), Mr. Wonderful (an ‘online store for happy products’), Cabify (e-hailing) and Glovo (food delivery). 

And it’s not as if a startup that’s set up in Spain should necessarily have to cater to a Spain-specific market – fintech, tourism, logistics, mobility, cybersecurity, education, foodtech, energy, cryptocurrencies, gaming, employment, retail or health are all sectors with signs of growth potential in Spain and around the world.

Which companies and startups find less success in Spain?

According to INE, among the companies that struggle to survive past the five-year mark in Spain are leather and shoe manufacturers (20 percent success rate), maritime industry businesses (29.8 percent success rate) clothing companies (33.2 percent) and entertainment and artistic businesses (33.7 percent). 

Civil engineering companies are the ones that struggle the most to make it past the first year (30.2 percent survival rate), followed by those involved in arts and entertainment.  

The life expectancy of new companies in Spain has worsened since the pandemic, according to the latest report by Spanish business database Iberinform, who wrote: “The critical moment for any business project usually occurs after the third year, since the initial injection of capital allows the vast majority to complete the first 24 months of life without problems.”

Interestingly, during the pandemic, the sectors which saw the biggest increase in earnings in Spain but also the most businesses closing down were hospitality and retail, which together with tourism are the pillars of Spain’s service-based economy.

Iberinform’s general director Ignacio Jiménez told El Mundo newspaper that “the incomplete and uneven recovery that we are going through, marked by new challenges such as price escalations and supply problems” directly affect business survival in Spain.

“Companies, especially SMEs, which have less capacity to transfer these cost increases to prices are suffering a reduction in margins and loss of profitability,” Spain’s confederation of SMEs reported. 

READ ALSO: What will Spain’s income requirement for the new digital nomad visa be?

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WORKING IN SPAIN

What’s the law on having two jobs in Spain?

With the current cost of living crisis, working more than one job is becoming more and more common, but what are the rules on working multiple contracted jobs in Spain and the tax implications of this?

Published: 25 June 2024 13:24 CEST
What's the law on having two jobs in Spain?

Often it’s necessary to have more than one job at a time, particularly if they don’t pay well and you’re struggling to make ends meet.

In fact, historically that is part of the reason why establishments stay open so late and why siestas were so common – because people would have one job in the morning and then go home for a rest before starting their second.

This is still commonplace today and is in fact becoming more and more popular, with the rise in the cost of living, driving an increasing number of people to take up a second job.

Whatever your reasons for having two jobs or more – to save up more money or gain extra experience and work your way up, there are some financial implications you should be aware of.

What does the law say?

Currently in Spain, there is no restriction that prevents a person from having a second job, with two contracts in two different companies, for 80 hours a week.

According to data from the first quarter of this year from the Active Population Survey (EPA) prepared by the National Institute of Statistics (INE), the number of people with a second job in Spain stands at 591,300, although according to affiliation data of Social Security, some 800,000 people have more than one position.

This trend has been seen in each quarter of the EPA since 2022 and, right now, is close to a historic number.

Categories you should be aware of

There are two types of categories when you work in multiple jobs in Spain – these are pluriempleo and pluriactividad. Pluriempleo literally means multiple employment. This is understood as a person who works as an employee in two or more companies under the same Social Security regime.

In this way, it differs from pluriactividad or multiple activities, which is when people work for others and have their own business at the same time or their second job is under a different social security regime.

For example, if you work as a hotel receptionist in the morning and then in a restaurant at night, these positions are considered to be part of the same regime, but if you work in a hotel in the morning and then as a nurse in a hospital at night, these are two different careers and therefore social security regimes.

If you’re self-employed as well as having a contract job, this is a slightly different situation. To find out more, read our guide below. 

READ ALSO – Self-employed in Spain: What are the tax rules if you do two or more jobs?

What are the tax and social security implications?

If you have two separate jobs, you are required by law to report your situation to Social Security, and to each of the companies you’re employed by.

When it comes to the Tax Agency, it’s important to note that you are obliged to submit your yearly Income Tax return (Renta), when you are paid by more than one employer and your income exceeds €22,000 per year.

READ ALSO – EXPLAINED: The key changes to Spain’s 2023/2024 annual tax return

In 2024, the maximum social security contribution base for employees has been set at €4,720.50 per month. This means, that regardless of whether your income from two positions exceeds this amount, the social security base will not be more than this.

The amount of IRPF (Personal Income Tax) must also be taken into account. If you are combining two contracts, it’s important to calculate the withholding tax.

This is because companies calculate personal income tax based on your annual compensation expectations. They do not take into account the existence of another job, so they apply the discount depending on what they are paying you only.

This means that they will keep less than what they should and when you’re filling out your Renta yearly income tax return, you will most likely have to pay the extra to make up the difference. 

In this case, you should request that both companies calculate personal income tax according to your earnings, so that you can get a good idea of the amount you have to pay working two positions.

You may also consider hiring a gestor or accountant to file your yearly tax return for you if you have a particularly complicated situation and work three or more jobs for example. 

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