- Moving to Spain
- Buying a Business in Spain
- Is this the Right Time to Buy?
- Can I Buy and Run a Business in Spain?
- New or Existing Business?
- Which Business Should I Buy?
- Leasehold, Freehold or Rental?
Moving to Spain
Who would not want to live in a country where there are 320 days of sunshine to be enjoyed, where the food is delicious and inexpensive, with a proper infrastructure including healthcare which is as good or even better than in the UK, taxes which are lower than in the UK and where the beautiful scenery is varied and does not seem to end...?
Good question. Most people would love the opportunity to move to Spain and start a new life here on the Costa de Sol. That is why Spain has been for a long time and still is the country most Brits want to emigrate to. However, not everybody is in a position to leave the UK and start again here. So a lot of people do the second best and just enjoy their vacations here.
With the low cost airlines that fly into Malaga, it is very affordable (even cheap) to come and pay a visit to the Costa del Sol. It is very easy and quick to travel between Malaga and the UK (or most other European Countries). It takes about 2 and 1/2 hours to travel between the UK and Malaga. So if you are lucky enough to start your new life here, you will get plenty of visitors (is that a plus?) or you can easily reconnect with the homeland, family and friends and pay them a visit (especially when you start getting withdrawal symptoms missing the grey, cold and wet weather in the UK).
There are plenty of other Brits here and also other nationalities. And if you just feel a bit homesick and need a bit of a British boost, you can always pay a visit to the Iceland supermarket and everything from Shepherds Pie to Fish and Chips and English Sausages and Bacon (not to forget all the lovely sweets and biscuits) is at your fingertips at very decent prices. For people coming from other European Countries (other than the UK), a quick visit to "Carrefour", "Aldi" or "Lidl" does the same thing.
It is hard to put a percentage on the price difference between Spain and the UK at the moment because of the ever changing Exchange Rates. Before the Exchange Rate took a dive, the cost of living was about 30% lower than in the UK. At the moment prices are probably very similar except if you go to a Spanish Supermarket (like Mercadona) then prices for produce and household items are definitely cheaper here in Spain. But for those lovers of the healthy Mediterranean diet: prices of red peppers (always so expensive at home but far cheaper here), wine (yes the vino is great here and inexpensive), fish (always an abundance of tantalizingly fresh fish for the barbecue) and lovely meat (great also for the barbecue - sorry for those of you who are vegetarians), lovely colored vegetables and fruits...all of it is here waiting for you!
And then you have that lovely southern lifestyle...very different to the UK and typically relaxed like in a lot of Mediterranean countries. Whenever you would become stressed, there are those lovely villages to stroll through, beaches to relax on and a beautiful sea to swim in or just take a cool refreshing dip in. Afterwards have a nice barbecue with friends or just relax at home with a nice glass of wine. Life could be worse...
Are you ready to move to Spain? We at Costa Bars Spain are here to help you make that happen.
Buying a Business in Spain
The economic crisis has made this world a very uncertain and insecure place to live in. All over the world, people worry about there jobs also here in Spain. Being dependent on the company you are working for does not make life easier.
Instead of staying in the UK, in the grey wet and cold weather and being worried about your job - your job's destiny being in the (capable?) hands of your boss - why not take control of your own destiny and your family's future and start your own Business in Spain? There are plenty of opportunities here. It will not be easy (but probably easier than in the UK) and it will mean hard work (but probably more enjoyable and less hard than in the UK) but you will be able to buy a Business for less money than in the UK. You will be here enjoying the Costa del Sol lifestyle at the same time.
We here at Costa Bars Spain are ready and able to help you find the right Business for you: the type of Business you would love and which is suitable for you, the location you prefer and the price which matches your budget. We will help you to analyze Business propositions, help you in assessing what would really be the ideal business for you, and get you the right price. We will make sure your independent legal representative (Gestor: a sort of legal accountant here in Spain who are the experts on the Sale of Businesses) checks everything out (Business should be debt free and have a valid license) and we will help you through completion. But even after you have completed the transaction and are the proud owner of your new Business, we will help you wherever we can.
Is this the Right Time to Buy?
With the current economic downturn things are of course none the easier in the UK or any other European Country. Money is tight and banks are difficult. Everybody feels the pinch. This has an impact on job security and a lot of people are terribly worried they will lose their job or have already lost it. Restaurants, Bars, Shops and other Businesses feel that pinch too, wherever you are. But actually this is the time of opportunity for the smart investor and/or Business person: prices have never been lower, and there are some really good deals out there. Businesses which were completely unaffordable a few years ago are now for sale much cheaper. Whoever buys now, with focus, Business insight and hard work, stands to really gain when the Market returns.
Although the Exchange Rate is bad at the moment, British Sellers are happy with less Euros for their Business because they still get about the same amount in Pounds (they get more Pounds for the Euros) so that evens out the playing field.
Can I Buy and Run a Business in Spain?
If you hold a British or EU Passport you can buy and run any Business in Spain. You will need to obtain an NIE (which is a Tax Identification Number in Spain) which is a requirement by Spanish Law if you want to start up a Business in Spain or if you want to buy a Property or obtain a mortgage. We and your Gestor will help you with that. As a British or EU citizen, once you obtained the NIE number and pay your Social Security in Spain, you are entitled to exactly the same as any Spanish Citizen. You will also be able to enjoy free schooling (Spanish schools have a good name and children seem to settle pretty well once they are at school here), free medical care as part of you social security package.
If you do not hold a British or EU passport you can still buy a Business here. You also will need to get an NIE number. But you also will need to get a work permit. Until you get that work permit, you can not work in the Business yourself. You can hire an autonomo (self employed person) who can work in the Business but you can not employ staff unless they are autonomo (until you receive your work permit). It can take several months (up to 6-12 months) and the work permit can be refused (in other words you are not certain you will receive a work permit). We can put you in contact with a lawyer who specializes in work permits for non-EU members.
For more information on the NIE Number you can visit http://nienumber.com/.
New or Existing Business?
If you want to start a Business in Spain or anywhere else the first question that comes to mind is whether it is better to start up a completely new Business or whether to buy an existing Business.
Statistically, the failure rate for new start-up Businesses is much higher than for existing Businesses. A large percentage fail in the first year. Maybe the Business Plan did not fully understand the Local Market conditions or maybe the Business Plan did not get executed properly. In addition, you are coming to a Country you did not live in before and might not be aware of some local information in order to make a successful Business Plan.
Starting up a new Business from Scratch
Starting up a new Business from scratch is maybe the hard way to do things here. If you are going to use Business premises, you probably will have to spend money on refurbishment and the potentially necessary specialized equipment and you will also need to obtain a License from the Town hall which can be a long and drawn out (and costly) process. Costa Bars Spain will help you get in contact with the right people to do this of course if this is the way you want to go about setting up a Business.
Buying an existing Business
The easiest way is of course to buy an already fully operational Business which ticks most of your boxes. This is the way most people who move to Spain decide to go about buying a Business here. They believe that it is probably much better to buy a fully operational Business because the hard work has already been done by somebody else. There would be a lot of existing information on performance, operations etc and instead of building a business from scratch you would be in the comfortable position to be shown how it works leaving you to look for how you can improve upon an already successful operation.
Costa Bars Spain will assist you in finding a Business which is ideally suited for you and will even help you assess the current operation and results and where we see you could potentially improve.
Third Option
Of course there is a third option which is to buy an existing Business with room for improvement and expansion. You could buy an existing Business which is maybe 20% of what you want but which could form a basis for what you want to achieve. Any Business which needs improvements but which has potential for expansion would be a prime candidate. This Business would be much cheaper to buy than a Business which is already 100% there but it could become exactly what you want it to be.
There is even the possibility of buying a Business which is not functioning very well at the moment and which you can buy at a good price. You can then improve the Business and sell it on for a profit. This approach is currently being pursued by quite a few investors.
Again the Costa Bars Spain Team will gladly help you along the way.
Which Business Should I Buy?
A lot of people wonder which type of Business they should buy. Costa Bars Spain has a large variety of Businesses for sale: Cafe Bars, Music Bars, Drinks Bars, Bars, Nightclubs, Restaurants but also other Businesses like Shops, Launderettes, Magazines, Car Dealerships, Rental Car Businesses...we have them all.
You should buy a Business which you feel will suit your lifestyle, interests you and which you feel comfortable you can run it and possibly improve it. Some people buy a Business in which they can directly apply their past experience and other people want something new. We at Costa Bars Spain believe that you are the person to make the decision; we will be there to advice you and help you make the right informed decision.
Another important question is where to buy a Business. There are different parameters to consider. We have listed some: which area does appeal to you? Is there a demand in that area for the type of Business you want to run? Are there good schools there? How far from the airport is the area? All things to take into account. Again, we will advise you wherever we can and are there for you all the way!
Leasehold, Freehold or Rental?
There are three ways you can start running a Business in Spain: you either buy a Leasehold Business, a Freehold Business or you decide to just rent a Business. And of course there can be variations on these three by combining the different options: e.g., you could buy a Leasehold with an option to buy the Freehold or you could first rent (although a lot of owners are not so keen on that) with an option to buy the Leasehold or even the Freehold.
Costa Bars Spain is a facilitator. We are open to any suggestions by Buyers or Sellers as long as they are legal, both parties involved agree and as long as it is documented in a proper legal way in a private Contract. We even might offer suggestions on how to come to an agreement which suits both parties. In these difficult times, flexibility is a necessary ingredient to make deals happen.
The Contracts for the Lease, Freehold or Rental will be drawn up in Spanish and are subject to Spanish Law. Any disputes will be resolved in Spanish Courts.
Leasehold
"Traspaso" does not exist anymore!
Let's first clear up any confusion with regards to the word "Traspaso" which you have probably heard before. The usual way Business transfers were being done before in Spain was via a "Traspaso". This is not anymore a legal option in Spain. A "Traspaso" a lot of times was favoring the landlord and was very rigid. In a lot of instances, it turned out to be a fixed term rental agreement with all its disadvantages (you can not sell on and/or renew).
A Lease is much more flexible and it is a now the legal way to buy the Leasehold of a Business. However, with this flexibility also comes the danger of confusion and complexity that might cause problems in interpretation later on. Therefore, always use a good Gestor or Lawyer before signing a Lease or "Traspaso".
Despite "Traspaso" not being legal anymore, many landlords still offer a "Traspaso" and many Businesses are still being sold as such. Does this sound confusing? Welcome to Spain!
The Real Deal - a Real Lease
A Lease or Leasehold is the most popular way to buy a Business here on the Costa del Sol. Most of our Buyers buy a Leasehold. A Leasehold has the following characteristics:
Lease Purchase Price
You pay a lump sum (purchase price of the Leasehold) to the Seller (who normally is the current Leaseholder but it can also be the landlord i.e., the person who owns the Freehold - see later).
Fixtures and Fittings
You buy the Business (goodwill) and all fixtures and fittings.
The Lease Contract also stipulates any deposit to be paid (typical 2 months Security Deposit - you also have to pay the first month's rent but that is not part of the Security Deposit). If you finish the Lease agreement at the end of the Lease period (e.g., 5 years), or if you sell on the Lease (see later) you will receive the deposit back (minus damages if any).
Bank Guarantee
Some Landlords require a Bank Guarantee (Aval Bancaria) which protects the Landlord in case you would not make your rent payments. You will have to put the money required by Bank Guarantee in the bank, and the Landlord can only access this money in case he really has not been paid the Rent. This is rather unusual but if required we (or your Gestor) will help you set this up with your bank.
Selling on the Lease
You are allowed, throughout the duration of the Leasehold contract, to sell the Lease to a new Buyer. You will be paid the purchase price (which hopefully is more than you paid for your Lease). You will have to pay the Landlord 10%-20% of the new Purchase Price (in accordance with the terms specified in the Lease contract you signed with the Landlord when you purchased your Business - it might be a fixed amount; whatever you have been able to negotiate - we will help you achieve the best terms possible).
Upon you selling the Lease, you will cancel your Lease with the Landlord (you both sign the cancellation of the Lease) and your Deposit (minus damages) should be returned to you.
Duration of the Lease
A new Lease Contract is normally drawn up between you and the Landlord and signed by you and the Landlord after the Seller cancels his Lease Contract with the Landlord. Normally a Lease is renewable: e.g. a 5 year renewable Lease which means at the end of the 5 years, you can renew for another 5 years. The length can be whatever is agreed between you (and your Gestor) and the Landlord. Typical Lease lengths are 5 or 10 years (renewable), sometimes even longer or even indefinite (lifetime leases). The length will be stipulated in the new Lease Contract.
Lease Renewal
Whether or not the Lease is renewable or not will be specified in your Lease Contract. When the Lease is being renewed, the Landlord can increase the rent by up to 20% (depends on what you agree in the Lease Contract). The longer the Lease, the better because the Landlord can then not increase the rent by a large amount (only adjust it according to inflation).
If you plan to run a Business for 10 years, it might be better to agree a Lease term of 10 years renewable (just in case) instead of having a 5 years renewable contract and you then renew the Lease after 5 years. Because in the latter case, the Landlord can increase the rent by maybe 20% instead of increasing the rent slowly according to inflation. However, a Landlord might ask a higher monthly Rent for a 10 years renewable Lease than for a 5 years renewable Lease. It all can be negotiated and agreed before you sign the Lease.
Monthly Rent Payment
The monthly rent payments listed on our website represent the current monthly rents. When you buy the Business, a new Lease Contract is drawn up with the Landlord and the Landlord can increase the rent up to 20% (but typically maybe 10%), although in reality Landlords normally agree to much lower increases - they want to increase the rent but they also want the new Leaseholder to be comfortable with the rent payments. After all, the Landlord wants the new Leaseholder to be successful and make regular Rent payments instead of ending up with empty premises in case the Rent is simply too high. We will help you to negotiate a reasonable Rent with your Landlord.
During the Lease period (first 5 years), the Landlord can adjust the rent every year according to the inflation rate which is normally a few percent.
The Rent is normally paid by direct debit but you can also go and pay cash into the Bank. The Rent has to be paid between the 1st and the 5th of every month.
Rent Retention and IVA
You have probably heard people talk about this. It is a bit confusing at first.
First of all IVA is the Spanish counterpart of VAT. The IVA on Rents or Services is currently 16%. As an example, suppose your monthly rental payment is 1000 Euros (just to use a round figure - hopefully your rent is lower). So you really have to pay 1000 Euros plus 160 Euros for the IVA. That is a total of 1160 Euros. This IVA can be claimed back at the end of the year against any IVA payments you received when you sell items or services and you created invoices with IVA.
The Landlord is supposed to pay 18% Tax on the Rental Income. That is 180 Euros. However, the Spanish Law says that you should withhold that amount from the Rental payments. So you pay the Landlord only 1000 Euros + IVA of 160 Euros minus 18% or 180 Euros Tax retention which means monthly you pay 980 Euros (or 1000 Euros + 16% IVA - 18% Tax Retention which gives a total of 1000 Euros - 2% which is a total of 980 Euros).
However, if you look at the totals over a year: every 3 months you have to pay the government the Tax you have been withholding for the Landlord (which is 180 Euros x 3 = 540 Euros every 3 months) and at the end of the year you can claim back any IVA you paid on the Rent against IVA you generated from your invoices. So you can claim back all your IVA payments on the Rent.
For the year this means:
- 12 x monthly payment of 980 Euros = 11760 Euros
- 4 3-monthly payments of 540 Euros = +2160 Euros
- 12 x claim back monthly IVA of 160 Euros = -1920 Euros
- Total payment = 12000 Euros
Therefore, the net outcome over the year is that you pay a total rent of 1000 Euros per month.
Totally confused by now? Just contact us and the Costa Bars Spain Team will gladly explain it to you in more detail.
Insure your Premises
The Lease Contract will stipulate that you are responsible to insure the premises for fire and theft. You are responsible for the contents and your Landlord's insurance will be responsible for the building. Insurance costs are low in Spain (maybe 200 Euros to 300 Euros a year for the Contents Insurance). Costa Bars Spain can put you in contact with several reliable companies that provide good and fast service.
Freehold
You buy the physical building, the fixtures and fittings and the going Business (goodwill). You can get a Commercial Mortgage for this from the bank (if you qualify of course) for about 50% of the Bank Valuation.
A Freehold is normally much more expensive than a Freehold although now is a great time to buy a Freehold (because prices are so low and they are difficult to sell - strong buyer's market - because at the moment it is hard to get mortgages and there are few buyers around that have this kind of money).
Buying a Freehold property has the following advantages:
- 1. You can sell a Lease to a Leaseholder. You will get a lump sum up front and will receive a monthly rent for the duration of the Lease. Anytime the Leaseholder sells the Lease on, you will receive a lump sum of money (can be e.g. 20% of the Purchase Price or a fixed sum - depends on what is agreed in the Lease Contract). For more detail see "Leasehold" above.
- 2. If you decide to run the Business yourself, you do not have to pay any rent
Rental Contract
The only good thing about a Rental Contract is that it could be very cheap to obtain. However, there are not many Landlords who are prepared to rent out their Business unless the Business is maybe closed or not performing well. In addition, a lot of Landlords might ask for large Security deposits to protect themselves against Renters who try the Business out for a few months, ruin their premises, do not pay rent and then leave without much notice. Security Deposits or Bank Guarantees of up to 12 months have been suggested by some Landlords in the past which makes the Renting option not such a cheap option after all. Of course, if you finish the full term of the Rental Contract, and you always paid all the bills and your Rent and nothing has been damaged, you will get the Security Deposit back.
Some Leaseholders are trying to rent their Businesses out. This should be looked at very carefully to make sure it is all legally setup properly and there is a good and clear contract in please covering all possible angles of this arrangement. There are a lot of possible legal implications and this should be approached with extreme caution!
In addition, the following drawbacks should not be overlooked:
