GUIDE TO BUYING A BUSINESS IN SPAIN

THIS IS A VERY SPECIALISED AREA AND ONE IN WHICH
ONLY THE FOOLHARDY WOULD GO IT ALONE

Most Spanish Estate Agents will be able to offer prospective purchasers a small selection of businesses. However, this is a niche market and our advice would be to seek out specialist Spanish Business Transfer Agencies.

Location is all important and, unless you are a fluent Spanish speaker, you would be best advised to concentrate your efforts on the areas of Spain with the heaviest British tourist traffic and highest concentration of British ex-pat residents. The obvious areas are the Costa del Sol, Costa Blanca, Majorca and the Canary Islands.

Once again, it will pay dividends to do your homework. Seek out the Business Transfer Agencies in your area of choice and compare the businesses they have available and services on offer, both through their UK associates and direct from their Spanish offices.

Aftercare is all important where business purchase is concerned and you should be sure that this will always be available.

The vast majority of purchasers will opt for a bar or catering business of some kind - Pub - Café - Restaurant - Discotheque, etc……..Why?

1) There is plenty of availability

All the major tourist resorts and large towns will always have a good selection of this type of business available for sale.

2) It’s a tried and tested formula

British owners have been successfully operating bars, pubs, catering businesses, etc. in Spain for many years.

3) NO REAL NEED TO SPEAK SPANISH

(Although at least a smattering will always be useful!).

Customers will in the main be British tourists, British ex-pats residents or English speaking. Why would someone who doesn’t speak any English go into a British Bar?

4) EXPERIENCE

MANY PURCHASERS ARE NEWCOMERS TO THE CATERING BUSINESS. It’s a business that, in it’s simplest form, - ie serving drinks and light snacks - requires little or no previous experience.

5) INEXPENSIVE

Most Spanish resorts will have a selection of small Bar/Cafes available for sale at prices that will fit most budgets.

6) VIABILITY

MOST TOURISTS WILL SPEND A HIGH PERCENTAGE OF THEIR HOLIDAY MONEY ON FOOD AND DRINK. Also most ex-pat residents tend to be well heeled and gregarious and will eat and drink outside of their homes much more than in the UK.

Profit margins are good and overheads low.

THERE ARE OF COURSE OTHER BUSINESS THAT MAY SUIT A BRITISH PURCHASER

Our advice would always be to opt for those which are tried and tested. Car Hire, Gift Shops, Small Hotels and the like can all be considered.

LEASEHOLD or FREEHOLD

Most purchasers - including those with substantial budgets - would be best advised to opt for one of the cheaper businesses(which almost certainly will be leasehold), if this is a first venture in Spain. Caution has always been a successful businessman’s watchword - you can always trade-up at a later date.

As in the UK, one can buy a Leasehold or a Freehold business.

LEASEHOLD
Much the most popular choice.

Easy to buy and easy to sell on later, if required. Also relatively inexpensive. Most Spanish leases are of 25 years duration. The rent agreed on take-over can only be increased once a year equal to the rise in the cost of living in Spain (as set by the Spanish Statistical Bureau).

Normally the price asked for the Lease includes the goodwill plus fixtures and fittings. The rent is usually paid monthly in advance - often direct into the Landlord’s bank account. When initially purchasing, the buyer must pay 2 months rent in advance as a ‘returnable deposit’ (known as fianza).

Most Leases (although not all) will be on pre-printed Government forms, which are easily obtained in Spain. The clauses in the Government Lease are standard and set out the rights of both the tenant and the landlord.

Almost always, the Lease will contain reference to ‘participation’. This means that the landlord can claim a percentage of the sale price when the current owner sells the business. This is quite normal, although the percentage claimed can vary. Typically the ‘participation’ will amount to around 15% of the sale price. You can sell the Leasehold business whenever you choose, at whatever price you choose and to whoever wishes to buy it.

Occasionally leases of a shorter duration than 25 years are on offer. 5 and 10 year leases are becoming more common and are often cheaper than the traditional 25 year leases. You should ascertain what happens after the 5 or 10 year period before you buy. Some leases give the option to the purchaser to renew for a further period. However some don’t and, in these cases, the business would revert back to the landlord.

Most landlords will permit changes to the business premises after purchase - and providing these are only decorative his permission is not normally sought. However, major changes to business premises - re-positioning of toilets, knocking down walls, etc. - will require written permission from the landlord, and possibly planning permission from the local authority.

Care must always be taken to pay the monthly rent on time. Once a couple of months’ rent has been missed, the landlord can take the leaseholder to Court to recover the premises. Leaseholders, however, are always informed well in advance of such proceedings and have ample time to make-up any outstanding payments.

FREEHOLD
The legal costs and paperwork involved for Freehold business purchase are very similar to those for purchasing a freehold apartment or villa – a previously described.

Less popular than Leasehold, mainly because of the expense. The obvious benefits are that there is no monthly rent to pay. Also bear in mind that a Freeholder always has the option of selling the Leasehold of his business, retaining the Freehold and receiving a one off payment for the Lease plus monthly rent.

LICENCES, etc.
Always assuming that our advice has been taken and that a Specialist Spanish Business Transfer Agent has been utilised to locate your business, then it is safe to assume that the Agent will introduce you to a ‘Gestor’. A Gestor is the famous Spanish paperwork specialist - basically a ‘go between’ who liaises with the relevant Local Authority and Government Departments, who issue the licences and permits you will need.

Most small businesses - including pubs, cafes and restaurants will need all, or most, of the following and the Gestor will assist you to obtain them:

1) NIE NUMBER - This is an identity number given to all foreigners resident in Spain.

2) FISCAL LICENCE APPLICATION - A necessary licence for any taxable activity in Spain.

3) OPENING LICENCE APPLICATION - A permit given by the Local Authority authorising the business to trade. (Including liaison with the relevant Town Hall).

4) REGISTRATION FOR IVA - This is the Spanish VAT and works similarly to VAT in the UK, although at the moment the rates are lower.

5) APPLICATION FOR INCLUSION IN THE SPANISH NATIONAL HEALTH SERVICE

6) APPLICATION FOR RESIDENCE PERMITS

7) CONSULAR INSCRIPTION - All UK Nationals taking up residence in Spain are required to register at the British Consulate who issue a certificate to that effect.

8) FOOD HANDLERS CERTIFICATE (applies only to food related businesses)- This is a simple test in English which is obligatory. Few fail, but don't worry if you don't pass you can re-sit.

9) SECURITY CERTIFICATE – Arranged by an Architect and certifying that the premises are suitably prepared to trade.

10) LIAISON WITH THE REGIONAL JUNTA (Regional Authority) – Regarding all necessary permits.

11) LIAISON WITH THE GUARDIA CIVIL (Police) – Regarding all necessary permits.

12) SANITARY INSPECTION – Arrangement of Sanitary Inspection (the majority of existing businesses will already have passed this inspection – although minor up-grading may be required in some cases).

13) TECHNICAL INSPECTION – Arrangement of Technical Inspection.

Don’t expect to receive all your documentation at once - it takes time. However, the Local Authorities in most areas of Spain realise that the bureaucratic system is slow and cumbersome and, under normal circumstances, will allow the business to open once all the necessary applications have been made.

How Much Will The Gestor Charge?

His fees will be between £1,000 and £1,500 in most cases - which will include the charges made by Local Authorities for Licences, Permits, etc.

STOCK
Virtually all the catering businesses in Spain are ‘free houses’, ie you can deal with as many, or as few, Breweries as you like.

Most regular visitors to Spain will have sampled the excellent range of Spanish Beers, such as San Miguel, Cruzcampo, Aguila, Mahou, etc. These days most of the British favourites are also available in Spain – Guinness, Boddingtons, John Smith, Tetleys, Stones plus draught ciders such as ‘Olde English’ and Strongbow. German, American, French and Dutch beers and lagers are also available.

Beer coolers and fonts are provided free of charge by the Breweries – as well as umbrellas, drip mats, etc.

Deliveries are often on a daily basis, in consequence, little bar space is lost to non-moving stock plus, of course, cash layout on stock is minimal.

ACCOMMODATION
Some businesses will have in-built accommodation, although these are in the minority. The vast majority of businesses are sited in ‘locales’ (commercial units) where there is no provision for living accommodation.

It should be easy enough to locate an apartment, town house or villa to rent within easy commuting distance of your business.

If your business is in a holiday location, make sure that the lease for your living accommodation takes you over the busy vacation season, when accommodation will often be prohibitively expensive or impossible to locate.

Most property owners will give a 12 months lease at a fixed monthly rent. Almost always, this type of accommodation will be fully furnished, although occasionally unfurnished properties are available. Expect to pay 2 months rent as a ‘fianza’ or returnable deposit, plus one month’s rent in advance.

Alternatively, of course, you can buy your residential accommodation outright.

TAXATION AND ACCOUNTS
Your chosen Business Transfer Agent may introduce you to an Accountant to look after your book-keeping requirements. This will often be the ‘Gestor’ who has assisted with the paperwork for opening the business. If not, then ask around – prices and ability do vary.

The book-keeper usually charges a monthly fee ‘all-in’ for his services. Most small businesses pay around £500 per annum. The book-keeper will take care of such items as VAT (or IVA as it is known in Spain) and personal taxation.

All businesses in Spain are legally obliged to submit accounts annually and it is important to ensure that a suitably qualified book-keeper, or accountant, is employed to look after this important side of your business.

OVERHEADS

A typical small business in Spain will have the following monthly overheads:

RENT – always plus IVA (VAT).

ELECTRICITY and GAS
Electricity costs about the same as in the UK with bills often paid direct through your bank account. Minimal heating bills and light nights keep electricity charges down to a minimum.

There is very little piped gas in Spain. Most areas have gas supplied in containers similar to Calor Gas. Deliveries are to the door and cost about £5 per container. WATER – is metered, you pay for what you use. Your water bill is likely to be much less than for a similar business in the UK.
RATES – if your business is leasehold, local rates are invariably paid by the landlord. However, they are generally very low – typically £100 to £200 per year for a shop or bar.

COMMUNITY CHARGES – if your business premises are part of a community – eg. in a commercial unit on the ground floor of an apartment block - then you will pay an annual community charge for your share of the up-keep of the building. Generally in the £200 to £400 per year bracket.

TERRACE CHARGES – if your business has an outside terrace and is on a public street, the Local Authority levy a yearly charge which depends on the size of the terrace and the location of the business.
If your business is on the seafront then terrace tax is usually higher than for bars in the town. Typical shop or bar terrace tax is £250 to £600 per year.
Be careful if the terrace of your chosen business is in an apartment complex. There will be no Local Authority terrace tax to pay, but the community of owners may put restrictions on the use of the terrace.

BOOK-KEEPING – as detailed previously, around £500 per annum for a typical bar or shop.

SOCIAL SECURITY – this is compulsory for all business categories and is currently approx. £140 per month. The payment includes free National Health type medical care for the person who makes the payment, together with his wife (or common law partner) plus his dependent children.

INSURANCE – fire, theft and, most importantly, public liability. The cost is around £200 to £300 per annum for a typical business.