Sales channels to consumers have developed significantly in the last few years. While the traditional method of wholesalers selling directly to small shops continues, online sales, big box stores, and shopping malls are growing rapidly throughout the country.

Madrid and Barcelona are the two major hubs for the regional markets. Most agents, distributors, foreign subsidiaries, and foreign trade related entities are present in both cities. The section “Regions” on the website “Invest in Spain” includes details on each Spanish region, including main sectors of opportunity and investment incentives.  Nonetheless, given the ongoing importance of the 17 autonomous communities, greater importance is being attached to using distributors in each respective region. In the case of Catalonia, products for distribution in the region need to be labeled in the regional language (e.g., Catalan).

Using an Agent or Distributor

The legislation governing business activities in Spain is like that of other developed markets. The most common forms of representation agreements in Spain are:

• Distribution Agreements
  • Commercial concessions or exclusive distribution agreements: The supplier agrees to provide its products to several distributors within a specific territory and agrees not to unilaterally sell those products within the territory of the exclusive distributor(s).
  • Sole distribution agreement: Includes the provisions in the above-mentioned exclusive distributor agreement and reserves the right of the distributor to supply certain products to users in the territory of concession.
  • Authorized distribution agreements under the selective distribution system: Distributors are selected according to their ability to handle technically complex products and to retain a certain image or brand name.
• Agency Agreements
  • The agent promotes and sells the products as if he or she is the principal supplier and informs the principal supplier of all matters relating to the agency.
• Commission Agency Agreements
  • Involve occasional engagements and agent facilitates the conclusion of an agreement but does not ultimately represent either party.

Models of distribution contracts and clauses are available online from the bookstore of the International Chamber of Commerce.  It is recommended that contracts be reviewed by legal counsel prior to signature.

EU standards provide protection for self-employed commercial agents, changes in clauses, competition in the internal market, and payment delays. Companies with grievances regarding inefficient management can contact the European Ombudsman, which will investigate cases.

Establishing an Office

There are two options for businesses interested in establishing an office in Spain: incorporating a subsidiary or establishing a branch. Both options have full legal status, and their profits are taxable in Spain. It is recommended that companies obtain legal advice to aid in the process.

A subsidiary can be one of the following:

• corporation,
• public limited-liability company (Sociedad Anónima, S.A.), or
• private limited company (Sociedad de Responsabilidad Limitada, S.L. or S.R.L.).

The structure of the S.A. is better suited for larger operations and the S.L./S.R.L. for smaller.

Corporations (S.A.) and limited liability companies (S.L.) are similar in that the shareholders are not liable for the company’s debts and are limited to their contribution. The main differences between these entities are:

• capital ($67,200 minimum (€60,000) for S.A. versus $3,360 (€3,000)) and
• flexibility permitted at general meetings, transfer of shares and management of an S.L.

The steps to legally establish a branch are:

• Register company name. Applications are made at the Central Mercantile Registry. The certification is valid for two months.
• Declare the investment to the Spanish Ministry of Economy.
• Notarize public deed of incorporation.
• Pay asset transfer tax and legal proceedings document tax. These taxes are for new incorporations (roughly 1% of capital stock).
• Request a tax identification number (locally called NIF – Número de Identificación Fiscal). This must be done within 30 working days from the signing of the public deed. The NIF must be used within six months of application.
• Register the company in the Mercantile Registry. This is done at the corporate registry corresponding to the company’s official address. On average, it takes two months to complete registration. The Spanish Government and local chambers of commerce have created the “Ventanilla Unica” (One Stop Window) to simplify the process of setting up a business in Spain.

The Spanish government’s website, Invest in Spain, has specific chapters addressing “Establishing a Business in Spain” and “Company and Commercial Law.” 

For the latest Investment Climate Statement (ICS) which includes information on investment and business environments in foreign economies pertinent to establishing and operating an office and to hiring employees, visit the U.S. Department of State’s Investment Climate Statements website.

Franchising

Spain faced many challenges during the COVID-19 pandemic and the franchise sector has also suffered from the temporary economic shutdown. Several brands have closed their business, reduced their expansion plans by readjusting development plans, or renegotiated royalty fees. Franchisors adjusted their contracts quickly to adapt to challenges in the logistics and supply chains, labor force disruptions, and new consumer trends like online procurements and delivery services. Real estate prices have also impacted operations and the expansion of brands operating in Spain. Currently, several mergers and acquisitions are taking place, making the franchise landscape harder to navigate and increasing uncertainty.

When creating contracts, franchise companies, including Spanish, foreign, and master franchisees, need to meet the requirements of the Disclosure of Pre-Contractual Information. As of December 2018, national franchise agreements no longer need to be registered. Some regional regulations could require registration at a regional level, but only when the franchisor intends to operate exclusively in that specific region.  The intended franchisee must receive all the required information in writing at least 30 days prior to signing a franchising contract or a pre-contract, or prior to any payment to the franchisor. All new contracts must comply with Spanish and EU legislation.

Franchise Disclosure Rules in Spain

According to current law, key requirements include:

• Each franchisor must disclose how long they has been managing the franchised business in question prior to disclosure.
• Master franchisees are obliged to annex to their disclosure document a copy of their master franchise agreement.
• Foreign companies must translate all legal documents into Spanish and register them together with the original language versions.
• Each franchisor may voluntarily register the following information:
• the company’s quality certifications
• any mediation or Alternative Dispute Resolution (ADR) systems in use in the franchise network.
• whether the franchisor observes a Code of Conduct
• whether the franchisor participates in the consumer arbitration system or any other system to settle consumer complaints. Both sides must decide in which country or countries the arbitration method will apply, if needed

The major trade show supported by Commercial Service Spain is the EXPO FRANQUICIA taking place in Madrid from April 11-13, 2024.

The Spanish Franchise Association provides support for franchisors in the market. They also prepare annual reports on the sector.

For more sector information, please contact Angela.Turrin@trade.gov at the U.S. Commercial Service in Madrid, Spain.        

Direct Marketing

Direct marketing continues to be an important promotional activity in Spain.

According to INFOADEX (leading source of advertising sector intelligence), total investment in 2022 reached $12.86 billion (€12 billion), reflecting an average increase of 4.7% over the previous year. According to the source, the following marketing trends were identified in 2021:

• Traditional marketing investment in 2022 was $6 billion (€5.6 billion), an increase of 4.3% over 2021. The two main segments in this category are digital marketing (46.9%) and television (30.4%). 
  • Investment in digital marketing (46.9% market share) at $2.81 billion (€2.6 billion), an increase of 7.6% to 2021.
  • Investment in television (30.4% of market share) at $1.82 billion (€1.7 billion), a decrease of 3.3% to 2021.
• Non-traditional marketing investment in 2022 was $6.86 billion (€6.38 billion), an increase of 5% over 2021. These segments include:
  • telemarketing increased 8.1% to $1.74 billion (€1.62 billion),
  • personalized mailing decreased 1.5% to $1.52 billion (€1.41 billion),
  • on-site advertising increased 0.5% to $1.51 billion (€1.4 billion),
  • mailing flyers increased 25.1% to $270.2 million (€251.3 billion),
  • exports segment increased 37% to $39 million (€36.8 billion), and
  • influencers segment increased 22.8% to $67.3 million (€62.6 billion).

The wide range of EU legislation covering the direct marketing sector is applicable in Spain. Companies are required to provide full and transparent information to consumers prior to the purchase, as well as detailed information on the procedures followed to collect and use customer data. Compliance requirements are most robust for marketing and sales to private consumers.

The EU has a consumer rights omnibus rule, titled “the Consumer Rights Directive”. It covers important areas of marketing to consumers, doorstep selling, financial services, and eCommerce. Consumers have the right to turn to alternative dispute resolution entities for all types of contractual disputes including purchases made online, offline, domestically, or across borders. The platform to handle online dispute resolutions became operational at the end of 2015.

The General Data Protection Regulation (GDPR), covering data privacy, came into effect in May 2018, replacing the previous data protection directive. The GDPR applies in all member states of the EU, including Spain. This horizontal privacy legislation applies across sectors and to companies of all sizes.

In 2022, the United States and the European Commission announced the Trans-Atlantic Data Privacy Framework, which fosters trans-Atlantic data flows and address the concerns raised by the Court of Justice of the European Union when it struck down in 2020 the Commission’s adequacy decision underlying the EU-U.S. Privacy Shield framework. This Framework reestablishes an important legal mechanism for transfers of EU personal data to the United States.

In 2023, the European Commission adopted its adequacy decision for the EU-US Data Privacy Framework. As a result of the adequacy decision, personal data can flow freely from the EU to companies in the United States that participate in the Data Privacy Framework.

Distance Selling of Financial Services

Financial services are covered by a separate directive (2002/65/EC), designed to ensure that consumers are appropriately protected in transactions where consumer and the provider are not face-to-face. In addition to prohibiting certain abusive marketing practices, the directive establishes criteria for the presentation of contract information.

Joint Ventures and Licensing

License contracts in Spain may include industrial property rights (patents, utility models, and trademarks), intellectual property rights (use of literary, scientific, artistic works, or software), know-how, or other uses of technology. The Spanish system allows for flexibility when negotiating the terms and conditions of the agreement. Common clauses include:

• Exclusivity clauses, including exclusive purchase obligations.
• Measures to limit a licensor’s commercial activity.
• Confidentiality and non-compete obligations.
• Obligations relating to improvements and innovations (this includes updating the rights granted to the licensee and communicating to the licensor innovations developed by the licensee.
• Restitution, in case of breach of contract.

U.S. companies can also enter the Spanish market through joint ventures.

Express Delivery

Major global logistical service providers such as DHL, FedEx, and UPS operate in Spain and offer express delivery services. Transit times vary but for packages shipped from the United States to Spain, the average time is two to three days, not including the customs clearance process. Express service points are serviced at several locations around the country.

Customs procedures and requirements are standard and can be found on the Spanish Customs website.

Due Diligence

Product safety testing and certification is mandatory for the EU market. U.S. manufacturers and sellers of goods must perform due diligence in accordance with mandatory EU legislation prior to exporting.

Commercial Service Spain provides International Company Profiles and input from a qualified local credit-reporting agency. Commercial and financial reporting information are also available from the private sector or local chambers of commerce.

A complete list of credit reporting agencies may be obtained from Commercial Service Spain.  Two of the main entities are Informa and Axesor.