Spain dropped from 74th place last year to 82nd in the global rankings of 189 countries listed in the The World Bank Group’s Doing Business 2016 report.
The report looks at countries’ business regulations, including the ease of starting a business, paying taxes and trading across borders.
In terms of those OECD countries, Spain is among the bottom five for starting a business out of the world's 32 most developed nations ranking only above Poland, Czech Republic, Austria and in bottom place Germany.
Spain held its ground in overall terms, remaining in 33rd place overall on the global rankings in terms of the ease of doing business.
It means that although regulations in Spain are not among the worst for existing companies, would-be entrepreneurs still face a battle against bureaucracy to get their businesses started.
"Spanish entrepreneurs face regulatory complexity and red tape. They interact with different government levels—the national government, regions (comunidades autónomas), provinces and municipalities—each with its own competencies and legislation," the report states.
But it wasn’t all bleak, Spain was praised for measures that saw a greater protection given to minority investors and tax reforms that have reduced rates for corporate income, capital gains and environment taxes, and made it easier to file VAT returns.
It was also noted that Spain had reduced the amount allowable for depreciation of fixed assets and raised the ceiling for social security contributions, all measures that eased business building in Spain.
The report looked at countries’ business regulations, including the ease of starting a business, paying taxes and trading across borders with a total of ten topics were examined.
Although the report welcomed initiatives to promote business creation introduced under the conservative government of Mariano Rajoy it concluded:"Spain still lags behind high-income OECD economies on the ease of doing business."
It called for further labour reforms to boost job creation and a concerted effort to streamline bureaucracy.
"It is important for Spanish policy makers to continue reforms to create jobs and increase productivity. Improving the business climate and removing national, regional and local regulatory barriers should be a priority to facilitate business creation and encourage economic growth," the report said.
"The country can speed up the pace of regulatory reform to increase competitiveness and allow firms to make the most of the opportunities coming out of the crisis."
A recent survey of Spain's startup ecosystem concluded that although Spain wasn't the easiest place to start a business it still boasted many alternatives over other European hubs and had a thriving entrepreneur industry.
"Despite evidence demonstrating that Spain is not the easiest place to start a business, the survey results show that it’s not as bad as it is perceived to be," concluded Starting up in Spain: The Survey.
"Far from being plain sailing, the initial friction in starting a company demonstrated there are clear barriers to entry, and cultural differences to overcome for the foreigner,” explained Tom Evans from Startups: Made in Spain which published the survey last month.
"At a time when Spain needs jobs, it’s surprising to see bureaucratic red tape getting between founders and the execution of their vision," Evans said.
But he insists that Spain is changing and that there are still huge advantages to be found by setting up here.
"It is now possible to see the possibilities the economic downturn has facilitated in creating potentially fertile ground for new companies to grow and create badly needed jobs," he told The Local.
"All the factors are present to build scalable innovative companies from Spain, they could now just do with increased reduction in some of the bureaucratic red tape and taxation sooner rather than later."