Lucium total war is a mod that takes place in the year 1700, and goes all the way to 1850, with technologies and warfare progressing as you play. There are 2 main campaigns to play, both being completely unique, taking place in an expanded Europe that goes from Swedish-Finland to Persia, and an original and totally unique South America. The Europe campaign beginning in 1700 (around the Spanish Succession Crisis and the Great Northern War), and the South American campaign beginning in 1819 (around the revolutions of Simon Bolivar). The 1.0 version of the Europe campaign of Lucium Total War, was released officially on April 20th 2020, with the 2.0 version being released shortly afterwards on the 14th of June 2020, and then also a 2.5 version on the 4th of July 2020. This began a short break for the team as we worked on the 2.6 version, as well as the South Americas campaign: Bolivars Revolution, having those release on the 12th of November 2020. We adore 3.0, and hope you do also!
Why does Spain have that flag?
Because it is their coat of arms.
That coat of arms is from 1981 onwards. The red and yellow flag was created in 1785 for the navy and it wasn't the official national flag until 1843. I think the Cross of Burgundy would be a more appropriate flag for the period.
sch92 is right, the cross of burgundy (Cruz de Borgoña) would be the most accurate flag for the Spanish Empire, if you are going to use the yellow banner with a coat of arms, it better be this one Commons.wikimedia.org
It has been changed already and will be in the next release.