Globalisation, the digital age and the rapid expansion of e-commerce have enabled many businesses to access international markets and expand their operations across national borders.

Along with the opportunity to sell products and provide services in other countries, international expansion often involves entering new markets, opening offices and employing staff abroad.

This trend has been reinforced by agreements between countries designed to facilitate international trade, not only through traditional bilateral agreements eliminating customs duties but also through the creation of stable legal and economic frameworks, such as the European Union. Within the European Single Market, goods, services and capital can move freely between Member States, allowing businesses to operate almost as if they were trading within their own country.

 

How Can a Foreign Company Operate in Spain?

The most appropriate legal structure for operating in Spain depends primarily on the purpose of entering the Spanish market:

1. If the primary objective is to sell goods or provide services, the foreign company may either sell directly from abroad or establish a subsidiary or a branch in Spain.
2. If the primary objective is to open offices or production facilities or to employ staff in Spain, the foreign company will generally need to establish a permanent presence in Spain. An exception may apply where the company merely employs Spanish workers who work exclusively from home. Further information can be found in our article Home Office.

Companies established in EU Member States, Switzerland, Norway or Liechtenstein may establish themselves freely in Spain without relocating or restructuring their parent company.

 

 

Subsidiaries and Branches

1. A subsidiary (filial) is a company incorporated in Spain under Spanish corporate law (usually as a Spanish Limited Liability Company – Sociedad Limitada (S.L.)). It has its own legal personality and management and operates independently from the foreign parent company.
2. Unlike a subsidiary, a branch (sucursal) does not have its own legal personality. It is simply a dependent establishment of the foreign company. In this case, a branch manager or legal representative must be appointed to represent the company in Spain.

 

Both subsidiaries and branches are generally subject to taxation in Spain (Corporate Income Tax or Non-Resident Income Tax, depending on the circumstances). In both cases, annual financial statements must be filed with the Spanish Companies Register. Branches must also file the financial statements of the foreign parent company.

In summary, the main advantage of establishing a subsidiary is that it has its own legal personality and operates independently of the parent company. Furthermore, only the subsidiary's financial statements must be filed with the Spanish Companies Register, whereas a branch must also register the parent company's financial statements.

The incorporation process for a subsidiary usually takes approximately three months when completed through the traditional procedure. However, when all formalities are completed electronically, the company can normally become fully operational within only three to five working days.

Electronic incorporation also allows a branch to be established and registered within approximately three working days (provided the parent company already has a Spanish tax identification number). This procedure reduces notarial and registration costs and can be carried out by law firms and authorised entities connected to the Spanish CIRCE system, known as PAEs (Entrepreneur Service Centres).

Steps to Incorporate a Subsidiary in Spain

1. Obtain a Company Name Clearance Certificate from the Spanish Companies Register.
2. If necessary, grant a notarised Power of Attorney from the parent company and the future managing director if a Spanish law firm or representative is handling the incorporation.
3. Obtain the managing director's Spanish NIE number.
4. Obtain the company's Spanish Tax Identification Number (NIF).
5. Prepare the Articles of Association in accordance with Spanish law and sign the Public Deed of Incorporation before a Spanish notary (this may also be done by means of a Power of Attorney).
6. Apply for the company's provisional Tax Identification Number (NIF) before the Spanish Tax Agency.
7. Apply for the exemption from Stamp Duty applicable to company formations.
8. Register the company with the Spanish Companies Register.
9. Obtain the final Tax Identification Number (NIF).
10. Register for tax purposes and complete the relevant business tax registrations.
11. Receive the registered Deed of Incorporation and open the company's bank account.

The company may begin operating immediately after signing the Public Deed of Incorporation before the notary. From that moment onwards, it may issue invoices, including invoices without VAT under the reverse charge mechanism when invoicing its foreign parent company or other foreign businesses.

Our Legal and Tax Services

We assist you throughout the entire process of establishing your subsidiary or branch in Spain. Once your business has been incorporated, we continue to represent your company before the Spanish Tax Agency as your tax advisors and take care of your bookkeeping, tax compliance, annual financial statements and statutory filings. All essential documentation and communication can be handled in German.

Learn more about our services

As a Spanish law firm, tax advisory practice and registered PAE (Entrepreneur Service Centre), we will be pleased to analyse your specific situation, complete all necessary administrative procedures on your behalf and prepare and file the required tax returns. Further information about our services can be found in the section Company Formation.

If you require further information or have any questions regarding this topic, please do not hesitate to contact us by email or telephone.

Author:

Adrián Vera
Tax Advisor
info@sspartners.es
Tel: (+34) 951 12 13 06
Facebook I LinkedIn I Amazon