Business Domiciliation: Legal Requirements, Benefits, and Virtual Office

Business domiciliation is the process of giving your company an official legal address, also known as its registered office. This is where all government correspondence, tax notifications, and legal documents are sent. It’s a mandatory requirement for any company operating in Europe, from startups to established enterprises.

However, domiciliation services go far beyond paperwork. The address you choose determines your company’s legal nationality, jurisdiction, and tax obligations. In other words, where your business is domiciled defines which laws apply, how profits are taxed, and which courts have authority in case of disputes.

For today’s entrepreneurs, especially digital founders, consultants, or international e-commerce brands, maintaining a full physical office often isn’t practical. Many now use a business address service or virtual office in Spain and other European countries to establish a legal presence, receive mail, and meet compliance requirements without the cost of renting office space.

In this blog, you’ll learn the meaning of domiciliation, the main types of business addresses available, and how a virtual office can help your company stay compliant while optimizing flexibility and costs.

Domiciliation Meaning: The Three Types of Business Address

When setting up a company, understanding the meaning of domiciliation is key to staying compliant. Many entrepreneurs assume all addresses serve the same purpose, but each type has a distinct legal and administrative function.

Here’s a breakdown of the three essential business addresses every company should know before choosing a domiciliation service.

1. Registered Office (Domicile Social)

This is your company’s official business domiciliation address and serves as its legal headquarters.

• It can determine the company’s legal nationality, jurisdiction, and competent commercial court.
• Must be publicly registered in the Commercial Register and appear on all company documents, invoices, and contracts.
• Any changes to this address must be officially declared and recorded.

2. Fiscal Address (Domicile Fiscal)

The fiscal address is used exclusively for tax purposes and communication with the Tax Administration.

• This address is typically not public and is used exclusively for tax purposes (including the delivery of notices, audits, and correspondence).
• It can differ from the registered office, especially for companies that use a business address service or virtual office for operational purposes.

3. Commercial or Business Address

This address reflects your daily business activity.

• Used for marketing, client communication, and supplier invoicing.
• Usually matches the physical office or coworking space, but may differ for online or international businesses.

In summary:

• The registered office defines your company’s legal and corporate identity.
• The fiscal address governs your tax relationship.
• The commercial address supports your daily business activity.

Managing these correctly ensures compliance and flexibility, especially for companies using business domiciliation services to establish a legal presence in Spain or elsewhere in the EU.

Not sure which type of address your business needs? Speak with one of our corporate lawyers to find the right setup for your company’s goals.

Business Domiciliation Services vs Virtual Office: Clarifying the Difference

The terms “business domiciliation” and “virtual office” are often used interchangeably, especially by service providers. In reality, they refer to two distinct concepts. Understanding the difference is key to choosing the right setup for your company’s legal and operational needs.

Business Domiciliation: The Legal Core

• Business Domiciliation is the legal process of assigning a registered or fiscal address to a company.
• It is the minimum legal requirement for registering a business in Spain or the EU, as authorities require every company to have an official administrative address.
• This address is used for official notifications, tax registration, and corporate filings with the Chamber of Commerce or Trade Register.
• In essence, domiciliation establishes your company’s legal footprint in the country, even if you operate remotely or from abroad.

Virtual Office: The Service Package

• A virtual office goes beyond basic business domiciliation. A virtual office is a commercial service model designed for entrepreneurs and remote teams seeking a prestigious business address without maintaining a physical office.
• It includes business domiciliation as its foundation but adds administrative and operational support to simulate a real office presence.

Additional Services Typically Included with a Virtual Office

Virtual office packages typically include the following:

• Mail reception, scanning, and forwarding to your preferred address.
• Quick receipt of important correspondence (in our case, lawyers receive legal notices)
• Administrative support, including document reception or courier management.

In a nutshell, business domiciliation provides the legal structure your business needs to exist officially, while a virtual office builds on that foundation by offering operational convenience and local presence, making it ideal for international entrepreneurs and digital-first companies.

Strategic Benefits of Business Domiciliation

Choosing the right business domiciliation service is a strategic decision that shapes your company’s professional image, operational flexibility, and tax position. For international entrepreneurs and remote businesses, domiciliation offers a cost-effective way to establish a credible and compliant presence in a new market.

Professional Image & Prestige

A business address service allows companies to project a polished, trustworthy image without the expense of renting physical office space.

• You can register your company at a prestigious location, such as Madrid’s financial district or central Paris. This can enhance credibility with clients, partners, and investors.
• This is particularly valuable for startups and remote-first teams that need a local corporate presence to build trust.

Cost Efficiency & Flexibility

Opting for domiciliation services offers major financial advantages over traditional office leases:

• It eliminates recurring costs like rent, utilities, and business property taxes (such as the CFE tax in France).
• Companies can scale up or relocate easily, adapting their business presence to new markets without logistical hurdles.
• For growing startups, it’s an ideal way to maintain a professional front while remaining agile and lean.

Privacy & Compliance

Domiciliation protects your privacy by clearly separating personal and professional addresses. This is especially important for sole traders or home-based business owners.

• It ensures official correspondence and legal documents are received at a secure, authorized address.
• Using a registered fiscal address also guarantees compliance with local business and tax regulations, avoiding administrative penalties.

Tax and Legal Jurisdiction

Your domiciliation address determines where your company is legally registered, consequently determining which legal system and tax regime applies.

• Establishing your headquarters in a particular region or city can have direct implications for corporate taxation, VAT registration, and business incentives.
• For foreign investors, strategic domiciliation is a practical way to optimize regulatory and tax positioning while maintaining full legal compliance.

In short, effective business domiciliation combines professional credibility, flexibility, and regulatory assurance, making it an essential step for any company expanding into new markets or operating remotely.

Legal and Regulatory Compliance (Substance Requirements)

As business domiciliation becomes increasingly common among international entrepreneurs and digital companies, governments have introduced stricter oversight to ensure transparency and prevent misuse. Understanding these compliance obligations is essential to maintaining your company’s good standing and avoiding regulatory issues.

Due Diligence (AML/KYC)

All accredited domiciliation services providers must comply with both Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations.

This means clients must submit verified identification documents, company registration details, and sometimes, proof of business activity. These checks protect both the service provider and the client from legal risk, ensuring the registered address is used for legitimate commercial purposes.

Domiciliation Contract

A formal domiciliation agreement is required to establish the legal relationship between the company and the domiciliation provider. This contract should outline the scope of services, costs, duration, and the obligations of both parties under applicable law. It also serves as proof of your company’s registered office or fiscal address when registering with local authorities or tax agencies.

Substance Requirement

While a domiciliation address provides a legitimate legal and tax presence, it does not always equate to substantive operations.

• Many jurisdictions, particularly within the EU, are increasing scrutiny on “shell” companies. These are entities registered only on paper without genuine activity or management presence.
• To demonstrate real substance, businesses may need to show local staff, operational management, or active business activity at their registered address.
• This distinction is especially important for companies seeking tax residency benefits or cross-border recognition.

Business domiciliation is a compliant, lawful solution, provided it’s handled through an authorized provider and supported by genuine economic activity. 

Always ensure your chosen virtual office or domiciliation company meets all local regulatory standards and offers transparent, legally binding agreements.

Need Support With Your Business Domiciliation?

Today, domiciliation is far more than a formality. It’s a legal foundation for operating within a country’s regulatory framework. Whether you are a foreign entrepreneur or an expanding SME, securing a professional domiciliation service ensures your company has a compliant registered address, a credible business presence, and the flexibility to operate remotely.

At Lexidy, we offer specialized business domiciliation and corporate support to help you register, launch, and remain compliant with local regulations. If you’re planning to establish your company in Spain or another European market, fill out the form below, and a member of our legal team will be in touch!