The prospect of investing sums of money into an office space you don’t even use– just to claim domiciliation in that country– can be a real turn-off for entrepreneurs expanding businesses into Europe.
But that’s not the only way.
Discover how domiciliation can actually save you some moolah as you build your business abroad.
What is Domiciliation?
Firstly, a business that fails to follow the requirement of trading under a known address can’t be incorporated. Thus, it will be shut down. Domiciliation takes care of this issue. The term “Domiciliation” means legally assigning a physical establishment as a base of operations for companies that don’t need a physical establishment in a country abroad.
It is a great solution for companies with their home base in another country. It has the added benefit of providing an address in European countries like Spain, Italy, Portugal, and Greece.
There are two types of Domiciliation:
- Social Domiciliation
- Fiscal Domiciliation
What Type Is Best?
To begin with, the answer is not that one of the two saves money.
By establishing the two in different places, your company could benefit.
In short, your Social Domiciliation is where you choose to register your office. It doesn’t have to match your Fiscal Domiciliation.
For example, let’s say you want to open a company in Spain. Your tax residence (fiscal domicile) for your company will be in Spain. However, you can still have different addresses for your company in Spain. And if the social domicile is NOT in Spain, the tax authorities understand your business NOT TO BE SPANISH.
You can register your social domicile (where you physically do the majority of your work) in another country. This is often the case when your company group headquarters are in this other country.
As an aside, in the case that your earnings come from real estate, you could establish you fiscal domicile where the property is located.
Once you establish separate Fiscal and Social Domiciliation, your Fiscal Domiciliation becomes the official address. This address is the official one for legal reference, for the Spanish Treasury and tax bodies, and for invoicing.
At that point, your Social Domiciliation becomes a secondary address. This address is where, normally and unless your bylaws say otherwise, Shareholder Meetings will take place.
The money-saving part is that, in some situations, it is possible for companies that do not have physical premises of their own to be domiciled at the physical premises of a “third party.”
In practice, this often looks like a low cost monthly subscription to a professional business within the country of tax residence. This Fiscal Domiciliation can be named as your company’s head office. Or, it can be named as an additional office of your company.
While this option is available in many European countries, keep in mind that there are exceptions (like Luxembourg). Check with legal experts for confirmation on the country you have in mind.
What Are The Benefits Of Changing Your Tax Address Abroad?
- Having a headquarter in certain countries can result in qualitative benefits for your brand sans the exclusive office pricing. Examples of this include the trustworthiness and assumed shared values that come with having an address in the same country as your consumers.
- You can hire staff in the country of the Fiscal Domiciliation, which often saves money on staffing.
- You become a tax resident of the country where you have Fiscal Domiciliation. This comes with the same tax benefits Spanish companies get, while you do a lot of your business in other countries.
How To Establish Domiciliation
Assuming you have your company ready to go, you need to make the domiciliation decision as your lawyer drafts the statutes of the company to be signed in the presence of a Spanish Notary Public.
If you decide to establish your domiciliation with a third party and establish your office on their premises, your company will be considered a “domiciled company”. You will have to choose a domiciliary agent to represent your company at the fiscal residence.
The “domiciliary agent” is usually an attorney at law, or a practising European lawyer, although this isn’t always the case.
Once you have chosen an agent, the agent and the domiciled company need to come up with a written domiciliation agreement together.
Generally, the Domiciliation Agreement includes:
- Key information about both parties
- The services provided by the agent
- The rights and obligations of the agent
- Anti-money laundering obligations
- Disclaimers from the agent
- The rights and obligations of the domiciled company
- The agreed upon method of communication between the agent and the company
- The cost of service
- The agreement timeline and end date
- Information about right of revocation of this agreement without notice
- Information about applicable laws and regulations
Before signing the agreement, it is the agent’s obligation to make sure all the legal requirements in the head office are fulfilled, that they have the true identities of the governing bodies of the domiciled company, that they have all relevant paperwork on file and are up to date.
Even after the agreement ends, the agent still has the legal obligation to keep all the paperwork on file for another five years, if not sent to the domiciled company.
And if the agent finds that the domiciled company is violating the agreement or any legal requirements, the agent can revoke the agreement via registered letter with no issue of liability.
As you can see, picking the right agent is key to success with Domiciliation.
Where To Find Good European Legal Assistance
The natural or legal person you choose as your agent can make your life easy, or impossibly difficult, so take the time to choose one carefully.
As earlier mentioned, in order to become your agent, this person must meet further stipulations beyond their credentials.
It is also important that this person be knowledgeable about handling administration in the country you would like to establish fiscal domiciliation.
If you would like to find a dedicated European domiciliation agent, contact our expert legal team through the form below.
Lexidy has multilingual legal teams in Spain, Portugal, Greece, France, Italy, and more. Our legal teams specialise in helping you navigate the rules, regulations, and tax schemes to seek the best solution for you.
That way, you can focus on what you care about: growing your business.
