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Subsidiary Formation in Spain

Would you like to extend your business to Spain ?

So your business is growing and you want to open a subsidiary in Spain? That’s great news — we are happy for you, and even more happy to show you the lay of the land when it comes to setting up a subsidiary in Spain. Spain is a top choice destination to do business, the well connected geographic positioning makes it an international hub for business and trade, paired with a powerful economy, solid infrastructure and networks, it’s an advantageous location.

¨We will be with your. company each step of the journey.¨

 

There are plenty of necessary steps and considerations when it comes to opening a subsidiary in Spain. This page will define what a subsidiary is, explain how to go about starting subsidiary in Spain, highlight current Spanish tax benefits for a newly established subsidiary, and help you determine whether opening a subsidiary is the best move to make for your business.

A subsidiary is a company which is linked to an existing company; thus creating a group of companies. A subsidiary is established under the umbrella of a parent company or holding company (these differ slightly), foreign or domestic. The parent company often contributes with the share capital and management of the subsidiary. However, It is important to understand that while a subsidiary is created under an existing company, the subsidiary is its own separate legal entity and treated as such when it comes to laws, regulations and taxes.

In Spain, a subsidiary can be set up either as a Limited Liability Company, or a Joint Stock Company. Determining which type to incorporate your subsidiary depends on the size of the company and the amount of money the parent company plans to invest in the subsidiary. 

Limited Liability Company (LLC): This option enjoys more organizational flexibility and lower capital requirements. 

  • 1 – 3,000 EUR to start (thanks to the new law Ley Crea Y Crece 2022) 
  • Shares cannot be publicly traded
  • Shares can only be transferred between holders and their immediate family members
  • Directors are appointed for an infinite amount of time
  • A minimum of 3 members on the board of directors and a maximum of 12

Joint Stock Company (PLC):

  • 25% of share capital, minimum of 15,000 EUR to start
  • Company representatives may trade shares
  • Founders have the legal right to transfer shares
  • Directors are elected for a maximum period of 6 years
  • A minimum of 3 members on the board of directors; no maximum

Steps and Procedures to Register Your Subsidiary in Spain

Regardless of whether you open an LLC or a PLC, legally a subsidiary is no different than a local Spanish company and must adhere to the same rules stipulated by the Spanish Commercial Law. The entire process to form a subsidiary in Spain takes approximately 4-8 weeks to complete. However, new laws are expected to reduce the total set-up time. Such new laws and EU directives will allow an LLC to be registered fully online within certain time limits.

Opening a bank account is an essential step to start a subsidiary. In the case of a limited liability company, investors must deposit a minimum of 1 EUR (thanks to the new law Ley Crea Y Crece into effect on October 19, 2022). Whereas, a joint stock company must deposit 25% of the share capital, no less than 15,000 EUR.

Here is a summary of the procedures to open a subsidiary in Spain (subject to change with new reforms):

  • The decision from the parent company expressing intentions to open a subsidiary and an attestation to the validity of the parent company; legally translated into Spanish
  • Check and reserve the proposed subsidiary’s name at the Central Mercantile Register
  • Apply for a Tax Identification Number from the National Tax Authority
  • Open a bank account 
    • Deposit required amount depending on which type of subsidiary you wish to open
    • Obtain a bank issued certificate declaring the disbursement
  • Prepare Articles of Association of the subsidiary
  • Administer an anti-money laundering and and terrorist financing declaration 
  • Sign & Notarize the public deed of the subsidiary’s incorporation
  • Complete a D1-A form declaring foreign investments and submit to the Registry of the Directorate General for Trade and Investment of the Ministry of Economy and Competitiveness 
  • Register your office at the Mercantile Register
  • Obtain a permanent NIF
  • Ensure all tax and labour procedures are complete through public bodies

Notably, Spain is aiming to improve the entire process through a series of newly introduced laws, so the aforementioned steps can be completed in a more singular environment, even telematic. 

OUR WORK

We are a department formed by qualified legal experts who have been trained in the field of corporate law. 

For us, Lexidy is a way of life and what excites us the most is to be able to deliver the happiness and satisfaction of a successful immigration process. We want to help you achieve your goals and dreams, whether it’s business in Spain or simply any activity.

Héctor Lopez Vazquez

Héctor Lopez Vazquez

Head of Corporate Department
Madeleine Cadwell

Madeleine Cadwell

Paralegal
Marta Ametller

Marta Ametller

Paralegal
Samuel Ortega Vega

Samuel Ortega Vega

Lawyer
Francesca Coluccio

Francesca Coluccio

Trainee
Luisa Rivera

Luisa Rivera

Trainee

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Bella F.
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Ryan Rich
Ryan Rich
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Lexidy has helped us so much in both the business and immigration side. We continue to use them for all legal needs and recommend them highly.
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First of all, I would like to appreciate all the team members of Lexidy for helping me to get my residency card.I had a great experience especially on the SEF appointment day with their kind and helpful Brazilian expert which made my experience smooth and without stress.When you decide to work with this law company you should notice that you don’t just pay for lawyers but also for the quality, respect and safety.I’m totally happy with the processes and quality of their job.
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RICHARD BRITTON
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21:46 29 Jun 22
We contacted Lexidy Law boutique when we recently moved from Cyprus to open a new chapter in our lives to move into a house in Brittany that we had bought 12 years previously. We had underestimated the twists and turns involved in obtaining residency in France - so we contacted Lexidy Law Boutique and were assigned Eleonore, an immigration lawyer well acquainted with French immigration laws. From the very beginning we realised she was determined that we should have a successful outcome and she guided us expertly to avoid all the pitfalls in the process of applying for residency. She even accompanied us to the prefecture and ensured that everything went smoothly - without her presence we might well have not succeeded.We thank and highly recommend Eleonore and Lexidy Law Boutique.
Declan Ryan
Declan Ryan
20:48 01 Jun 22
The Lexidy team is uniquely positioned to provide pan-European business and tax advisory services; what would be complex or impossible for a country-specific advisor is straightforward for Lexidy. They answered in days what would take weeks for other firms.
Rick Kleinhans
Rick Kleinhans
13:03 27 Apr 22
Lexidy has been a lifesaver. The entire team has helped us so much on different matters both personal and corporate. Isabel in correcting an error by a previous accountant that was costing us an extra €1000 every month in social security payments! Jose with various matters and tax advice. Diego in helping us get documents notarized in Valencia even though he is based in Madrid. I cannot recommend them enough!
Aleksandar Vorinski
Aleksandar Vorinski
08:12 25 Apr 22
I recently purchased apartment, got NIE and opened bank account with their help. I m satisfied with their service, they are accurate and responsible.
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17:31 24 Apr 22
I’ve dealt with hundreds of solicitors through business over the years but I must say Cristina and Lexidy Law are really something special. Responsiveness, proactiveness, knowledge and professionalism is, quite frankly, outstanding.M.
Sarah Taylor
Sarah Taylor
11:03 31 Mar 22
Lexidy did an amazing job setting up our company in Spain, which was a complicated and lengthy affair which they handled with patience and professionalism. Their ongoing tax, accounting and payroll services have been greatly appreciated. Friendly and professional team with perfect English. Highly recommended!
Jonas Hendrickx
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14:53 20 Oct 21
Update: While all of the initial responses were pretty quick, they started getting busy, so I had to constantly follow up. We have since sought assistance elsewhere.My husband and I plan to move from the USA to Porto, Portugal in the spring/early summer of 2023. We didn't know where to start or what to expect. I searched online and found Lexidy Law Boutique. Their website is intuitive, informative and inviting. I emailed the office and Lidiane responded within a few hours. Based on the information in my email, she emailed us appropriate information on our situation. She was very professional and offered to set up a web call if we wanted to. We ended up having our web call today and will be starting our journey of becoming Portuguese citizens. She informed us of the first steps, all of the documentation we need and what the law firm can do for us. Right after our call, she emailed us detailed information regarding pricing and what is entailed in that pricing. So far, the beginning of our journey is a positive one.
Parisa Fardad
Parisa Fardad
05:20 21 Sep 21
I have started to work with this company which was my friend recommendation. My first experiences have been very good. They are responsive, friendly and cares about their costumers.
Thijs van de Laak
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I experienced good, constructive and accurate service by Lexidy in composing my SHA. Thanks Hector and Samual
陳震東
陳震東
07:43 08 Sep 21
Samuel is very professional and patient. Really appreciate.
Erik van der Linden
Erik van der Linden
00:01 08 Sep 21
I contacted this company regarding a Labour dispute with a former employer. I quickly got an honest response that according to Spanish Labour laws, nothing could really be done anymore. Impressed with their swift, direct and honest opinion, I explained this was a very unusual case and would like to hire their services. Again I got a swift and direct answer that they did not deal with those kind of cases. Rather than milking a client, they showed admirable integrity by turning down the case…. a rare quality these days. My compliments.
Signore Raffaele
Signore Raffaele
12:53 07 Sep 21
The service I have received from Hector has been extraordinary.He has helped me opening bank accounts, managing my NIE and setting up my company's branch in Spain.I am very grateful for the help and the exceptional treatment and management.I won't hesitate to contact him again for any other business I may need.
ZULFU S.R.O
ZULFU S.R.O
16:40 04 Sep 21
We used Lexidy to help establish our company in Spain. The whole team and especially Samuel, were very helpful and professional. Their customer service is excellent. Prices are reasonable. Highly recommend.
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Frequently Asked Questions

When it comes to taxation, there is no difference in Spanish legislation between regular companies and subsidiaries. The corporate incorporate tax rate is 25% regardless. However, newly created entity is entitled to a reduced rate of 15% during the first two years of profitability. 

 

Beyond this initial tax break, the Spanish subsidiary may be eligible for a number of tax deductions and exemptions. Subsidiary companies can take advantage of double tax treaties ratified by Spanish authorities. Another tax benefit this type of business enjoys is the potential to qualify for relief from having to pay withholding taxes. 

Choosing whether to establish a subsidiary or creating a new company depends on the goals you seek to achieve. Having another company within the share capital structure will better your access to financing from banks and private investors, It will demonstrate you have previously carried out the same/another activity, and there is a structure backing you up.

 

Similarly, if you are a foreigner intending to apply for a residence permit through the Business Activity Permit then you will need to submit a business plan to the immigration authorities. Consequently, having highlightable experience in the field which you are starting your project adds merit to your application. 

 

Opening a subsidiary in Spain can be beneficial for companies with difference streams of business and/or different teams. Separation between activities can be valuable for a multitude of reasons. Companies with a main branch overseas most commonly prefer to establish a subsidiary branch in Spain. If the parent company’s goal is to increase brand awareness, a subsidiary can be an easy approach of doing so. A subsidiary branch will provide easier access to the Spanish market and other European markets. Additionally, a subsidiary can form a European Economic Interest Grouping (EEIG), as long as the subsidiary is founded in Spain or another European Union country. Bear in mind, it takes at least two EU companies to found the EEIG.

Consider your business and your goals. As mentioned, the need for financing in the early stages of your project, or the existence of a simultaneous immigration process will probably tip the scales in favor of the subsidiary option. 

 

Likewise, if you expect short term benefits and distribute them among shareholders, incorporating your company as a subsidiary could be a favorable option depending on which country the parent company is based. Due to the fact that taxation is more favorable to companies than individuals. In this regard, treaties to avoid double taxation are quite important — a matter which requires case by case analysis. Luckily, our corporate and tax advisors can help you with that!

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