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.
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
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.
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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!
