Registering a Branch in Spain
A Foreign Investor Can Invest in Spain by:
Opening a branch or representative office
Forming a Spanish company: traditionally, the most-used corporate form has been the corporation (S.A.); however, in recent years the formation of limited liability companies (S.L.s) has also become commonplace.
Associating with other businesses already established in Spain: joint ventures are a common way of setting up business in Spain, since they enable their members to share risks and pool resources and experience. Spanish law provides for different types of joint venture.
However, creating a new entity or associating with pre-existing entities is not the only way to invest in Spain. It is possible to gain a foothold in the Spanish market without having to physically set up a center of operations in Spain by:
Making distribution agreements.
Operating through an agent.
Operating through a commission agent.
Establishing a franchise.
Forming a Branch in Spain
To open a branch, a public deed must be signed and registered at the Mercantile Registry. Under Spanish foreign investment legislation, the branch must be allocated capital, although there is no minimum capital requirement.
The branch must have a legal representative with authority to manage its affairs. It does not have any formal managing or administrative bodies as such, and it largely operates as if it were a company in its commercial dealings with third parties.
The choice between forming a branch or a subsidiary in Spain may be influenced by commercial considerations (e.g., a company might provide a more “stable” presence than a branch) or by considerations of legal certainty (a subsidiary limits the shareholder’s liability).
To Register a Branch in Spain
Broadly speaking, the requirements, formalities and costs related to opening a branch are very similar to those for forming a subsidiary.
From a legal point of view, the most important differences between a branch and a subsidiary are as follows:
|Concept||Company of a commercial nature engaging in a business with its own capital||Permanent establishment, enjoying certain degree of management independence. Vehicle for parent company’s activities. Lacks separate legal personality from its parent company.|
|Stock Capital||Minimum of €60,000||Minimum of €3.000||Not required|
|Cash and non-cash contributions||Cash contributions in euros. In the case of an S.A., non-cash contributions require a report from an independent expert appointed by the Mercantile Registrar.|
|Registration||Public deed must be registered at the Mercantile Registry.||Together with the public deed creating the branch, the documents attesting the existence of the parent company, its by-laws in force, its Directors and the decision of opening the branch, duly legalized, must be registered at the Mercantile registry.|
30% Corporate Income Tax rate is applicable to both, the branch and the subsidiary, on their net income. However, certain aspects must be taken into account:
The remittance of income from a branch, or the distribution of dividends from a subsidiary to a parent company not resident in the EU or in a country that has a tax treaty with Spain, is taxed in Spain at 19% (21% for tax years 2012 and 2013). If the parent company is resident in the EU, the remittance/distribution is usually tax exempt.
If the parent company is resident in a non-EU country that does have a tax treaty with Spain, any dividends in the case of a subsidiary will be taxed at the reduced treaty rate, whereas any remittance of income in the case of a branch will not be taxed in Spain (under most tax treaties).
General cost-sharing arrangement with the parent company: in practice, it is usually easier for general costs to be considered deductible in the case of a branch than in the case of a subsidiary.
Interest on loans from the foreign parent company to its Spanish branch is not, in principle, tax deductible by the branch. Interest on loans from the shareholders of a subsidiary is usually deductible by the subsidiary, provided that it is at an arm’s-length rate and the ratio of net remunerated indebtedness is not exceeded (note that the ratio does not currently apply to entities resident in the EU).
What separates us from our competitors is that our services don’t end with the registration of your company. We offer a wide range of additional services others can’t or just won’t offer, such as lifetime free support.
Whilst most providers either specialise on personalized consultation at relatively high rates or run bulk registration factories without any support, we want to offer the positive aspects of both types.
Therefore TBA combines professional advice, worldwide registration services, reasonable fees, customized order processing, lifetime support and fast processing. Where others see company formation services as a bulk registration with no support and no individual assistance, we do care about your business needs
Should you have any question or matter
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Our multi-lingual team of business advisors is happy to assist you with all upcoming questions and issues in relation to your company.
You may call or email us, and we will be happy to assist you in a fast and efficient manner.
You can also come and visit us at our Limassol offices to discuss issues face to face if you prefer. Just arrange an appointment and we will be happy to meet with you.