Global expansion into Spain generally means that you need to set up an in-country entity. However, by partnering with us you create the possibility to bypass this process and utilize our Italian entity. By using our PEO-service we take care of the complicated paperwork.
Expanding into a new country is always an adventure, but we believe this adventure should be exciting instead of just frustrating and time-consuming. Therefore, we have been supporting companies in over a hundred countries with their expansion plans.
Once the subsidiary is legally established, other crucial factors must be dealt with. Tax processing, filing accounts, legal compliance, workforce management, payroll and recruitment add up to a hefty workload.
In this guide, we will share which documents you need to establish an entity in Spain, but also where you will need to register your business address and company’s name. We will also break down the advantages and disadvantages of setting up an entity in Spain.
How to set up a Spain Subsidiary
Spanish law treats subsidiaries of foreign companies the same as a domestic Spanish company, with no nationality requirements for directors or shareholders. All companies, whichever their form, operate under the Spanish Companies Act (Ley de Sociedades de Capital). The Act sets out the framework for registration, share capital, investors etc.
The procedure to set up a subsidiary in Spain can usually be completed in six to seven weeks. Steps must include:
- Applying for a trading name.
- Obtaining company Tax Identification Number (Certificado de ldentificacion Fiscal, CIF) which is a letter followed by eight digits, from the Ministry of the Interior.
- Applying for certificate of denomination for the subsidiary from the Commercial Registry (valid for six months).
- Opening Spanish bank account to deposit share capital and receive disbursement certificate.
- Minimum of €3,000 (US$3,540) share capital for a limited liability subsidiary, or €60,000 (US$ 70,900) for a joint stock company.
- Presenting public deeds of incorporation before a notary, including bank certificate, certificate of denomination, company bylaws and identity of managers.
- Presenting the D1-A form for declaring foreign investments to the Registry of the Directorate General for Trade and Investment at the Ministry of Economy.
- Applying for final registration of public deed of incorporation in the Commercial Registry (usually within 15 days).
- Receiving the final CIF from the Commercial Registry.
- Completing census registration for tax, VAT, social security etc.
Once ‘up and running’ other procedures must be followed to operate payroll for your staff. These include:
- Registering employees with the Social Security Institute (Instituto Nacional de la Seguridad Social – INSS) before employment starts.
- Registering employees with the Spanish Tax Authority (Agencia Tributaria).
- Creating employees’ contracts and registering them with the Public Employment Service.
- Complying with national minimum wage as laid down by the Ministry of Employment and Social Security and other statutory benefits and guarantees.
- Withholding national and regional tax from employees’ salaries to the INSS and the Tax Authority.
- Recording the daily working hours of all employees, following implementation of a law in May 2019.
- Applying special expatriation status (if applicable).
- Calculating monthly salary schedules and creating pay slips and completing tax returns.
- Researching available tax-free allowances.
What you need to set up a Spain Subsidiary
Incoming companies would typically choose to set up a Limited Liability Company (LLC), known as a Sociedad de Responsabilidad Limitada (SRL or SL), or a Joint Stock Company (Communidad de Bienes, CB), which operate under Spain’s Companies Law. Requirements include:
- Written evidence that the management body or board of directors of the parent company have agreed to create a subsidiary.
- The agreement translated into Spanish by a certified translator.
- Proof that the Spanish consulate nearest to the location of the parent company certifies it is incorporated according to the regulations of the home country.
- Confirmation from the office of the Commercial Register (Registro Mercantil) that the subsidiary’s chosen name is unique in Spain.
- Proof the €3,000 (US$3,540) minimum share capital for a limited company - €60,000 (US$ 70,900) for a public limited or joint stock company - has been deposited in the registered bank.
- A draft of the company statutes.
- Notarized public deeds of the subsidiary’s incorporation.
- Proof of registration with the Commercial Register and the Foreign Investment Register at the Ministry of Economy.
Benefits of setting up a Spain Subsidiary
Foreign companies targeting Spain’s economy – the 14th largest in the world and fourth in the European Union (EU) – typically set up a limited liability subsidiary. Known as a Sociedad de Responsabilidad Limitada (SRL or SL), it operates under Spain’s Companies Law in the same way as a local company. Another option, however, is the Joint Stock Company (Communidad de Bienes, CB).
Setting up a subsidiary in Spain enables a foreign company to test the market in a new territory without committing to capital investment. Spain could provide a steppingstone for further expansion into the European Union, while increasing the international credibility of the parent company.
There are also specific benefits:
- The subsidiary is a separate legal entity to the parent company
- Subsidiaries have the flexibility to operate under its own business name and pursue independent business activities once it has obtained any necessary licenses
- The international profile of the parent company will be boosted
- The subsidiary has the same legal standing as local companies and can be eligible for government tax incentives and benefits
- The parent company is not liable for the obligations and debts of the subsidiary
Spain Subsidiary Laws
Under Spanish law a subsidiary is a legal entity independent from the foreign parent company with its own legal personality. The subsidiary is legally resident in Spain and therefore subject to all Spanish laws and company regulations under the Companies Act.
Spain makes no distinction between foreign-owned subsidiaries in Spain and local companies. Accordingly, the foreign subsidiary is subject to all local company tax and accountancy laws and must record its accounts and any company activity in the Commercial Register.
If the subsidiary is set up as a limited liability company €3,000 (US$3,540) share capital must be deposited in the bank, with €60,000 (US$ 70,900) required for public limited or joint stock companies.
To comply with Spanish law on establishing subsidiaries, the parent company must ensure certain procedures are followed, including:
Registration and Documentation
- Providing written evidence that the management body or board of directors of the parent company have agreed to create a subsidiary.
- Providing proof that the Spanish consulate nearest to the location of the parent company certified it is incorporated according to the regulations of the home country.
- A draft of the company statutes.
- Notarized public deeds of the subsidiary’s incorporation.
- Proof of registration with the Commercial Register (Registro Mercantil) and the Foreign Investment Register at the Ministry of Economy.
Accounts and Taxation
- In common with all companies operating in Spain the subsidiary is liable for Corporation Tax, Capital Gains Tax and in some circumstances Withholding Tax on dividends, royalties, and interest.
- Obtain company Tax Identification Number (Certificado de ldentificacion Fiscal, CIF) which is a letter followed by eight digits, from the Ministry of the Interior.
- Register with the Spanish Tax Authority (Agencia Tributaria).
- Open Spanish bank account to deposit share capital and receive disbursement certificate.
- Register for VAT.
- Withholding Tax is not imposed on dividends paid to foreign companies in the European Union (EU) and where double taxation treaties apply profits are taxed only in the foreign company’s home country.
- The subsidiary is eligible to apply for tax incentives or deductions.
- A limited liability subsidiary’s shares cannot be traded on the stock exchange.
- The board of directors of a limited liability subsidiary must have a minimum of three members and a maximum of 12.
- A limited liability subsidiary’s directors can be appointed for an indefinite time.
Take a faster route into the Spanish economy
The cost-effective and time-saving alternative to the expensive and lengthy process of establishing your subsidiary in Spain is to work alongside a Professional Employer Organization (PEO) and Employer of Record (EOR) such as Bradford Jacobs.
We have over 20 years of global experience and our in-country specialists and Human Resources experts will steer you through the complexities of setting up operations by onboarding new employees, then ensuring compliance with all employment and tax regulations.
You retain day-to-day control of your staff – who are in place and operational within days rather than the months it could take to incorporate a legal entity. There is no reason for international borders to stand in the way of your international expansion. Contact us today for more information.