Setting up in Spain from abroad: a subsidiary or a branch?

A foreign company that wants to operate in Spain usually chooses between two structures: a Spanish subsidiary, almost always a sociedad limitada, or a registered branch of the foreign company. Both can hire, invoice and sign contracts. They differ in liability, tax and how much of the parent’s paperwork follows them to Spain.

The subsidiary

An SL is a separate legal person with its own capital, which can be as little as one euro, and its own limited liability. It files its own Spanish accounts and corporate tax return and is treated by banks, landlords and customers as a local company. Incorporation takes four to six weeks, most of it waiting for the bank account and the tax registrations.

The branch

A branch is the foreign company itself, operating in Spain through a registered establishment. The parent is fully liable for its debts and must file its own accounts in the Spanish registry each year, translated. It is quicker to set up when the parent is already well documented, and it suits activities that are genuinely an extension of the parent rather than a new business.

How to choose

• Choose the subsidiary when you will hire locally, take on contracts with Spanish counterparties or might bring in investors or partners.

• Choose the branch for a sales office or project that the parent wants to keep fully inside its own books.

• Check the tax treaty position: profits of both are taxed in Spain, but withholding on repatriated profits differs.

What to do now

Send us a paragraph on what the Spanish operation will actually do and how many people it will employ in the first year. The right answer is usually clear from that alone, and the written proposal that follows includes the full timetable.