Subsidiary versus Branch in Spain - Updated Guide for 2021
Subsidiary vs. Branch in SpainUpdated on Thursday 01st April 2021
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Main differences between branches and subsidiaries in Spain
|Independence||The branch is not an independent legal entity but has some autonomy when doing business in Spain. The foreign company is liable for its debts and obligations.||The subsidiary is a resident legal entity in Spain that acts in its own legal capacity.|
|Requirements for Incorporation||The branch needs to be registered with the Mercantile Registry and must appoint a representative (individual or company) to represent it||The subsidiary is subject to the same requirements as the SRL, must have its Articles of Association drawn up in Spain and be registered with the Mercantile Registry (subject to fees as per the procedure)|
|Minimum investment||There is no mandatory minimum share capital for a branch, however, investors are advised to use an amount similar to that in the case of the SRL||The minimum share capital for a subsidiary that is incorporated as a limited liability company (SRL) is 3,000 EUR|
|Taxation||The branch is subject to corporate income tax on its net income derived from Spain. The provisions of an applicable double tax treaty can influence the withholding tax on dividends, interest and royalties.||The subsidiary is a resident company in Spain and subject to corporate income tax on net income (worldwide income) as well as other taxes.|
What is the tax system for Spanish branches and subsidiaries in 2021?
What are the requirements for opening a branch or a subsidiary in Spain?
- a copy of the certificate of incorporation of the parent company and a copy on the certificate of good standing, issued for the parent company;
- a copy of the articles of association and memorandum of the parent company;
- the Spanish tax identification number and a notarized power of attorney;
- it is also necessary to obtain a Digital Certificate in the name of the company, a document which will be used for electronic communication with the local authorities;
- another requirement is to appoint a representative for the branch office in Spain, who must be the owner of a residency certificate in this country.
What are the procedures for opening a Spanish subsidiary in 2021?
- as a foreign investor opening a subsidiary, it is necessary to obtain a tax identification number;
- register with the Spanish Commercial Registry, which will issue a certificate of denomination;
- it is necessary to open a corporate bank account in which the investors will deposit the required capital, depending on the selected company type;
- notarize a set of company documents in front of a Spanish public notary, such as the deed of incorporation or the statutory documents;
- if the subsidiary is set up by a foreign company, it is necessary to know that the investors have to complete the Form D1-A;
- the Form D1-A represents a declaration of foreign investments and it has to be deposited with the Registry of the Directorate General for Trade and Investments, operating under the Ministry of Economy and Competitiveness;
- the company is legally required to pay a set of taxes, such as the transfer tax and the stamp duty;
- register the subsidiary with the relevant authorities for various corporate matters – social security, value added tax and obtain a public deed of incorporation, which must be issued by the Commercial Registry in Spain.
What are the main characteristics of a branch office in Spain?
- legal personality – the branch office does not have a legal personality, as it is just a sub-division of a local or foreign company;
- minimum share capital – the branch office does not require any minimum share capital during its registration steps, thus being a less expensive manner to start a business here– at least during its set up procedure;
- governing body – in a branch office, the main governing body is given by the branch office representative, the person who has received the right from the parent company to act in its name on the Spanish market;
- liability matters – in terms of liability, the parent company will be held responsible for any types of debts incurred while developing business activities in Spain;
- taxation – although several taxes applied to branch offices are the same as in the case of a subsidiary, the main tax requirements derive from the double tax treaties signed here.
What are the key aspects of a subsidiary in Spain?
Minimum share capital
In the case of a subsidiary, it is required to deposit a capital of minimum EUR 3,000 (if the company is set up as a limited liability company) or a capital of EUR 60,000 (when registering a public limited company)
A subsidiary is managed by the general meeting of the shareholders and a board of directors
As the subsidiary represents a separate legal entity from its parent company, it will be personally responsible for its debts;
Since the subsidiary is incorporated as a separate legal entity in Spain, it will fall under the tax regulations prescribed for Spanish commercial enterprises