The Spanish market is becoming increasingly attractive for foreign investment and many companies from all over the world are opening branches and subsidiaries in the country. We want to use this post to explain the requirements for setting up a subsidiary in Spain.

First and foremost, we need to know the difference between a subsidiary and a branch.

What’s the difference between a subsidiary and a branch?

A branch is a secondary establishment that depends on a company located in another country (known as a parent company).

A subsidiary, in contrast to this, is completely independent despite being controlled by the parent company, which owns most of the subsidiary’s share capital.

The best option for internationalising your company depends on its specific circumstances. The corporate structures that you want to develop should be taken into account, as well as the tax and legal implications of every possible aspect.

What are the requirements for setting up a subsidiary?

The following prerequisites need to be met to set up a subsidiary in Spain:

  • The management body of the parent company must agree to the creation of a subsidiary.
  • The agreement must be translated by a sworn translator.
  • The Spanish consulate corresponding to the location of the parent company must certify that it has been incorporated in accordance with the regulations of the country of origin.
  • A certificate of name availability needs to be requested from the Mercantile Register, accrediting that the name to be used for the subsidiary does not already exist in Spain.
  • The share capital sum needs to be paid into a bank. For limited companies, the minimum share capital sum is €3,000.
  • The company statutes need to be drafted.
  • A notary then needs to be consulted to sign a public deed of company incorporation.
  • With the deed of incorporation, the application for a provisional tax identification number (CIF) needs to be processed and the corresponding taxes (patrimonial transfer tax and stamp duty) need to be paid.
  • The subsidiary company must be registered in the Mercantile Register corresponding to the company’s address and as it is a foreign investment, it must also be registered in the Register of Foreign Investment, which is administered by the Ministry of Economy.
  • A permanent CIF needs to be requested.
  • The registration procedures need to be completed for the Spanish tax authorities, social security, etc.

Types of companies in Spain

Although Spanish law distinguishes between various types of companies, the most commonly used types are limited companies and public limited companies. The main differences between the two are as follows:

  • The minimum capital for a limited company is €3,000 and €60,000 for a public limited company.
  • The capital stock in a limited company is divided into shares (participaciones) and stocks (acciones) in a public limited company.
  • In a limited company, shares cannot be freely transferred, while in a public limited company stocks can be.

If you have any doubts about setting up a branch or subsidiary in Spain, you should contact an expert to help you choose the best option for you.