Accounting for Foreign Subsidiaries in Spain

All commercial companies in Spain — including subsidiaries of foreign companies — are required to maintain their accounting under the Plan General de Contabilidad (PGC, RD 1514/2007 of 16 November). Companies meeting the size criteria may apply the PGC for SMEs (RD 1159/2010), which simplifies certain recognition and measurement criteria.

The Spanish PGC is structured in five parts: Conceptual Framework, Recognition and Measurement Rules, Annual Accounts, Chart of Accounts, and Definitions and Accounting Relationships. It is aligned with IFRS as adopted by the EU, but presents significant differences that subsidiaries must manage:

• Property, plant and equipment: the PGC does not permit asset revaluation (cost model only), while IFRS permits the revaluation model (IAS 16).
• Leases: the PGC has converged with IFRS 16 but retains particularities in the classification of low-value leases.
• Financial instruments: differences in classification and measurement of financial assets compared to IFRS 9.
• Deferred tax: the PGC follows a balance sheet approach similar to IAS 12, but with nuances in deferred tax asset recognition.
• Foreign currency: exchange differences are treated in accordance with IAS 21, but the PGC has specific rules for intra-group monetary items.

Euroaccounts, from its Madrid office, masters these differences and manages the accounting conversion for over 500 international companies. Our team prepares the IFRS-PGC (or US GAAP-PGC) conversion adjustments as part of the recurring service, so the data the parent receives is always reconciled with the local accounts.

The Commercial Code (Articles 25 to 49) establishes fundamental accounting obligations: maintaining a Journal and an Inventory and Annual Accounts Book, legalising them at the Commercial Registry, and retaining all accounting documentation for 6 years from the last entry (Article 30 CCom).

Every commercial company in Spain is required to prepare, approve and file its Annual Accounts at the Commercial Registry. This process has strict legal deadlines whose non-compliance generates significant consequences.

The legal calendar is as follows (for fiscal years coinciding with the calendar year):

• 31 March: directors must prepare the Annual Accounts (Balance Sheet, Profit and Loss Account, Notes, and where applicable, Statement of Changes in Equity and Cash Flow Statement) within a maximum of 3 months from the year end (Article 253 LSC).
• 30 June: the Ordinary General Meeting must approve the Annual Accounts within the first 6 months of the following year (Article 164 LSC).
• 30 July: the approved Annual Accounts must be filed at the Commercial Registry within the month following approval (Article 279 LSC, Article 365 RRM).

The consequences of non-filing are severe:

• Registry closure: the Commercial Registry will not register any document for the company (except officer removals, power revocations, and dissolution/liquidator appointments) if the Annual Accounts for prior years have not been filed (Article 282 LSC).
• Financial penalties: fines from the Institute of Accounting and Auditing (ICAC) of EUR 1,200 to EUR 60,000 (up to EUR 300,000 if turnover exceeds EUR 6 million).
• Loss of limited liability protection: in insolvency situations, non-filing may be considered a presumption of director culpability.

In parallel, the Official Books (Journal and Inventory and Annual Accounts Book) must be legalised at the Commercial Registry in electronic format within 4 months of the fiscal year end (30 April for fiscal years = calendar year).

The subsidiary is subject to mandatory audit when it exceeds at least two of three thresholds for two consecutive years: total assets exceeding EUR 3,565,000, net turnover exceeding EUR 7,125,000, or average number of employees exceeding 50 (Article 263 LSC, updated under the transposition of EU Delegated Directive 2023/2775, which raised thresholds by 25% for accumulated inflation).

Euroaccounts manages the complete process: Annual Accounts preparation, coordination with auditors (when the subsidiary is subject to mandatory audit), General Meeting convocation and conduct, electronic filing at the Commercial Registry, and Book legalisation. Our Madrid team has been performing this process for over 500 companies since 1996, as part of the INPACT Global network.