In the business landscape of 2025-2026, many international companies are looking to expand in Spain, and the most critical structural decision is choosing between establishing a subsidiary or a branch. If you are researching “subsidiary vs branch Spain” or the “tax difference between subsidiary and branch”, this guide offers a technical overview for the CFO.
We will not just stick to legal definitions. We will analyze the impact on
What is a Subsidiary and what is a Branch in Spain?
Understanding the legal difference is the basis of tax planning:
- Subsidiary: It is an independent legal entity (usually S.L. or S.A.) with its own legal personality. Even if 100% of the shares belong to the foreign parent company, in the eyes of Spanish law it is a local company. This creates a legal “firewall” between the parent company and the operations in Spain.
- Branch: It is not a separate entity, but a secondary permanent establishment. It is, for all purposes, the same parent company operating on Spanish soil. It lacks its own legal personality, so the parent company is directly responsible for all its actions and debts.
For more details on the steps of incorporation, see our Guide to Establishing a Subsidiary in Spain.
Comparative Table: Subsidiary vs. Branch (CFO Analysis)
Below, we break down the operational and fiscal differences in force in 2025. Pay special attention to the “Loss Treatment” row, a decisive factor in the early years of investment.
| Aspect | Subsidiary | Branch |
|---|---|---|
| Legal Entity | Independent (SL/SA). The risk is encapsulated in Spain. | Extension of the parent company. Same foreign NIF with Spanish suffix. |
| Responsibility | Limited to the capital contributed. The parent company is not liable for commercial debts. | Unlimited. The parent company is liable with its global assets for debts in Spain. |
| Corporate Income Tax (IS) | 25% General. Possibility of a reduced rate of 15% (new creation) for 2 years. | 25% General. They can rarely access the reduced rate for new creation. |
| Loss Treatment | Losses remain in the Subsidiary (future tax credit). | Key advantage: Possibility of offsetting losses from Spain directly in the Parent Company (depending on country of origin). |
| Repatriation of Funds | Distribution of Dividends (Exempt in the EU under the Parent-Subsidiary Directive). | Remittance of profits. Subject to special tax (19%) unless there is an agreement or EU residence. |
| Cost and Bureaucracy | Higher. Requires full annual accounts to be filed with the Commercial Registry. | Lower initial cost, but equally rigorous accounting in Spain. |
Note: If your parent company is in an EU country, the tax difference is diluted, but the difference in legal liability remains. Check our guide on double taxation treaties.
The “Branch Profit Tax” and the Repatriation of Dividends
One of the most frequently asked questions is how to get money out of Spain. Here are important nuances for 2025:
- In a Subsidiary: Dividends are distributed. There is generally a withholding tax of 19%. However, if the parent company is resident in the EU (or European Economic Area) and owns >5% of the capital, the distribution is usually exempt from taxes in Spain (0% withholding).
- In a Branch: The Branch Profit Tax applies. By default, Spain taxes the outflow of profits at 19%. However, thanks to Double Taxation Agreements (DTAs), this tax is usually cancelled if the parent company resides in a country with an agreement (EU, USA, Canada, etc.) and there is reciprocity.
For a detailed analysis of your specific country, see our section on International Taxation in Spain.
When to choose which? The expert’s verdict
- Choose BRANCH if: You anticipate significant losses in the first few years and want to deduct them in your parent company (e.g. market research, intense R&D) or if the administrative structure should be very light.
- Choose SUBSIDIARY (S.L.) if: You are looking to limit the legal risk of the parent company, you want to give a 100% local company image to Spanish clients, or you plan to sell that business unit independently in the future.
How Euroaccounts optimizes your landing in Spain
Spanish bureaucracy can be complex, especially in matters of Compliance and bank openings for non-residents. At Euroaccounts, we not only manage the accounting; we act as your external financial department.
From obtaining the NIF for the parent company to the Transfer Pricing strategy between the headquarters and the Spanish office, our team ensures that your structure (Subsidiary or Branch) is efficient and complies with current regulations.
