Setting Up a Subsidiary or Branch in Spain

The Spanish Companies Act (Real Decreto Legislativo 1/2010) sets a minimum share capital of EUR 3,000 to incorporate a Sociedad Limitada (SL — equivalent to a UK Ltd or US LLC), the most common legal form used by foreign companies to operate in the Spanish market. Euroaccounts, from its offices in Madrid and with over 500 international companies advised since 1996, manages the entire incorporation process: from obtaining the provisional tax ID (NIF) to final registration at the Commercial Registry. As members of INPACT Global, we coordinate with your home-country advisers to ensure the chosen structure is tax-efficient in both jurisdictions.

Full incorporation of an SL in 15-20 business days with minimum share capital of EUR 3,000
Branch opening with no independent share capital requirement
NIF, NIE for directors and census registration all included
Notarial and registry coordination in English, Spanish and French
Pre-incorporation analysis: Subsidiary vs. Branch vs. Permanent Establishment
INPACT Global network to align the structure with the parent company

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Three Routes into the Spanish Market

Each structure has distinct tax, liability and operational implications

Sociedad Limitada (SL) — Subsidiary

The SL is a separate legal entity with its own legal personality, which limits the parent company's liability to the contributed capital (minimum EUR 3,000). It is the preferred option for multinationals seeking operational autonomy in Spain and access to double tax treaties as a Spanish tax resident. Corporate tax applies at 25% (15% for newly created entities in their first two profitable years).

Branch of a Foreign Company

A branch has no separate legal personality — it is an extension of the parent company. It does not require its own share capital, but the parent is fully liable for all obligations incurred in Spain. Regulated by Articles 119-124 of the Commercial Code and Directive 89/666/EEC, it is suitable when the company wishes to operate under the brand and structure of the head office.

Permanent Establishment (PE)

A PE arises when there is a fixed place of business in Spain without formally incorporating an entity. It may be created involuntarily through an office, a dependent agent, or a construction project exceeding 12 months. Tax obligations apply from day one under Article 5 of the OECD Model Convention and the Spanish Non-Resident Income Tax Law (LIRNR).

Representative Office

Limited to auxiliary or preparatory activities (market research, business contacts) that do not generate income in Spain. No commercial registry registration is required, but any productive activity may be reclassified as a PE by the Spanish Tax Agency (AEAT), with the corresponding tax consequences.

Step-by-Step Incorporation Process

Actual timeline based on our experience with over 500 companies

1

We assess the planned activity, transaction volume, the jurisdiction of the parent company, and applicable double tax treaties. We issue a comparative report — Subsidiary vs. Branch vs. PE — with estimated tax impact in both jurisdictions. This phase is critical to avoid structures that generate double taxation or involuntary PE risk.

2

We process the NIE (Foreigner Identification Number) for non-resident directors and attorneys-in-fact through the National Police or the relevant Consulate. Simultaneously, we apply for the company's provisional NIF (tax identification number) through Form 036 at the AEAT.

3

We request a negative company name certificate from the Central Commercial Registry, confirming that the chosen name for the subsidiary is available. The certificate is valid for 6 months and is a mandatory requirement for the deed of incorporation.

4

We open a bank account in the name of the company being formed and deposit the minimum share capital (EUR 3,000 for an SL). The bank issues the deposit certificate required for the notarial deed. Euroaccounts manages the banking relationship to expedite a process that without professional intermediation can take weeks.

5

Execution of the deed of incorporation before a Spanish notary. This includes the articles of association, appointment of directors and capital contribution. For branches, the parent company's board resolution, translated and apostilled articles and the representative's power of attorney are notarised.

6

We file the deed at the provincial Commercial Registry (Madrid). Once qualified and registered, we obtain the definitive NIF and complete the census registration (Form 036) with business activity codes (IAE), VAT regime and withholding obligations. The company is then fully operational.

COMPARATIVE ANALYSIS

Subsidiary (SL) vs. Branch vs. Permanent Establishment — A Complete Guide for Foreign Companies

Choosing between incorporating a Sociedad Limitada (subsidiary), opening a branch, or accepting the existence of a permanent establishment in Spain is the most important decision an international company must make before operating in the Spanish market. Each structure has direct implications on taxation, asset liability, accounting obligations and perception by local clients and suppliers.

The Sociedad Limitada, governed by Royal Decree Legislative 1/2010 (the Spanish Companies Act), requires a minimum share capital of EUR 3,000, offers limited liability to the contributed capital, and is subject to Corporate Income Tax (Impuesto sobre Sociedades) at the standard rate of 25% (15% for the first two fiscal years with a positive tax base for newly created entities, pursuant to Article 29.1 of Law 27/2014). As a Spanish tax resident, the subsidiary accesses Spain’s network of over 93 double tax treaties and may elect the ETVE regime for dividend repatriation.

The branch, regulated by Articles 119-124 of the Commercial Code and Directive 89/666/EEC, has no separate legal personality. It does not require its own share capital, but the parent company is fully liable for all obligations incurred in Spain. It is subject to Non-Resident Income Tax (IRNR) on profits attributable to the branch at 25%. There is also a supplementary 19% levy on profits transferred abroad (Article 19.2 LIRNR), although double tax treaties typically reduce or eliminate this.

The permanent establishment is a de facto concept that can arise without any formal incorporation. Under Article 5 of the OECD Model Convention and Article 13.1 of the LIRNR, a PE exists wherever there is a fixed place of business — an office, workshop, mine, construction project exceeding 12 months, or a dependent agent with authority to conclude contracts. Tax obligations are retroactive from the first day of activity, which can generate penalties and late-payment interest if not properly declared.

The SL enables invoicing as a Spanish company, facilitating business with public administrations and large corporations
The branch simplifies the structure but exposes the parent to unlimited liability in Spain
An involuntary PE is the most dangerous scenario: retroactive tax obligations with no prior planning
Euroaccounts analyses each case with the parent and its local advisers through the INPACT Global network

SL: minimum capital EUR 3,000, limited liability, CIT at 25% (15% for new entities)
Branch: no independent capital, unlimited parent liability, NRIT 25% + supplementary levy
PE: arises de facto, retroactive obligations, risk of penalties for non-declaration
Representative office: auxiliary activities only, no income generation

LEGAL FRAMEWORK

Legal Requirements and Documentation for Incorporating a Company in Spain as a Foreign Entity

The Spanish regulatory framework for company formation by foreign investors centres on several key statutes. The Companies Act (RDL 1/2010) governs the incorporation, operation and dissolution of limited and public companies. Law 14/2013 on support for entrepreneurs introduced improvements such as electronic incorporation through CIRCE (Information Centre and Business Creation Network), although for multinational subsidiaries the traditional notarial procedure remains more reliable and flexible.

The documentation required varies depending on the chosen structure. For an SL subsidiary, you need: a negative company name certificate from the Central Commercial Registry, NIE for all non-resident shareholders and directors, a deed of incorporation executed before a Spanish notary, a bank certificate for the capital deposit, Form 036 for census registration, and a Transfer Tax (ITP) self-assessment at 1% on share capital (exempt since 2010 under Royal Decree-Law 13/2010, but the self-assessment must still be filed).

For a branch, the documentation includes: a resolution from the parent company’s competent governing body authorising the opening, the parent company’s current articles of association, a certificate of good standing, a power of attorney for the representative in Spain, and all documentation must be apostilled (Hague Convention of 1961) or legalised through diplomatic channels, and translated by a sworn translator. Notarial costs range between EUR 600 and EUR 1,500 depending on the complexity of the articles and share capital.

Since the approval of Law 11/2023 (transposing EU Directive 2019/1151), it is possible to incorporate an SL online via video conference with a notary through the Notarial Citizen Portal. With standard articles, the Commercial Registry resolves within a maximum of 6 business hours. However, this option is limited to cash contributions. For international operations with complex structures (multinational subsidiaries, non-cash contributions, shareholders’ agreements), the in-person notarial procedure remains the most common and flexible. Euroaccounts coordinates the entire documentary process with home-country advisers through the INPACT Global network, ensuring that documents meet both Spanish and home-country requirements simultaneously.

All foreign documentation requires an Apostille of The Hague and sworn translation into Spanish
The NIE can be processed at the Spanish Consulate in the country of origin or in person in Spain
Commercial Registry registration timelines depend on the provincial registry: Madrid typically takes 5-10 business days
Euroaccounts has managed over 500 incorporations since 1996 and maintains direct relationships with notaries and registries in Madrid

Foreign documentation: apostille + sworn translation mandatory
NIE for directors: obtainable at consulate or in person (3-5 days)
Company name certificate: valid for 6 months
ITP on share capital: exempt since 2010, but self-assessment must be filed
Indicative notarial cost: EUR 600-1,500 depending on complexity

TAXATION AND OPERATIONS

Tax and Operational Obligations After Incorporating the Subsidiary or Branch

Once the entity is incorporated in Spain, tax and formal obligations are immediate and ongoing. The SL subsidiary is subject to Corporate Income Tax (Impuesto sobre Sociedades, Law 27/2014) at the standard rate of 25%. Newly created entities apply a reduced rate of 15% in the first fiscal year with a positive tax base and the following year (Article 29.1 LIS). Instalment payments are due in the first 20 days of April, October and December (Form 202). The annual CIT return (Form 200) must be filed within 25 calendar days following the 6 months after the end of the fiscal year.

For VAT purposes, the subsidiary registers as a taxable person (standard rate 21%) and files quarterly returns (Form 303) or monthly if registered under REDEME or the large companies regime (turnover exceeding EUR 6,010,121.04). Intra-Community transactions require registration with the Intra-Community Operators Registry (ROI) and filing of Form 349.

Withholding obligations (Form 111 for employment and professional income, Form 115 for rent) are filed quarterly. If the subsidiary hires employees, it must register with the Social Security system, obtain its employer contribution code (CCC) and comply with labour law obligations under the Workers’ Statute.

Regarding transfer pricing, transactions between the Spanish subsidiary and related parties (the parent or other group entities) must be conducted at arm’s length in accordance with Article 18 of Law 27/2014. Entities with related-party transactions exceeding EUR 250,000 per year are required to document their transfer pricing policy. Groups with consolidated turnover exceeding EUR 750 million must file the Country-by-Country Report (Form 231).

Euroaccounts manages all these obligations as part of its comprehensive tax compliance service, adapting calendars and procedures to the parent company’s reporting requirements. With over 500 international companies advised from our Madrid office, we ensure Spanish regulatory compliance and integration with group requirements, supported by our INPACT Global network of firms in over 70 countries.

CIT: 25% standard, 15% for new entities (first 2 profitable years)
VAT: 21% standard, quarterly or monthly returns
CIT instalment payments: April, October, December (Form 202)
Transfer pricing: documentation mandatory if related-party transactions > EUR 250,000/year
Spanish tax calendar: over 30 annual obligations for an operational subsidiary

Frequently Asked Questions

Detailed answers on setting up a subsidiary or branch in Spain

The full process of incorporating a Sociedad Limitada (SL) in Spain for a foreign company takes between 15 and 20 business days, provided that the parent company’s documentation is ready (apostilled and translated). The timeline breaks down as follows: NIE processing (3-5 days), company name certificate (1-2 days), bank account opening and capital deposit (3-5 days), notarial execution (1 day) and Commercial Registry registration (5-10 days). Euroaccounts manages all phases simultaneously where possible to reduce the total timeframe.

The minimum share capital for incorporating a Sociedad Limitada (SL) in Spain is EUR 3,000, as per Article 4 of the Companies Act (RDL 1/2010). This amount must be deposited in full in a Spanish bank account before the deed of incorporation. For a Sociedad Anonima (SA — equivalent to a UK PLC), the minimum capital is EUR 60,000, with a minimum 25% paid up at incorporation. Branches do not require their own share capital as they operate as an extension of the parent.

A subsidiary (SL) is a separate legal entity with its own legal personality — the parent’s liability is limited to the contributed capital. It is subject to Corporate Income Tax (25%) as a Spanish tax resident. A branch has no separate legal personality — it is an extension of the parent, which is fully liable. It is subject to Non-Resident Income Tax (25%) plus a potential supplementary 19% levy on profit repatriation, although double tax treaties typically reduce this. The subsidiary is preferable when seeking operational autonomy and access to Spain’s double tax treaty network.

You will need: the parent company’s deed of incorporation (apostilled and translated by a sworn translator), a certificate of good standing, a board resolution authorising the investment in Spain, passports and NIE for shareholders and directors, a negative company name certificate from the Central Commercial Registry, and a bank certificate of the capital deposit. For companies from countries that are signatories to the Hague Convention (1961), an apostille suffices; for others, full consular legalisation is required.

Indicative costs for incorporating an SL in Spain include: notarial fees (EUR 600-1,500), Commercial Registry registration (EUR 150-300), company name certificate (EUR 20), sworn translations (variable depending on volume), and professional fees for full management of the process. The Transfer Tax on share capital has been exempt since 2010 (RDL 13/2010), although the self-assessment must be filed. Euroaccounts provides a fixed-price quote covering the entire process from NIE application to final census registration.

It is not legally required for the director of an SL to reside in Spain. However, it is highly advisable for practical reasons: signing documents before a notary, banking relationships and dealings with the Tax Agency are significantly simplified with a director present in Spain. For branches, it is mandatory to appoint a permanent representative in Spain registered at the Commercial Registry (Article 122 of the Commercial Code). Euroaccounts can act as interim director or provide a permanent representative.

An SL subsidiary is subject to Corporate Income Tax at 25% (15% for the first two profitable years), VAT at 21% on its operations, payroll withholdings (IRPF for employees), withholdings on rent (19%), and Business Activity Tax (IAE — exempt if turnover is below EUR 1 million). Dividends distributed to the parent may be exempt or subject to reduced withholding depending on the applicable double tax treaty and the Parent-Subsidiary Directive (Directive 2011/96/EU) for EU parent companies.

Partially. Law 14/2013 allows electronic incorporation through the CIRCE system, but in practice, for subsidiaries of foreign companies with complex structures, attendance before a notary is required (either directly or through an attorney with a specific notarial power). The NIE can be processed at the Spanish Consulate in the country of origin without travelling to Spain. Euroaccounts can act as attorney-in-fact, managing the entire process from Madrid without shareholders or directors needing to travel.

Insights

International Specialist Team

The Euroaccounts team in Madrid, led by David Bua (ex-Big Four), has managed the incorporation of over 500 subsidiaries and branches for companies from Europe, the Americas, Asia and the Middle East since 1996. Our trilingual professionals (Spanish, English, French) coordinate directly with home-country advisers through the INPACT Global network, present in over 70 countries, ensuring that the structure formed in Spain is consistent with the group's global tax planning.

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Incorporate Your Subsidiary or Branch in Spain with Full-Service Support

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Setting Up a Subsidiary or Branch in Spain for International Companies

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