If you already own a company outside Spain and would like to establish a business presence for it, setting up a branch in Spain is a practical option. Known as a sucursal in Spanish, a branch has a number of advantages to foreign businesses. In this article, we look at the benefits of a branch and how to set one up.
What is a Branch?
A branch is a physical and permanent presence in Spain owned by its parent company in a different country.
What is the Difference Between a Limited Company and a Branch in Spain?
A limited company (sociedad limitada) is an independent legal entity established in Spain whereas a branch is not a legal figure. Limited companies also need capital (minimum €3,000), company shareholders and statutes. In the case of a branch, the parent company outside Spain provides all of these.
Need a business presence in Spain? Find out how Costaluz Lawyers can help you set up a company or branch in Spain.
What are the Benefits of Setting up a Branch in Spain?
A branch has several advantages including:
- No need to set up a limited company – this makes the process easier and quicker.
- No need for separate share capital and structure – the parent company provides these.
- Fewer legal obligations – for example, a branch does not need to present annual financial reports to the Spanish tax authorities. This obligation is fulfilled by the parent company.
- Representative only – a branch does not need shareholders to manage it, just a representative.
Are There Any Disadvantages
If all you need is a business presence, setting up a branch in Spain easily fulfills your needs. The only significant drawback is that the representative can manage the branch but cannot take all decisions since this responsibility falls to the parent company shareholders. In some circumstances, this may slow down the decision-making process.
What are the Legal Obligations for a Branch?
Although a branch in Spain is not a legal figure, there are still obligations that it must comply with. They include:
- The branch must submit its accounts to the parent company.
- The branch must pay VAT (IVA) and corporate tax in Spain (non-resident rate).
How do you Set up a Branch in Spain?
The procedure to set up a branch is relatively straightforward and should take no more than a few working days.
- The parent company designates a representative to act on their behalf in Spain and to manage the branch.
- The parent company obtains a Spanish VAT number and the representative obtains a NIE (fiscal identification number in Spain).
- The representative opens a bank account for the branch in Spain.
- The representative signs the deeds for the constitution of the branch at a Notary Public. Note that the parent company must supply the articles of association explaining the parent company and its relationship with the branch. The articles must be translated into Spanish and include the Hague apostille.
- The branch is registered at the Mercantile Registry in Spain.
Get Professional Advice
While setting up a branch is relatively straightforward, it can be challenging if you do not speak Spanish or understand the system. To ensure the procedure goes smoothly and that your branch fulfills all legal requirements, get in touch with the Costaluz Lawyers expert team.
We will be only too happy to assist with the paperwork and legal aspects so that you can get on with the important business of doing business!
Maria Luisa Castro
