To incorporate a subsidiary in Spain requires to create an entity with its own legal status, despite that the parent company contributes with the share capital and with the management of the subsidiary.
What is a subsidiary company?
There is often a lot of confusion about the position of a subsidiary and what it does. A subsidiary is a company that is owned or partly owned by another company. The company that owns a subsidiary is called the parent or holding company. However, it should be noted that a holding company is somewhat different from a parent company.
It should not be forgotten that a subsidiary is an independent legal entity (with its own management and control bodies), different from its parent company and it is considered to be a resident in Spain for all purposes and is, therefore, subject to local regulations and laws. It is for that reason a taxpayer of Spanish corporate income tax and must comply with accounting and tax obligations, as well as submit their annual accounts and other corporate transactions in the Commercial Registry. Do not confuse it with a branch, which is not an independent legal entity and that depends completely on its parent.
Should you set up a subsidiary company?
You should consider setting up a subsidiary company if..:
- You operate overseas – overseas companies will always prefer to set up a subsidiary in Spain if their main business is based overseas.
- Two different businesses – sometimes you have different lines of business that are so different that they need to be formally separated.
- Different teams – some companies set up subsidiaries if they have a team working on another project in another office. The project may have nothing to do with the main purpose of the business, so the subsidiary can provide a formal separation.
Benefits of setting up a subsidiary in Spain
For a foreign company wishing to expand its business, setting up a subsidiary in Spain is one of the most valued options in the current international scenario. This allows having access to the Spanish and European markets and benefits from the freedom of movement of goods, reducing operational and tax costs (thanks to existing treaties in EU) as well as positioning itself as an international company with the prestige that this entails.
Requirements to set up a subsidiary in Spain
A subsidiary could be a “Sociedad Limitada” or a ”Sociedad Anonima” company depending on the share capital, the type of shareholders, the terms for transferring the shares and the operational issues of the business that will determinate whether to incorporate one or other. In both cases, the step and requirements for its incorporation are the same and it takes from 4 to 7 weeks to complete all of them:
1. To get the Tax Identification Number (NIE) as a foreign investor.
2. To apply for the subsidiary’s name certificate issued by the Commercial Registrar.
3. To open a bank account on behalf of the subsidiary and to deposit the capital share and once done the bank entity will issue a certificate declaring the disbursement.
4. To prepare the Articles of Association of the subsidiary in which will be set, among others, the social object, the domicile, the share capital, the terms and conditions of the transfer of shares or the Director’s system.
5. To attend a Notary to sign the public deed of the subsidiary’s incorporation (through a notary public deed).
6. To submit the D1A form to declare foreign investment into the international investment Registrar.
7. To submit the notary public deed into the Commercial Registrar.
8. To get the de permanent subsidiary’s NIF.
9. To proceed with all the tax and labour procedures with public bodies.
Starting a subsidiary is not an easy decision. It is not always necessary and it may be better to just start another business from scratch. This is a decision you have to make yourself. And it may be better to hire a professional tax advisor to help you open a subsidiary.
In order to carry out all the steps and requirements in a simple and fast way, we recommend you to have the services of a tax and legal advisors such as GM Tax. We’ll advise you in everything you’ll need in a professional and personalized way. Contact our tax advisors and let us know how we can help you.
