Registering a Branch in Spain
A foreign investor can invest in Spain by:
Forming a Spanish company: traditionally, the most-used corporate form has been the corporation (S.A.); however, in recent years the formation of limited liability companies (S.L.s) has also become commonplace.
Associating with other businesses already established in Spain: joint ventures are a common way of setting up business in Spain, since they enable their members to share risks and pool resources and experience. Spanish law provides for different types of joint venture.
- Making distribution agreements.
- Operating through an agent.
- Operating through a commission agent.
- Establishing a franchise.
Forming a Branch in Spain
The branch must have a legal representative with authority to manage its affairs. It does not have any formal managing or administrative bodies as such, and it largely operates as if it were a company in its commercial dealings with third parties.
The choice between forming a branch or a subsidiary in Spain may be influenced by commercial considerations (e.g., a company might provide a more “stable” presence than a branch) or by considerations of legal certainty (a subsidiary limits the shareholder’s liability).
Formalities to register a Branch
From a legal point of view, the most important differences between a branch and a subsidiary are as follows:
|Concept||Company of a commercial nature engaging in a business with its own capital.||Permanent establishment, enjoying certain degree of management independence. Vehicle for parent company’s activities. Lacks separate legal personality from its parent company.|
|Stock capital||Minimum of €60,000||Minimum of €3,000||Not required|
|Cash and non-cash contributions||Cash contributions in euros. In the case of an S.A., non-cash contributions require a report from an independent expert appointed by the Mercantile Registrar.|
|Registration||Public deed must be registered at the Mercantile Registry.||Together with the public deed creating the branch, the documents attesting the existence of the parent company, its by-laws in force, its Directors and the decision of opening the branch, duly legalized, must be registered at the Mercantile registry.|
Taxation in Spain
Spain country and foreign investment overview
The real estate boom that followed contributed almost 16% of GDP and employed 12% of the workforce. The collapse of the property boom has led to high increases in personal debt with unemployment now at the 26% mark.
The standard corporate income tax rate is 30%. Personal income tax ranges from 24% to 45%. For 2012 and 2013 tax years, a supplementary tax of between 0.7% and 7% applies.
Scope of corporate tax
All resident companies and permanent establishments of non-resident companies are subject to income tax. Resident companies are liable for tax on their worldwide income. Non-resident companies are taxed on their Spanish-sourced income only.
Income tax rates
Calculation of taxable base
Sales tax and VAT
Filing requirements and payment of tax
The tax year is generally the calendar year, although the company may choose an alternative accounting year. Tax returns must be filed and all taxes due paid by the 25th day following the sixth month of the end of the tax year.
Companies are generally required to make three tax prepayments in April, October and December of each year, based on accounts of the first three, nine and 11 months of the calendar year, respectively. This is compulsory for businesses with an annual turnover of more than EUR 6,010,121.04 (for 2012), at a rate of between 21% and 29%. However, companies with a turnover below this threshold can opt to pay instalments at a rate of 18% of the gross tax payable in the previous year.
Withholding tax of 21% is payable on interest and dividend payments, whether domestic or to non-treaty countries. However, where dividends are paid to a company that has share capital, which has been held during the prior year, equal to or above 5%, withholding tax does not apply.
Royalties are generally subject to withholding tax of 24.75% in the case of the licensing of rights of publicity, and 18% for other royalties. Until 2011, royalties paid to associated EU-resident companies are subject to withholding tax of 10%.
Other withholding taxes include 18% on commission, rental payments and contest prizes; 15% on income from courses, conferences, symposiums, seminars or derived from the literary, artistic or scientific work; and 2% on farming income and forestry activities.
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