Branch office registration in Spain

If you plan to do business in Spain and you already have a corporation in another country, you may want to register the Spanish business as a branch.

What you should know before registering as a branch in Spain:

• Permanent establishment: A branch is a permanent establishment in Spain, owned by a separate entity in a different country. It is the Spanish law for taxes, accounting, and employment that will apply to your business. (If you do not require a permanent establishment in Spain, then you can apply for a non-resident VAT number instead.)
• Liabilities: The parent company will be responsible for any liabilities that the branch incurs (such as employment obligations or fines from the tax office).
• Backing capital: Branch registration does not require a minimum backing capital. This is because the capital is the parent company.
• Employees: The branch can hire employees.
• Tax filing: Tax filing requirements for a branch are similar to an SL. As opposed to an SL, though, annual accounts do not need to be filed for a branch.

To register a branch office in Spain, you will need to fulfill the following requirements:

• The parent company's approval of the incorporation of the branch entity, duly signed by the management body.
• A certificate proving incorporation of the parent company and showing who the appointed directors are.
• A certificate proving that the parent company is in good standing.
• The parent company's by-laws.
• A copy of the VAT certificate of the parent company.
• Someone will have to be designated to represent the branch in Spain. This representative will need to obtain a NIE number in Spain​.
• A Spanish tax identification number for the parent company.
• It is necessary to open a bank account in a Spanish bank.

Once your branch entity has been registered in Spain, it will have a tax ID beginning with the letter "W".

Articles:

FAQs:

My company wants to open a branch in Spain. Is this better than creating a new company?

Creating a branch has similar requirements to VAT registration in Spain. In most cases, it is preferable either to create an SL or to register for VAT. If you plan to set up a permanent establishment in Spain, creating an SL usually offers more tax advantages than a branch. Comparing branch creation with VAT registration, for the latter you don't have to file corporate tax forms in Spain whereas you do for a branch.

What is considered a permanent establishment in Spain?

The law defines a permanent establishment as:

• Effective places of management, branches, offices, factories, workshops, warehouses, shops, and other establishments. In our experience, "other establishments" is understood in an ample sense: a vendor stand in the hall of a mall is considered by the tax office as a permanent establishment.
• Mines, wells, or quarries.
• Agricultural, forestry, or livestock businesses or any other place of extraction of natural resources. This includes solar energy and wind farms, even if you are only renting the land.
• Construction, installation or assembly sites that last longer than 6 months.

--Source: Spanish tax office

Forming a branch office in Spain

Article adapted from the Ministry of Industry

In this case, the foreign parent company is expanding its business into Spain through a new establishment that is not a separate and independent entity.

The most common reason for establishing in Spain through a branch office instead of through a limited liability company is because the business in Spain is going to be primarily cash-consuming and will require recurring transfers of cash from the head office for a number of years.

Tax and corporate filing requirements and obligations are very similar to a limited liability corporation.

Legally speaking, a branch is fully dependent on the parent company. For example, in terms of responsibility, the parent company is responsible for all liabilities incurred by the Spanish branch.

For tax purposes, a Spanish branch office of a foreign company is considered a permanent establishment in Spain. Therefore, the branch office will be subject to the same rules that apply to Spanish resident companies, and it must pay Spanish corporate income tax on its net income.

International tax treaties signed by Spain to provide relief from double taxation should be taken into consideration.

The branch office will pay VAT tax on the purchase of any goods or services in Spain. In some cases, this VAT may be refunded.

The branch must also pay Spanish Social Security and withholding tax on behalf of its employees.

The steps to be followed for establishing a branch office are:

• A formal resolution of the board of directors of the parent company is required in order to authorize the establishment of a branch in Spain and to name a representative in Spain.
• The resolution must be duly legalized to be valid in Spain, i.e. approved by the board in accordance with the company's bylaws, duly notarized and stamped with The Hague Apostille and sworn translation into Spanish.
• Registration of the above resolution with the Mercantile Registry in Spain, including a copy of the head office corporate bylaws duly stamped also with The Hague Apostille and sworn translation into Spanish.

The branch is regulated by Real Decreto 1784/1996.