Setting up a branch in Spain: key questions for foreign companies

What is a branch in Spain?

From a corporate law perspective, a branch is a secondary establishment of a foreign company in Spain, with permanent representation and a certain degree of management autonomy. It allows the company to carry out activity in the Spanish market without incorporating a new company with separate legal personality.

From a tax perspective, the activity of the branch may entail the existence of a permanent establishment in Spain, which requires the applicable tax obligations to be analysed in each case.

In other words, the branch operates in Spain, but remains part of the foreign parent company.

How does a branch differ from a subsidiary?

The main difference is that a subsidiary is an independent Spanish company with its own legal personality. A branch, by contrast, has no legal personality separate from the foreign company.

The choice between a branch and a subsidiary will therefore depend on the group’s strategy, the degree of autonomy intended for the Spanish operation and the legal, tax and operational implications of each alternative.

If a subsidiary is the more appropriate alternative, it is advisable to review from the outset the steps and documentation required for company incorporation in Spain for foreign investors.

Branch, subsidiary or representative office?

Not all forms of presence in Spain have the same scope. A representative office is generally used for preparatory, commercial or prospecting activities, but not to carry out full economic activity in Spain.

A branch, by contrast, is designed to operate on a stable basis in the Spanish market on behalf of the foreign company. A subsidiary goes one step further by creating an independent Spanish company within the group.

When can opening a branch be interesting?

A branch can be an attractive option when the foreign company wants to have a stable presence in Spain, operate directly in the local market and maintain a structure that is more integrated with the parent company.

It can also be useful when the objective is to start activity in Spain without creating a separate company, although each case should always be analysed individually.

Does the branch need to be registered in Spain?

Yes. To operate regularly, the branch must be formalised and registered with the relevant Commercial Registry.

Registration gives publicity to the existence of the branch, the foreign company on which it depends and the persons authorised to represent it in Spain.

This process should be coordinated with the subsequent maintenance of the structure. In this regard, corporate governance and corporate secretarial services help keep registry and corporate information for entities or branches operating in Spain up to date.

What documentation is usually required?

In general terms, it will be necessary to evidence the existence of the foreign company, its bylaws, its representatives and the resolution approving the opening of the branch in Spain.

Where the documentation comes from abroad, it is important to review from the outset whether it must comply with additional formal requirements, such as legalisation, apostille or sworn translation in Spain.

An early review of the available documentation can help avoid notarial, registry or tax delays during the opening process.

Who represents the branch?

The branch must have a person with sufficient powers to act on behalf of the foreign company in Spain.

The identity of the permanent representatives of the branch and their powers must be recorded with the Commercial Registry. In order to register their appointment, whether initially or subsequently, such representatives must have a NIE.

Registry regulations do not, by themselves, require the representative to reside or be physically present in Spain. However, for Non-Resident Income Tax purposes, where there is an obligation to appoint a representative, that representative must be resident in Spain.

Who is liable for the branch’s activity?

As the branch does not have its own legal personality, it is not legally separate from the parent company.

The activity of the branch is therefore directly linked to the foreign company, which must be taken into account when choosing this structure and assessing the level of exposure the group wishes to assume in Spain.

Does the branch need a tax identification number in Spain?

Yes. The branch will need to obtain tax identification in Spain in order to comply with its obligations, enter into contracts, issue invoices and interact with authorities, financial institutions and third parties.

This step must be carefully coordinated with the rest of the opening process, particularly with registry registration, banking operations and compliance with tax obligations.

Does the branch need a physical address in Spain?

Yes. The branch must have a physical address in Spain, meaning a postal address, in order to be registered.

This is because the branch is an establishment located in Spanish territory, with permanent representation and a certain degree of management autonomy, and its address must appear in the registry entry.

In addition, the Commercial Registry Regulations require the address to be indicated by street and number or location, town, municipality and province, which presupposes an identifiable physical location.

Therefore, a PO box or postal mailbox does not, in principle, qualify as the address of the branch, as it does not identify the location of the establishment.

What obligations does a branch have once registered?

Once registered, the branch must comply with its tax, accounting, registry and, where applicable, employment or Social Security obligations. At this point, it is particularly relevant to have an orderly view of tax compliance in Spain for international companies.

It must also keep the information relating to its representatives up to date and coordinate its banking, tax and corporate operations with the parent company.

If the foreign company later decides to cease operating in Spain, the closure of branches in Spain and the corresponding tax, registry and employment communications will need to be properly planned.

What should be reviewed before deciding?

Before creating a branch, it is advisable to analyse, among other aspects, the activity to be carried out in Spain, the group structure, the representative’s powers, tax and accounting obligations, banking operations and the foreign documentation available.

If the opening of the branch involves the relocation of directors or employees to Spain, the associated employment, immigration and tax implications of global mobility should also be reviewed.

A prior review can help avoid delays and facilitate an orderly entry into the Spanish market.

How can Seegman help?

At Seegman, we support international companies in their entry and expansion in Spain, both through the opening of branches and the incorporation of subsidiaries.

Our advice addresses the process comprehensively, considering not only corporate and registry aspects, but also the tax, employment and immigration implications that may be necessary in each case.

The key is not only to establish a presence in Spain, but to do so in an orderly and secure manner aligned with the client’s international strategy.