If you are doing business in Spain and you already have a corporation in another country, you may want to register the Spanish business as a branch. A branch is a permanent establishment in Spain, owned by a separate entity in a different country. The parent company will be responsible for any liabilities that the branch incurs (such as employment obligations or fines from the tax office). Spanish social security costs regarding your employees will be in place. Branch registration does not require a minimum backing capital -- this is because the capital is the parent company.
If you are going to have a permanent establishment, the options to do business in Spain as a foreign corporation are:
In both cases, be aware that it is the Spanish law for taxes, accounting, and employment that will apply to your business. As opposed to an SL, annual accounts do not need to be filed for a branch.
Once your branch entity has been registered in Spain, it will have a tax ID beginning with the letter "W".
If you do not require a permanent establishment in Spain, then we can obtain a non-resident VAT number for you.
Forming a branch office
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: