Non-Resident Company Formation in Spain
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Non-Resident Company Formation in Spain

Spain non-resident companies: formation and taxation

Navigating the vibrant Spanish market presents a unique set of opportunities for foreign investors and business owners aiming to tap into the consumer base without the complexities of establishing a full-fledged company on Spanish soil. Operating as a non-resident company in Spain offers a strategic alternative, allowing for commercial engagement with local customers under a different set of legal prerogatives. However, this route comes with its own legal intricacies and procedural requirements that must be meticulously understood and adhered to. This article aims to demystify the concept of non-resident company formation in Spain, providing insight into whether it aligns with your business objectives and outlining the steps necessary to undertake this venture successfully.

founders of a non resident company in spain put together pieces of a puzzle ad a symbol for company formation

What is a non-resident company in Spain?

A non-resident company serves as a practical solution for those looking to engage in business within the Spanish market without establishing a traditional corporate entity. A non-resident company in Spain is defined by its lack of fulfillment of certain criteria that would otherwise render it a tax resident.

To be considered a tax resident, a company must either be established according to Spanish law, possess its registered office within Spanish territory, or have its effective management headquarters located in Spain—where key business decisions are made and central control is exercised.

Furthermore, companies established in jurisdictions with no taxation or those deemed as tax havens may also be classified as Spanish tax residents if their principal assets or activities are predominantly based in Spain. This stipulation ensures that companies cannot easily circumvent Spanish tax obligations.

In contrast, businesses that do not align with these residency criteria retain the ability to operate in Spain as non-resident entities, subjecting them to a different set of regulations and tax considerations, which we will explore further in this article.

Embark on your Spanish business journey with confidence, regardless of where you’re based. Lawants specializes in facilitating the establishment of non-resident companies in Spain, ensuring a seamless and compliant setup process. Our expertise in Spanish corporate law and regulations means we navigate the complexities on your behalf, from initial registration to legal compliance and beyond. Unlock the potential of Spain’s vibrant economy with our tailored company formation services.

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Legal framework for non-resident companies in Spain

The legal framework governing non-resident companies in Spain is multifaceted, with Spanish Corporate Law and the Spanish Companies Act delineating specific regulations that affect how these entities conduct business.

Non-resident companies are subject to tax laws that differ markedly from those applied to resident companies.

While resident companies are liable for spanish corporate tax on their global income, non-resident entities are taxed solely on the income generated within Spanish borders. This includes revenue from operations, assets situated in Spain, or economic activities carried out on Spanish territory.

Moreover, non-resident companies must navigate the intricacies of Double Taxation Agreements that Spain may have with other countries, which can impact the tax liabilities and reporting requirements for these businesses. The legal obligations also extend to registration duties with the Spanish tax authorities and compliance with VAT regulations when applicable.

Understanding the full scope of these legal and tax implications is crucial for non-resident companies to ensure they operate within the bounds of Spanish law while optimizing their fiscal responsibilities.

Read also: What is VIES (VAT Information Exchange System)?

Taxation of non-resident companies in Spain

The taxation of non-resident companies in Spain hinges on whether they have established a permanent establishment (PE) within the country or not. This distinction significantly influences their tax liabilities and how they engage with the Spanish tax system.

Non-Resident Companies with a Permanent Establishment

A non-resident company that operates through a permanent establishment in Spain is taxed on income attributable to that PE at the standard corporate income tax (CIT) rate of 25%. This permanent establishment could take various forms, such as offices, factories, or stores, and is characterized by continuous or habitual business activities within Spanish territory. The tax obligations mirror those of resident companies, including the requirement to withhold taxes and make prepayments akin to Spanish entities.

If you’re interested to know how to start a business in Spain, read our comprehensive guide.

VAT Registration

All businesses engaging in taxable activities in Spain must register for Value Added Tax (VAT), known locally as IVA. The standard VAT rate is 21%, with certain goods and services enjoying reduced rates due to their essential nature. VAT registration is a crucial compliance step for non-resident companies as it governs their transactions within Spain.

Non-Resident Companies without a Permanent Establishment

Companies without a PE are taxed on each component of their Spanish-sourced income separately. The Nonresident Income Tax Law specifies various income sources, including profits from economic activities, services used within Spanish territory, and income from property located in Spain. The general taxation rate for these companies is 24%, reduced to 19% for EU or EEA residents under certain conditions. Additionally, dividends, interests, and securities incomes are subject to a 19% tax rate.

Other Applicable Taxes

The IRNR (Impuesto sobre la Renta de no residentes) applies to business profits earned within Spain by non-resident companies. Meanwhile, the IRPF (Impuesto sobre la Renta de las Personas Físicas) is relevant for companies employing workers in Spain, requiring them to withhold employee taxes. It’s important for non-resident companies to consult the Agencia Tributaria for details on double taxation agreements (for example the US-Spain double taxation agreement) and specific withholding rates applicable to their operations.

Setting Up a Non-Resident Company in Spain

Establishing a non-resident company in Spain requires navigating a series of legal and fiscal procedures to ensure compliance with Spanish regulations. Here is a step-by-step guide to setting up your non-resident company:

Obtain a Tax Code

The initial step involves obtaining a tax code (Número de Identificación Fiscal or NIF) from Spain’s Tax Agency (Agencia Tributaria). For non-resident companies, this process begins with completing the Modelo 036 form. The VAT number assigned will include the prefix ‘N’ to indicate non-residency.

Register for VAT

Upon securing a tax code, the company must register for VAT (IVA) if it intends to carry out taxable activities. The applicable VAT regime must be indicated on Modelo 036. Non-resident businesses without an existing NIF must first apply for one using Modelo 030, along with providing supporting documentation as required by the Agencia Tributaria.

Documentation and Legal Requirements

The setup process entails submitting specific documents that may vary based on the foreign corporation’s or individual’s circumstances. It’s imperative to have all legal and fiscal documentation in order, including proof of identity and business operations.

Designation of a Legal and Tax Representative

Non-resident entities may need to appoint a fiscal and tax representative in Spain under certain conditions, such as operating through a permanent establishment, engaging in economic activities allowing for expense deductions, or when mandated by Spanish tax authorities due to the nature or amount of income. This representative serves as the primary contact with the tax office and is essential for entities in countries lacking an effective information exchange system with Spain, particularly if they own property within Spanish territory.

Take the next step towards establishing your non-resident company with Lawants. Our dedicated team is ready to guide you through every phase of company formation, ensuring a smooth and compliant entry into Spain’s market.

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Advantages and Challenges of Operating as a Non-Resident Company

Operating as a non-resident company in Spain can offer several advantages, such as reduced administrative burdens and the flexibility to test the Spanish market without committing to a full corporate establishment. Non-resident companies benefit from not being subject to corporate tax on worldwide income, as is the case for resident companies. This can lead to potential tax savings, especially for businesses that operate primarily outside of Spain but have some activities or transactions within Spanish territory.

However, this mode of operation is not without its challenges. Non-resident companies may face difficulties in establishing a local presence and credibility, navigating the complexities of tax regulations, and managing operations from abroad. Additionally, they might encounter issues with double taxation if proper treaties are not in place between Spain and their home country.

To address these challenges, it’s advisable to seek expert legal guidance. In some cases, setting up a business in Spain might be a more straightforward solution than operating as a non-resident entity due to the clear legal structure it provides. A Spanish company can offer more stability, easier access to local banking services, and the ability to dirctly hire employees in Spain. Legal professionals can assist in evaluating the best course of action, taking into account the specific needs and goals of the business in question.

If a non-resident company is not the right option for you you might be interested in seeing if your company can benefit from the measures under the new Startup Law in Spain.

building of a non resident company in spain

Starting a Business in Spain as a Non-Resident

For non-residents, Spain offers a conducive environment for starting a business, with clear pathways to legal residency for entrepreneurs. The process begins with obtaining the appropriate visa (the spanish Golden Visa) and fulfilling the criteria for legal residency, which includes applying for a residence permit and a foreign national identity card. Two key visa options are available for business initiators: the Entrepreneur Visa and the Self-Employed Worker Visa.

The Spain Entrepreneur Visa or Golden Visa is particularly attractive as it grants permission to live in Spain for an initial three-year period. It is designed for those who plan to launch businesses that will positively impact the Spanish economy by creating jobs, offering valuable investment opportunities, or incorporating advanced technology. To qualify, one must present a robust business plan that demonstrates the prospective economic benefits of the venture. This forward-thinking approach by Spanish authorities streamlines the process for non-residents to contribute to and benefit from the dynamic Spanish marketplace.

Help with Non-Resident Company Formation in Spain

Embarking on the journey of non-resident company formation in Spain can be a complex process, fraught with legal nuances and procedural intricacies. Our law firm, Lawants, stands ready to guide you through every step of this endeavor. We offer comprehensive assistance tailored to the unique needs of non-resident companies seeking to establish their business presence in Spain. Our team of seasoned attorneys, accountants, and labor consultants are well-versed in Spanish corporate law and are equipped to provide expert legal advice that ensures your business complies with all regulatory requirements.

We encourage potential investors and business owners to seek our consultation services to navigate the Spanish legal landscape effectively. Whether you are considering non-resident company formation in Spain or setting up a resident company, Lawants offers a strategic partnership to facilitate a smooth and successful entry into the Spanish market. Our commitment is to provide you with the legal expertise necessary to make informed decisions and achieve your business objectives with confidence.

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As a leading law firm in Spain, with international, experienced and expert professionals, we understand how important it is for […]

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