Setting Up a Subsidiary Company in Spain: Benefits, Requirements and How It Compares to a Branch

What foreign companies should know before setting up a subsidiary in Spain

Lawants Guide · Company Formation, Spain

A subsidiary company in Spain is a separate Spanish legal entity, distinct from the foreign parent in both law and liability. It is the most common structure chosen by foreign companies planning long-term operations in Spain: it limits the parent’s exposure, creates a local legal identity that banks and commercial counterparties recognise, and provides full access to the EU VAT system. The more important question for most foreign groups is not whether to open a subsidiary, but how it compares to a branch or a permanent establishment, and which of the three fits the specific situation: the activity, the timeline, the shareholder structure, and the tax position of the parent.

Lawants works exclusively with foreign companies in Spain, with over twenty years of experience setting up subsidiaries for UK companies, US companies, and international groups. Every enquiry is reviewed personally by Roberto Bosco, Managing Director, before any recommendation is made.

Lawants · Best Law Firms Spain · Barcelona and Madrid · Over twenty years assisting exclusively foreign companies · Lawyers and accountants under one roof

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What Is a Subsidiary Company in Spain?

A subsidiary company in Spain is a new, independent Spanish legal entity incorporated by a foreign parent company.

Unlike a branch or a permanent establishment, the subsidiary is entirely separate from its parent in law: it has its own legal personality, its own assets and liabilities, and its own obligations toward Spanish authorities, creditors, and employees. The parent company’s liability is limited to the amount of capital it has contributed to the subsidiary. Everything beyond that belongs to the subsidiary alone.

In practice, the vast majority of foreign subsidiaries in Spain are incorporated as a Sociedad Limitada (S.L.), the Spanish equivalent of a UK private limited company or a US LLC. The S.L. is the appropriate form for the great majority of market entry scenarios. The Sociedad Anónima (S.A.), with its €60,000 minimum capital requirement, is reserved for companies with complex capital structures, bond issuance plans, or potential public listing.

The subsidiary is taxed independently in Spain under the Impuesto sobre Sociedades (IS) at the standard rate of 25%. It maintains its own accounts, files its own tax returns, and operates with full commercial autonomy. The parent company retains control through its shareholding but is not involved in the subsidiary’s day-to-day legal and tax obligations.

Spanish Subsidiary · Foreign Companies

A Spanish subsidiary is more than an incorporation. It is the foundation of your Spanish operation.

For foreign groups, the subsidiary becomes the vehicle through which employees are hired, contracts are signed, VAT registrations are obtained, and local operations are managed. Getting the structure right at the outset makes growth easier and reduces legal, tax and compliance friction later.

Over twenty years helping foreign companies establish and operate Spanish subsidiaries.

Discuss your Spanish expansion

Roberto Bosco
Managing Director, Lawants
Response within 24 business hours

Subsidiary vs Branch vs Permanent Establishment

For a foreign company entering Spain, the structure question is not just “what kind of subsidiary?” but “should this be a subsidiary at all, or would a branch or a registered PE serve the same purpose with less complexity?”

The three structures exist on a spectrum of formality and legal separation, and the right answer depends on what the company plans to do in Spain, for how long, and what liability and tax exposure the parent is willing to carry.

What is a branch, a subsidiary and a permanent establishment in Spain?

• A permanent establishment is a tax concept: it describes a level of economic presence that makes the foreign company’s Spanish profits taxable in Spain, regardless of whether any formal structure has been registered.
• A branch is a registered legal structure (with a public deed and Mercantile Registry entry) that is an extension of the foreign parent, not a separate entity. Every branch is automatically a permanent establishment.
• A subsidiary is a new Spanish company, entirely separate from the parent in law and in liability. Not every permanent establishment is a registered branch, and no permanent establishment or branch is a subsidiary.

The intercompany deduction advantage

One of the most commercially significant differences between a subsidiary and a branch or PE is the treatment of payments made to the parent company. When a branch or PE pays royalties, management fees, or interest to its own head office, those payments are not deductible in Spain: Spanish law treats the branch and the parent as a single entity, so internal charges are not recognised.

A subsidiary, as a separate legal entity, can deduct arm’s length payments made to its parent (royalties, service fees, interest on shareholder loans) provided they meet the transfer pricing requirements of the Ley del Impuesto sobre Sociedades. For groups with significant intellectual property, brand licences, or management services, this difference alone can be decisive.

Profit repatriation: subsidiary vs branch

Both structures are subject to a potential withholding tax when transferring profits to the foreign parent, but the mechanism and rate differ significantly.

• A subsidiary distributes dividends. For EU parent companies, dividends from a Spanish subsidiary are generally exempt from Spanish withholding tax under the EU Parent-Subsidiary Directive, provided the parent holds at least 5% of the subsidiary for a minimum of one year. For UK and US parent companies, the applicable withholding rate depends on the relevant double taxation treaty and is typically lower than the domestic 19% rate.
• A branch remits profits to its head office. Spain applies a branch profits tax of 19% on repatriated earnings. This tax is exempt for EU head offices but applies to non-EU companies unless a treaty reduces or eliminates it. The US-Spain treaty specifically provides for a branch profits tax on repatriated earnings. For UK companies, the applicable rate under the UK-Spain treaty applies. In practice, the subsidiary dividend route is legally cleaner and better established than the branch profit remittance mechanism, particularly for groups that need predictability in their repatriation planning.

When to choose a branch rather than a subsidiary in Spain

A branch makes sense when the Spanish activity is a well-defined extension of the parent’s existing work: a construction or infrastructure project of defined duration, an engineering firm executing a single long-term contract, or a regulated sector where a branch is operationally or legally required.

The key characteristic is that the activity is tightly controlled by the parent, has a foreseeable end, and does not require an independent Spanish commercial identity. When any of these conditions fail, the branch structure tends to create friction over time and often ends in a conversion to a subsidiary at additional cost.

For a better understanding of the differences, read our full comparative guide to subsidiary vs branch office in Spain.

Subsidiary vs Branch · Structure Decision

The wrong structure costs more to fix later than to get right from the start.

Whether to incorporate a subsidiary or register a branch depends on the specific activity, timeline, liability position of the parent company, and the wider tax structure of the group. Lawants analyses each situation before making any recommendation. Every assessment is reviewed personally by Roberto Bosco, Managing Director.

Over twenty years working exclusively with foreign companies in Spain. No domestic clientele.

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Roberto Bosco
Managing Director, Lawants
Response within 24 business hours

When to Set Up a Subsidiary in Spain

A subsidiary is the structurally appropriate choice when the Spanish activity requires its own legal identity, when the parent’s liability exposure needs to be contained, or when the commercial relationships in Spain work better with a locally incorporated counterparty. In practice, these conditions apply to the large majority of foreign companies planning genuine market entry rather than a single project.

Situations where a subsidiary in Spain is typically the right answer

• Hiring local employees. A subsidiary is the natural employer of record for Spanish staff. Operating through a branch or PE adds complexity to Spanish employment law compliance and creates a direct link between employee obligations and the parent’s global assets.
• Entering into Spanish commercial contracts. Clients, suppliers, and public sector counterparties that require a locally incorporated entity as a contractual party can only be served effectively through a subsidiary.
• Long-term market presence. Any activity expected to last more than two to three years and generate recurring revenue justifies the additional setup cost of a subsidiary. The cost of converting a branch to a subsidiary later almost always exceeds the cost of incorporating directly.
• Liability containment. A subsidiary limits the parent’s exposure to what it has invested. For groups with significant commercial or regulatory risk in Spain, this protection is not optional.
• Intra-EU VAT operations (VIES). A Spanish S.L. registered in the ROI (Registro de Operadores Intracomunitarios) enables zero-rated intra-community VAT transactions. For any company buying from or selling to EU counterparties, VIES access is operationally essential.
• Future sale of the Spanish operation. A subsidiary’s shares can be sold independently of the parent’s business. A branch or PE cannot be sold as a standalone unit without a prior conversion.
• Group structures and transfer pricing. When the Spanish entity is part of a group with intercompany transactions (management fees, royalties, shared services), a subsidiary provides the legal separation required to make those transactions deductible and documentable under Spanish and OECD transfer pricing rules.

When a subsidiary may not be necessary

A single defined project with a clear end date, no local employees, and no need for independent contracting authority in Spain may be adequately served by a registered PE or a branch.

The same applies to exploratory market testing where the parent is not yet ready to commit to a Spanish corporate structure. In both cases, the simplified approach works only if the activity remains genuinely limited. The moment it grows beyond those boundaries, the structure needs to change.

Lawants Case Study SPANISH SUBSIDIARY · CORPORATE EXPANSION

Spanish subsidiary for international group: 2 months of administrative stasis avoided

When a foreign corporate parent sets up a Spanish subsidiary, the main hurdle is the parent’s tax registration (NIF). Lawants optimized the onboarding sequence, trimming redundant document requests to ensure immediate execution.

The Context

An international technology group planned to establish a stable presence in Spain via a wholly owned S.L. subsidiary to deploy operations and hire a country manager entirely from a distance, without any corporate representative traveling.

The Problem

A non-specialized advisor had provided an oversized document list to secure the parent company’s mandatory Spanish NIF. Legalizing, apostilling, and translating unnecessary corporate records would have delayed the subsidiary’s launch by two months.

The Lawants Solution

01

Surgical document pruning: We stripped out extra translations and apostilles, keeping only what the Spanish notary and Tax Agency strictly require for corporate shareholders.

02

Single cross-border POA: Drafted one international power of attorney to execute the parent’s NIF application and the subsidiary’s incorporation deed simultaneously.

03

100% remote execution: Handled all local tax and notary filings through legal proxy, entirely bypassing the need for physical travel or board commutes.

04

HR compliance alignment: Coordinated local employer registrations concurrently, preparing employment contracts to be live on the exact date of the subsidiary’s birth.

Results

7 days

To incorporate the subsidiary from the receipt of the correct, optimized documents

2 mos

Of administrative stasis avoided by filtering out common but redundant loops

0

Trips or flights required to Spain for the international parent company’s board

“Choosing a business structure is only half the battle; the real complexity lies in executing it across borders. Mapping out exactly what the Spanish Tax Agency needs from a corporate shareholder prevents weeks of redundant legal and translation expenses.”

Roberto Bosco — Managing Director, Lawants

For foreign parent companies planning their Spanish corporate framework

The documentary burden on non-resident corporate shareholders is the primary source of operational friction when setting up a subsidiary. Lawants designs optimized workflows to launch your vehicle securely and entirely from a distance.

Set up your Spanish subsidiary with Lawants →

Requirements to Open a Subsidiary Company in Spain

The formal requirements for incorporating a Spanish subsidiary are those of any S.L. incorporation. For foreign parent companies, what requires the most careful preparation is the documentation chain before the notarial deed, not the Spanish-side steps themselves.

• NIE for individual shareholders and directors. All individual foreign shareholders and directors must hold a Spanish Número de Identificación de Extranjero before signing the incorporation deed.
• NIF for the foreign parent company. When the shareholder of the new Spanish subsidiary is a foreign company (UK Ltd, US LLC, or any other legal entity), that company must obtain its own Spanish NIF from the Agencia Tributaria through Form EX-15, before the deed can be signed. This is the most frequent source of delay in subsidiary incorporations involving corporate shareholders.
• Share capital. €3,000 minimum recommended, fully paid up at incorporation, deposited in a Spanish bank account before the notarial deed.
• Registered address in Spain. A legal domicile is mandatory for Mercantile Registry registration and for all AEAT filings. The quality of the registered address is assessed by the AEAT in VIES registration decisions. Lawants offers domiciliation at its Barcelona and Madrid offices.
• Articles of association. The estatutos sociales must define the corporate purpose (with CNAE code), capital structure, management body, and share transfer rules. For foreign-controlled structures, generic templates frequently create governance and tax problems in subsequent years.
• Administrator appointment. The management structure must be defined at incorporation. In practice, a Spain-resident administrator is necessary for both bank account opening and VIES registration.

How to Set Up a Subsidiary in Spain: Step by Step

The incorporation process for a Spanish subsidiary follows a fixed sequence. Lawants manages every step on behalf of the client through a power of attorney, with no physical presence required at any stage.

• Step 1: NIE for individuals / NIF for the foreign parent. All individual shareholders and directors must obtain a Spanish NIE. If the parent company is a foreign legal entity, it must first obtain its own Spanish NIF through Form EX-15. This step must be completed before any other Spanish-side work can begin.
• Step 2: Company name reservation. A negative name certificate is obtained from the Registro Mercantil Central by proposing up to five names in order of preference. The Registry typically responds within 48 hours. The certificate is valid for three months.
• Step 3: Articles of association. The estatutos sociales are drafted to reflect the specific governance structure, corporate purpose, capital, and share transfer rules of the subsidiary. For a foreign-controlled S.L., standard templates are often inadequate.
• Step 4: Bank account and capital deposit. A Spanish bank account is opened in the name of the company in formation and the share capital is deposited. The bank issues a deposit certificate required for the notarial deed. For companies with non-resident shareholders, KYC requirements can extend this step.
• Step 5: Notarial deed of incorporation. A Spanish notary executes the deed of incorporation. Lawants acts under power of attorney, eliminating the need for physical presence. The provisional NIF is obtained within 24 hours of signing.
• Step 6: Mercantile Registry registration. The notarial deed is filed at the provincial Registro Mercantil. Registration grants the subsidiary full legal personality and typically takes two to three weeks.
• Step 7: Tax registration, VIES and digital certificate. Lawants files Modelo 036 to convert the provisional NIF into the definitive NIF, register for VAT and corporate tax, and enrol in the ROI for VIES access. The digital certificate is obtained for remote management of all Spanish filings.

Subsidiary Incorporation · Foreign Companies

From project analysis to operational subsidiary in Spain, without physical presence.

Lawants manages the complete incorporation: NIE and NIF for all parties, articles of association, bank account, notarial deed, Mercantile Registry, tax registration, VIES, and digital certificate. Remotely, with only the documentation that is strictly necessary.

7 to 10 working days on the Spanish side from receipt of complete documentation.

Start the incorporation process

Roberto Bosco
Managing Director, Lawants
Response within 24 business hours

How Much Does It Cost to Set Up a Subsidiary in Spain?

The cost of setting up a subsidiary in Spain depends primarily on the shareholder structure, the nationality of the parent company, and whether additional registrations are required (such as VIES, fiduciary administration, or fiscal representation). The incorporation itself is relatively inexpensive. In practice, the costs that foreign groups tend to underestimate are the preliminary steps: obtaining the Spanish NIF for the foreign parent company, apostilles, sworn translations, and the banking compliance process.

Typical costs include:

• Company name reservation: approximately €20.
• Spanish notary fees: generally between €300 and €600 depending on the structure.
• Mercantile Registry registration: approximately €100 to €250.
• Sworn translations and apostilles: variable depending on the parent company’s jurisdiction and documentation.
• Spanish NIF for the foreign parent company: professional fees depend on the complexity of the case and the documentation involved.
• Share capital: €3,000 is generally recommended for an S.L. and remains available to the company after incorporation.
• Ongoing compliance: accounting, corporate tax, VAT, payroll, annual accounts, and Mercantile Registry filings should be considered from the outset rather than after incorporation.

For most foreign groups, the incorporation costs themselves are a small part of the overall investment. The more important question is whether the structure is designed correctly from the beginning. Converting a branch into a subsidiary, replacing administrators, restructuring shareholder arrangements, or correcting tax registrations after operations have started is usually far more expensive than addressing those issues before incorporation.

Tax and Compliance for Spanish Subsidiaries

A Spanish subsidiary is taxed as a fully independent Spanish company. Its tax position is entirely separate from the parent: it files its own Spanish returns, maintains its own accounts under the Spanish Plan General Contable, and is subject to all standard Spanish corporate tax rules. This independence also creates planning opportunities that are not available through a branch or PE.

Corporate Income Tax

The standard corporate income tax (IS) rate is 25%. Newly incorporated subsidiaries with individual shareholders benefit from a reduced rate of 15% for the first two profitable years. This reduced rate does not apply where the shareholder is a legal entity. Spain has no equivalent to Italy’s IRAP, and all business expenses are fully deductible. The regulatory framework is the Real Decreto Legislativo 4/2004 (Ley del Impuesto sobre Sociedades, consolidated text), which governs deductibility, loss carryforwards, and the participation exemption.

Dividend Distribution and Participation Exemption

When a Spanish subsidiary distributes dividends to its foreign parent, the applicable withholding tax depends on the parent’s jurisdiction. EU parent companies holding at least 5% of the subsidiary for a minimum of one year are generally exempt under the Parent-Subsidiary Directive (0% withholding). For UK and US parent companies, the relevant double taxation treaty governs the rate. Beyond dividend withholding, the participation exemption allows the Spanish subsidiary to receive dividends from its own subsidiaries with only 1.25% effective taxation (95% exemption on dividends received, taxed at 25%). This makes Spain an efficient holding location for international groups with Latin American or European subsidiaries.

Transfer Pricing and Intercompany Transactions

Transactions between the Spanish subsidiary and its foreign parent (management fees, royalties, intercompany loans, shared services) must be priced at arm’s length and documented under Spanish transfer pricing rules, which align with OECD guidelines. Unlike a branch, the subsidiary can deduct these payments as business expenses, provided they meet the arm’s length standard and are properly documented. For groups with significant intercompany flows, the subsidiary structure combined with rigorous transfer pricing documentation can produce a materially lower effective tax rate in Spain than a branch.

Ongoing Compliance Calendar

The annual compliance calendar for a Spanish subsidiary includes: annual accounts drafted by 31 March, approved by shareholders by 30 June, corporate income tax return (Modelo 200) filed by 25 July, and annual accounts filed at the Registro Mercantil by 30 July. Quarterly filings include VAT returns (Modelo 303), withholding tax settlements (Modelo 111), and corporate tax instalments (Modelo 202). If the subsidiary has intra-EU transactions, the Modelo 349 (summary of EU purchases and sales) is filed quarterly or monthly depending on volume.

How Lawants Sets Up Subsidiaries for Foreign Groups

Lawants works exclusively with foreign companies and entrepreneurs operating in Spain. Setting up subsidiaries for UK companies, US companies and international groups is the baseline of the practice, not an occasional service.

Many firms can incorporate a Spanish subsidiary. The more important question is what happens once the company exists. Hiring employees, obtaining VAT registrations, dealing with banks, appointing administrators, managing tax compliance and adapting the structure as the business grows are often more significant than the incorporation itself.

Lawants supports foreign parent companies throughout the entire lifecycle of their Spanish subsidiary, providing a single point of contact for the legal, tax and accounting dimensions of the operation. The objective is not simply to incorporate a company, but to ensure that the structure continues to work as the Spanish business evolves.

Your legal and tax partner in Spain

A subsidiary in Spain is not a transaction. It is the beginning of a long-term presence in the Spanish market.

Over twenty years assisting foreign companies in Spain, exclusively, with an integrated team of lawyers and accountants.

The incorporation itself is usually the simplest part of the process. The real challenge is ensuring that the structure continues to work as the Spanish operation grows, hires employees, enters new markets, and develops its relationship with the parent company.

Lawants supports foreign groups throughout the entire lifecycle of their Spanish subsidiary, providing a single point of contact for the legal, tax and accounting aspects of the business. The objective is not simply to create a company, but to build a structure that remains effective years after the incorporation is complete.

First assessment directly from the Managing Director

Roberto Bosco reviews every project personally within 24 business hours. No call centre, no intake department, and no generic incorporation package: a direct assessment of your plans for Spain from the outset.
Lawants · Best Law Firms Spain.

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FAQ: Subsidiary Company in Spain

The most frequent questions Lawants receives from foreign parent companies and groups before setting up a subsidiary in Spain.

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