Spain Branch Office

Starting a Spanish Branch of a Foreign Company

A branch is one way for a company to set up a business in Spain. Opening a branch has many drawbacks, mainly that the foreign parent carries full liability for the branches operations, and that lengthy and complicated dealings with the tax authorities may be necessary regarding the branches tax obligations.

The disadvantages of a branch office are:

• The parent company is fully liable for the liabilities of the branch
• The branches representatives may be held jointly and severally liable for the tax debts
• The financial statements of the branch must be filed at the Companies Registry in Spain
• There are the same tax obligations as a full company: such as filing VAT returns and filing corporation tax returns, so there are no savings in administering a branch
• Banks and clients may prefer dealing with a Spanish company than a branch
• A branch is not ideal for substantial projects because the parent company runs the entire risk
• You will require a Spanish CIF identification number for the parent company with the taxation authorities
• Any public act by the branch, is likely to need ratification by the board of the main foreign parent. A company that is likely to sign contracts in front of a notary on a regular basis, should have an SL company for administrative ease

The advantages are:

• Less obligations to present accounts than with corporations

Features of a branch office in Spain

From a tax point of view, branches are permanent establishments of non-resident companies and a Spanish branch is not a separate legal company from its parent. As with an S.L. most types of business activities can be performed by a branch, although the parent company is fully liable for its debts. The branch must have the same name as the parent company, but adding the words Branch in Spanish - Sucursal en España.

A branch of a non-resident company must appoint a resident individual or a company to represent it in its dealings with the tax authorities. The representatives may be held jointly and severally liable for the tax debts of the permanent establishments of non-resident entities, which they represent.

If the parent company’s financial statements are not filed at the Companies Registry of its country of origin, the financial statements of the branch itself must be filed at the Companies Registry in Spain.

A branch of a foreign company must be established in the presence of a Spanish Notary Public and the deed of establishment must be filed in the Companies Registry. The following documents are required:

• A certificate issued by the Spanish consulate, the Commercial Registry or a Notary Public of the foreign company’s home country stating that the company is incorporated
• A copy of the Memorandum and Articles of Association of the foreign company - a sworn translation into Spanish must be prepared
• Certified minutes of the meeting of the shareholders, with details of the capital allocated to the branch, the purpose of the branch and confirmation of the appointment of the legal and tax representatives of the branch
• A bank certificate must be included in the public deed establishing the branch, proving that the working capital assigned to the branch has been credited in the branch’s bank account.

Simultaneously with the signature of the public deed, a form is filed at the General Directorate of Commerce and Investments to record the foreign investment for statistical purposes.