Entering Spain through a subsidiary or a branch (sucursal)

Terms used

• Filial — A filial is a subsidiary: a separate Spanish company, usually an SL or SA, owned by the foreign parent.
• Sucursal — A sucursal is a branch: a Spanish office that is part of the foreign company, not a separate legal entity.
• NIF — The NIF is the Spanish tax identification number, which a company needs to operate and file taxes.
• NIE — The NIE is the Spanish tax identification number for foreign individuals, such as a branch's representatives.
• Registro Mercantil — The Registro Mercantil is the Spanish commercial registry where companies and branches are officially recorded.
• Modelo 036 — Modelo 036 is the form used to register a business with the Spanish tax agency.

Key rules

• Subsidiary liability: Your parent's risk in a subsidiary is limited to its capital contribution, apart from guarantees it gives.
• Branch liability: A branch is part of the foreign company, so the parent is fully liable for its debts with all its assets.
• Tax rate: Both structures are generally taxed at 25% on Spanish profits.
• Registration: A branch needs a notarised deed registered at the commercial registry, then Modelo 036 with the tax agency.

The short answer

A subsidiary (filial) is a separate Spanish company. A branch (sucursal) is the foreign company itself, operating in Spain. That one difference drives liability, and it shapes the tax and registry steps too.

Liability: the main difference

A subsidiary is usually an SL or an SA. It is its own legal entity. Your parent company risks only the capital it put in, plus any guarantees it chooses to give.

A branch has no legal personality of its own. The parent answers for the branch's debts and obligations with all its assets, not just what it sent to Spain.

If you want to cap your risk, choose a subsidiary.

Tax treatment

Both are taxed at the general corporate rate, generally 25%, on Spanish profits. A branch is taxed as a permanent establishment under non-resident rules. A subsidiary is taxed under ordinary corporate income tax.

Differences to weigh:

• Profit sent home. A subsidiary generally withholds tax on dividends paid to its parent, unless an exemption applies. Profit a branch sends to its head office is not treated as a dividend and generally has no withholding. A 19% rate can apply in some cases to branches of owners outside the EU.
• Charges from head office. A branch's deductions for payments to its head office, such as royalties or interest, are limited.
• Tax benefits. A branch cannot use some benefits that are only for subsidiaries.

How profit transfers are taxed can depend on your home country and any tax treaty. Ask a Spanish tax adviser before you decide.

How to open a branch

1. Pass a board resolution, or equivalent decision, to open the branch.
2. Get your constitutional documents and a certificate of existence from your home company registry. Both need an apostille and a translation into Spanish by a sworn translator.
3. Get a Spanish tax ID (NIF) for the company and an NIE for each representative.
4. Open a Spanish bank account. File a foreign investment declaration if it is required.
5. Sign the public deed before a Spanish notary.
6. Register the deed at the commercial registry (Registro Mercantil) of the branch's provincial address.
7. Register with the tax agency using Modelo 036. Register with Social Security if you will hire staff.

Required documents can vary by registry, so ask the registry for its list before you start. The documents list and checklist below cover these steps in more detail.

How to choose

Pick a subsidiary if you want separate liability, or if you plan to bring in partners or hire many people. Pick a branch if you accept that the parent is fully liable and you want a simpler link to head office. The decision block below sets the two options side by side.

Choosing between options

Should you enter Spain through a subsidiary (filial) or a branch (sucursal)?

• Subsidiary (filial): Choose it if you want the parent's risk limited to its capital contribution, apart from any guarantees it gives. It is a separate legal entity, usually an SL or SA, and it pays withholding on dividends to its parent unless exempt.

• Branch (sucursal): Choose it if you accept that the branch is part of the foreign company, so the parent is fully liable with all its assets. It pays 25% tax on its Spanish profits as a permanent establishment, and profit sent to the head office is generally not treated as a dividend.

If you want the Spanish business's debts kept apart from the parent's assets, choose a subsidiary. If you accept full parent liability in exchange for no dividend-style withholding on profit transfers, a branch can fit. A branch also cannot use some subsidiary-only benefits and has limited deductions for head office charges.

Documents you need

• A board resolution, or equivalent decision, of the parent company to open the branch in Spain.

• The parent's constitutional documents (its articles of association), legalised with an apostille and translated into Spanish by a sworn translator.

• A certificate of existence of the parent from its home company registry, apostilled and translated into Spanish by a sworn translator.

• A Spanish tax ID for the company (NIF) and for each representative (NIE).

• The public deed signed before a Spanish notary, to be registered at the commercial registry (Registro Mercantil) of the branch's provincial address.

Checklist

• Confirm you want a branch: it is part of the foreign company, so the parent answers for its debts with all its assets, unlike a subsidiary (filial).

• Get a certificate of existence from your home registry, apostille it and have it translated by a sworn translator.

• Apply for a Spanish tax ID for the company and each representative.

Frequently asked questions

Can the parent company lose more than its investment in a Spanish subsidiary?

Generally no, because a subsidiary is a separate company and your loss is limited to the capital you put in. The exception is any guarantee the parent gives for the subsidiary's debts, which you would have to honour.

Do I pay tax when a branch sends profit to the head office?

Generally no withholding applies, because a branch's profit transfer is not treated as a dividend. The 19% rate can apply to branches of non-EU owners in some cases, and the result depends on your home country and any tax treaty.

Can a branch deduct charges from its head office, such as royalties or interest?

Only to a limited extent, because deductions for head office payments such as royalties or interest are restricted.

Do I need to register a branch with Social Security?

Yes, but only if the branch hires staff in Spain. Every branch also registers with the tax agency using Modelo 036 after the deed is recorded at the commercial registry.