Branch or subsidiary in Spain: what the parent risks, what it pays and what it signs

From 31 July 2028, a company registered in an EU Member State will be able to prove in Spain that it exists, who its directors are and who may act for it with an EU Company Certificate and an EU digital power of attorney, and those documents will need no apostille. That is the effect of Directive (EU) 2025/25, which Member States must transpose by 31 July 2027 and apply from 31 July 2028. Until then, and for parents incorporated outside the EU even after that date, the parent's corporate documents reach Spain the old way: apostilled or legalised, then translated. Spain has not yet transposed the Directive, and the Cortes Generales are currently dissolved. Brussels has also tabled an optional EU-wide company form, the EU Inc. proposal (COM(2026) 321, 18 March 2026). It is still awaiting a committee decision in the European Parliament and has no legal effect today.

A foreign group entering Spain in 2026 therefore chooses between the two forms Spanish law has always offered:

• A branch (sucursal) is the parent itself operating in Spain through a registered establishment.
• A subsidiary is a Spanish company the parent owns. In practice it is almost always a sociedad de responsabilidad limitada (SL, the Spanish private limited company).

The paperwork weighs much the same for both. The decision turns on who answers for the Spanish debts, what tax falls due when profits leave Spain, and how expensive it is to change course later. The figures below are stated as of October 2026.

Who answers for the debts

A branch has no legal personality. The Reglamento del Registro Mercantil (the regulation governing the Spanish companies register) defines it as a secondary establishment with permanent representation and some management autonomy, through which the company carries on its business (Article 295 RRM). Every contract the branch signs, every tax assessment it receives and every judgment against it binds the parent. A creditor can pursue the parent's assets wherever they are. Employees hired by the branch are employees of the parent.

A subsidiary is a separate person, and the parent's exposure is in principle limited to the capital it contributes. That limit gives way in five places, all of which a board should know before relying on it:

• Guarantees the parent signs. Spanish banks and landlords often ask a newly formed subsidiary for a parent guarantee or comfort letter. In public procurement, a subsidiary that relies on its parent's financial standing to qualify can be required to accept joint liability with the parent for performance of the contract (Article 75.3 of Ley 9/2017, the Spanish public procurement act).
• Capital below €3,000. An SL can be incorporated with €1 of share capital. While capital stays below €3,000, two rules apply under Article 4 of the Ley de Sociedades de Capital (the Spanish companies act, «LSC»). At least 20% of each year's profit must go to the legal reserve. If the company is wound up without enough assets to pay its debts, the shareholders answer jointly for the gap between €3,000 and the capital subscribed. The sum is small. The point is that the €1 company carries a residual shareholder liability.
• Directing the subsidiary from head office. Spanish law extends directors' liability to de facto directors, and treats as one the person on whose instructions the directors act (Article 236.3 LSC). A parent that runs the subsidiary through standing instructions to a nominee director can find itself sued as a director.
• The directors' own liability. Where losses bring net equity below half of share capital, the directors must call a shareholders' meeting within two months to dissolve the company or restore its equity. If they do not, they become jointly liable for every company debt arising after that point (Articles 363.1.e and 367 LSC). Directors can also be held secondarily liable for a company's taxes where it commits tax infractions, or ceases trading with taxes unpaid (Article 43.1 of the Ley General Tributaria, the general tax act). When group executives sit on the Spanish board, this is their personal exposure.
• Abuse of the corporate form. Spanish courts disregard separate personality where it is used to defraud creditors or evade the law, a doctrine known as levantamiento del velo. They apply it sparingly and only to cases of abuse.

Branch and subsidiary side by side

The tax difference in detail

Profits. A branch is taxed on the income attributable to it at the rates of the corporate tax (Article 19.1 of the Texto Refundido de la Ley del Impuesto sobre la Renta de no Residentes, «TRLIRNR», the Spanish non-resident income tax act). The general rate is 25% (Article 29.1 of Ley 27/2014, the corporate tax act).

For tax periods starting in 2026, two reduced scales exist (transitional provision 44 of Ley 27/2014, confirmed by the AEAT, the Spanish tax agency):

• companies with turnover below €1 million pay 19% on the first €50,000 of taxable income and 21% on the rest;
• companies with turnover below €10 million pay 23%.

Neither threshold helps a subsidiary of a sizeable group, because turnover is measured across the whole group, wherever its members are resident (Article 101.3). Newly formed companies normally pay 15% in their first profitable tax period and the one after. That rate is expressly unavailable to companies that belong to a group, again regardless of residence (Article 29.1). Unless the whole group is small, a Spanish subsidiary controlled by a foreign company pays 25% from its first profitable year.

Charges to head office. A branch cannot deduct royalties, interest or commissions it pays to its own head office. It can deduct a reasonable share of head-office management and general administration expenses, on three conditions: the allocation appears in its accounts, it is explained in a report filed with the return, and it follows rational, consistent keys (Article 18.1 TRLIRNR). A subsidiary can deduct arm's-length royalties, interest and service fees paid to its parent, subject to the general limits of the corporate tax, arm's-length pricing among them. For a business model built on licensing intellectual property or financing from the parent, this alone can decide the question.

Profits leaving Spain. When a branch transfers profits abroad, it owes a supplementary tax of 19% on the amounts transferred, including the non-deductible payments to head office (Article 19.2 TRLIRNR). Article 19.3 switches it off in two cases:

• the parent is resident in another EU Member State, unless that State is classed as a non-cooperative jurisdiction;
• the parent is resident in a country whose tax treaty with Spain does not expressly provide otherwise, provided that country treats Spanish companies reciprocally.

The tax is declared on form 210, as the AEAT's page on the supplementary tax explains. Two treaty positions show how far apart outcomes can be:

• The treaty between Spain and the United States, as amended by the 2013 Protocol, expressly allows a branch tax of up to 5%. Companies that meet its limitation-on-benefits tests are exempt.
• The treaty between Spain and the United Kingdom does not provide for it, so it does not apply to UK companies after Brexit either, as the AEAT confirms.

Where the tax applies in full, a branch that remits all its profit bears 25% plus 19% of the remaining 75%, a combined 39.25%.

Dividends. A subsidiary's dividends to a non-resident parent bear 19% withholding under domestic law, whether or not the parent is in the EU (Article 25.1.f TRLIRNR). An EU parent holding at least 5% for an uninterrupted year receives them exempt. If the year is completed after the dividend, the tax withheld is refunded. The exemption is refused where the EU parent is majority-controlled by persons outside the EU or EEA, unless its incorporation and operations respond to valid economic reasons and substantive business purposes (Article 14.1.h TRLIRNR). A parent placed in an EU holding company only to obtain the exemption will not get it.

Other parents rely on their treaty. Under the treaty with the United States, the rate is:

• 5% for a company holding at least 10% of the voting stock;
• 15% below that threshold;
• 0% for a holding of at least 80% kept for twelve months, subject to the limitation-on-benefits tests.

What the parent signs, and in what order

For a subsidiary:

1. A board resolution of the parent approving the incorporation, the articles, the capital and the first directors. It also grants a power of attorney to whoever will sign in Spain.
2. A certificate of the parent's existence and of the signatory's authority, apostilled or legalised and translated into Spanish.
3. Spanish tax numbers. The parent needs one as shareholder, beginning with the letter N (Article 4 of Orden EHA/451/2008, the order on tax identification numbers). Each individual who will sign the deed or take office as director needs an NIE.
4. A certificate that the company name is available, and the capital. The capital is either deposited in a Spanish bank or covered by the founders' declaration in the deed that they answer jointly for its payment (Article 62.2 LSC). The second route lets the incorporation go ahead before the Spanish bank account exists.
5. The deed of incorporation before a Spanish notary, who must identify the beneficial owner before authorising it (Articles 2.1.n and 4 of Ley 10/2010, the anti-money-laundering act). The deed can be executed by videoconference on two conditions: the capital is contributed in cash, and the signatory accesses the notarial platform with an identification system accepted by Spanish administrative law, such as a qualified certificate from a provider on the EU trusted list (Article 17 ter of the Ley del Notariado, the notarial act, introduced by Ley 11/2023, and Article 9 of Ley 39/2015, the administrative procedure act).
6. Registration at the Registro Mercantil, within six business hours where standard articles are used (Article 15 of Ley 14/2013, the act supporting entrepreneurs). The company's provisional tax number then becomes definitive (Article 24 of Real Decreto 1065/2007, the general regulation on tax procedures).
7. The foreign investment declaration on form D-1A, filed by the notary who authorised the deed, within one month (Article 12 of Orden ECM/57/2024, the order setting the foreign investment forms).

For a branch:

1. A resolution of the parent's competent body establishing the branch. It states the branch's address and activities and appoints its permanent representatives with their powers (Article 297 RRM). A parent outside the EU must also state the capital allocated to Spanish operations (Article 56.2 of Real Decreto 828/1995, the regulation on capital duty).
2. Documents proving the parent's existence, its current articles and its directors, together with that resolution, all legalised (Article 300 RRM) and translated.
3. A Spanish tax number for the parent and another for the branch, beginning with W (Article 5.2 of Orden EHA/451/2008), and NIEs for the representatives.
4. The notarial deed and registration at the Registro Mercantil of the branch's address. A parent registered in another EU Member State can file entirely online. The registrar checks its data through the interconnected EU business registers and registers the branch within ten working days (Articles 308 bis and 308 ter RRM).
5. Form D-1A, which also covers the setting up of branches (Article 4.d of Real Decreto 571/2023, the foreign investment regulation).
6. Every year afterwards, the filing of the parent's annual accounts and any consolidated accounts at the Spanish registry that holds the branch's data (Article 375 RRM). If the parent's accounts are already filed in its home register, the registrar only checks that fact. If the parent's law does not require equivalent accounts, the branch must prepare its own and file them (Article 376).

What actually holds up the calendar

Registration itself is fast for both forms. The weeks are lost before the notary.

NIEs. Every person who appears at a deed with tax consequences must show a Spanish tax number, and so must the entity they represent (Article 23 of the Ley del Notariado). For a foreign individual, that number is the NIE. From abroad it is requested in person through a Spanish consulate. The regulation gives the authorities five days to decide and treats silence as a refusal (Article 205 of Real Decreto 1155/2024, the immigration regulation). Those five days start only once the application is lodged, and obtaining the appointment is what takes time. Applications for every director and signatory should start on the day the structure is chosen.

Apostille, legalisation and translation. Documents from a country party to the 1961 Hague Convention need an apostille (Spain's instrument of ratification). Documents from other countries need diplomatic or consular legalisation. All of them need a translation into Spanish.

The EU's regulation on public documents does not help here. It covers civil-status documents such as birth and marriage certificates, and leaves company documents out (Article 2 of Regulation (EU) 2016/1191). Relief for EU parents arrives only with Directive 2025/25 in 2028. A branch multiplies this cost, because every later decision of the parent concerning the branch, and every amendment of its articles, has to reach the Spanish register in the same form.

The bank. Spanish banks must identify every natural person who ultimately owns or controls more than 25% of the client, directly or indirectly. They must refuse the relationship when they cannot determine the ownership and control structure (Articles 4 and 7.3 of Ley 10/2010). For a parent held through several layers of companies or funds, the bank will ask for documents on each layer. The account opens only when the chain reaches identified individuals.

Once incorporated, a Spanish company declares its beneficial owners with every filing of annual accounts, and must file an update within ten days of any change. Failing to do so closes the company's sheet at the register to further filings (Real Decreto 609/2023, additional provisions 2 and 3, the regulation on the beneficial ownership register).

The sole-shareholder company

A subsidiary wholly owned by its parent is a sociedad unipersonal, and two sets of duties follow from that.

The first concerns registration. Its single-member status and the identity of the shareholder must be entered in the Registro Mercantil. The company must also state that it is unipersonal on its correspondence, order forms and invoices (Article 13 LSC). A company may start with several shareholders and later come to have one. If that is not registered within six months, the sole shareholder answers personally and without limit for the debts incurred in the meantime (Article 14 LSC). A buy-out of a local partner needs that registration on the closing checklist.

The second set concerns intra-group contracts. Every contract between the company and its sole shareholder must meet three requirements (Article 16 LSC):

• it must be in writing;
• it must be entered in a register book of the company, legalised like its minute books;
• it must be mentioned individually in the notes to the annual accounts.

Service agreements, licences, loans and cash-pooling arrangements with the parent are all caught. If the company or the parent becomes insolvent, some contracts cannot be relied on against the insolvency estate: those neither entered in the register book nor disclosed in filed notes. And for two years after each contract, the sole shareholder answers to the company for any advantage it obtained at the company's expense.

Foreign investment filings

Form D-1A is routine. It records the investment after the fact, for subsidiaries and branches alike, and the notary files it where a Spanish notary authorised the deed. Two further filings depend on the facts:

• An investor from a jurisdiction classed as non-cooperative must declare in advance on form DP-1 where the foreign holding will exceed 50% (Article 5.5 of Real Decreto 571/2023).
• An annual report on form D-4 is due from a branch whose allocated capital or net equity exceeds €3 million, and from a Spanish company above the same figure with foreign participation of at least 10% (Article 5.4).

Prior authorisation is a different matter. It is governed by Article 7 bis of Ley 19/2003, the act on capital movements and foreign investment. Two kinds of investor need government authorisation to acquire 10% or control of a Spanish company in the listed sectors:

• an investor resident outside the EU and EFTA;
• an EU or EFTA investor more than 25% owned by such residents.

The sectors include critical infrastructure, data processing and storage, artificial intelligence, semiconductors, cybersecurity, access to sensitive data such as personal data, and the media. Authorisation is also required where the investor is controlled by a foreign government. An investment made without it has no validity or legal effect until it is legalised. The fine can reach the value of the transaction, with a minimum of €30,000 (Articles 7 bis.5 and 9). The authorities have three months to decide and silence counts as refusal (Article 14.9 of Real Decreto 571/2023).

The text speaks of investments in a «sociedad española». It does not say expressly whether setting up a new company from scratch is caught, and it says nothing about branches. Where the activity falls within one of those sectors, the safe course is the voluntary consultation. The authorities must answer within thirty working days, and the answer binds them (Article 9 of Real Decreto 571/2023).

The EU framework moves in the same direction. Regulation (EU) 2026/1386 has been in force since 16 July 2026 and applies from 17 January 2028. It brings new establishments within its scope and leaves it to each Member State whether to require prior authorisation for them. Until 2028, Ley 19/2003 and Real Decreto 571/2023 govern alone.

Choosing between them

Contracts and clients in Spain. A branch contracts with the parent's full balance sheet behind it, because it is the parent. Large Spanish customers and public bodies would often ask a subsidiary for a parent guarantee; a branch gives them the same comfort without a separate instrument. Where the contracts carry heavy liability, a subsidiary keeps that exposure in Spain. Consumer sales, health, construction and anything that can produce mass claims fall in that group.

Employees. Both forms can employ staff. With a branch, every Spanish employment claim is a claim against the parent. A team of any size usually argues for a subsidiary.

Public tenders. For works contracts, the tender documents may require a non-EU contractor to open a branch in Spain registered with the Registro Mercantil (Article 68.2 of Ley 9/2017). A non-EU bidder must also show that its home country admits Spanish companies to its own public contracts. That requirement is waived for bidders from countries party to the WTO Government Procurement Agreement, in contracts subject to EU harmonised rules (Article 68.1). A subsidiary bids as a Spanish company, but with its own short track record. Relying on the parent's standing to qualify brings back joint liability through Article 75.3.

Planned investment and data. A large investment in assets, people or intellectual property argues for a subsidiary that ring-fences it and can later raise outside capital. Either form is an establishment in the EU. Personal data processed in the context of the Spanish activity therefore falls fully under the GDPR (Article 3(1) of Regulation (EU) 2016/679). A subsidiary that sends customer or employee data to a parent outside the EEA needs a transfer mechanism under Chapter V. The data side of an entry into Spain is covered in more detail on the GDPR for Non-EU Companies page.

A future sale. Shares in an SL are transferred by public document before a notary, and the buyer takes the company with its contracts, licences and employees (Article 106 LSC). A branch can only be sold as a business, asset by asset and contract by contract. If an exit, a joint venture or a local investor is part of the plan, the subsidiary is the structure that can be sold.

When the branch is the better answer. For an EU parent setting up a sales or support office with limited liability exposure, a branch is often the simpler and cheaper choice. It pays no supplementary tax and registers online in ten working days. It files accounts that are already on its home register, and from 2028 its register documents will need no apostille. The same holds for parents in three other positions:

• their treaty with Spain rules out the branch tax;
• their Spanish activity is a test of the market;
• they have to bid for works contracts that require a branch.

Recommending a subsidiary in those cases adds a company to maintain without adding protection that matters.

Changing course later

Branch into subsidiary. The usual route is for the parent to contribute the branch's business to a new SL in exchange for its shares. This is a contribution of a branch of activity, meaning a set of assets capable of operating as an autonomous business by its own means (Article 76.3 and 76.4 of Ley 27/2014).

The tax-neutrality regime for restructurings applies by default and defers tax on the gains (Articles 87 and 89). The operation must be notified to the tax authorities within three months of registration of the deed (Article 48.2 of Real Decreto 634/2015, the corporate tax regulation). Late notification carries a fixed fine of €10,000 per operation. The regime is refused where the main purpose is a tax advantage without valid economic reasons.

The rest of the conversion runs as follows:

• The transfer of the business is outside the scope of VAT (Article 7.1 of Ley 37/1992, the VAT act).
• The incorporation is exempt from capital duty (Article 45.I.B.11 of the Texto Refundido de la Ley del ITPAJD, the act on transfer tax and stamp duty).
• The employees move to the new company on their existing terms. The parent and the SL remain jointly liable for three years for unpaid employment debts arising before the transfer (Article 44 of the Estatuto de los Trabajadores, the employment statute).
• The new company cannot claim the 15% start-up rate, because the activity was previously carried on by a related party (Article 29.1.a of Ley 27/2014).
• Contracts, licences and registrations held by the parent through the branch all have to be moved.

Closing or selling. Closing a branch requires a resolution of the parent and its entry in the register, and EU parents can do it online (Article 308 quater RRM). When the branch ceases, or its assets are moved abroad, the difference between their market value and their tax value is taxed in Spain (Article 18.5 TRLIRNR).

A subsidiary is closed by dissolution, liquidation and removal from the register. It can also be exited by selling its shares, which within a group can be transferred freely unless the articles say otherwise (Article 107.1 LSC).

Already operating in Spain without a structure

A company that sells into Spain from abroad has no permanent establishment in Spain if it has no premises there and no one there who habitually concludes contracts in its name. One arises, under Article 13.1.a TRLIRNR, in three situations:

• the company has, on a continuing or habitual basis, a place of business in Spain through which it carries on all or part of its activity;
• it acts through an agent authorised to contract in its name who habitually uses that authority;
• it runs a building, installation or assembly site lasting more than six months.

The Spanish rule is tested against the relevant tax treaty, which governs where one applies. A permanent establishment exists from the facts, registered or not. It is taxed as a branch would have been, for every year since it arose.

The review starts with three facts: who negotiates and signs contracts with Spanish customers, where the people serving the Spanish market work, and whether any space in Spain is at the company's disposal. Where the answer reveals a permanent establishment, regularising it and choosing the structure for the future become the same decision. Whether a particular situation needs a lawyer at all can be tested first with an eight-question self-check on when a matter in Spain needs a lawyer.

Where the decision lands

The choice turns on three questions, in this order:

1. whether the parent can accept answering for every Spanish debt;
2. what the parent's residence and treaty do to profits leaving Spain;
3. whether the Spanish business will one day need to be sold, financed or separated.

The NIEs, the apostilles and the bank account then set the pace, whichever answer is reached. PASSAS handles the analysis and the setting up of either structure in a single engagement, described on the Setting Up in Spain page. The price is fixed and published in advance. All work is done remotely with electronic signatures, so no one has to travel, in Spanish, English, German or French. Where the decision is still open, a Virtual Consultation is the place to test it against the business model.

Frequently asked questions

Branch vs subsidiary in Spain: which is better?

It depends on liability, tax and exit plans. A branch makes the parent liable for all its Spanish debts but is simpler to keep, and for EU parents profits leave Spain free of the 19% branch tax. A subsidiary ring-fences liability, deducts arm's-length charges to its parent and can be sold, at the cost of running a separate Spanish company.

Does a foreign company need a Spanish subsidiary to do business in Spain?

No. A foreign company can operate through a registered branch. It can also sell into Spain without any structure, provided it has no place of business and no dependent agent concluding contracts in Spain. A subsidiary becomes advisable when the Spanish activity carries significant liability, employs a team or may be sold.

How long does it take to set up a company in Spain?

The registration of an SL with standard articles takes six business hours from filing. The time goes on what comes before: NIEs for directors and signatories, apostilled or legalised and translated documents from the parent, and the bank's beneficial-ownership checks. With documents ready, incorporation is a matter of days.

What is the minimum capital for an SL in Spain?

One euro, since Ley 18/2022. While capital stays below €3,000, at least 20% of each year's profit goes to the legal reserve. In an insolvent winding up, the shareholders answer jointly for the difference between €3,000 and the capital subscribed. A sociedad anónima requires €60,000.

Can a non-resident be director of a Spanish company?

Yes. The Ley de Sociedades de Capital sets no nationality or residence requirement, and a company, Spanish or foreign, can itself be director through a designated individual. In practice the director needs an NIE, because every person appearing at a Spanish deed with tax consequences must show a Spanish tax number.

Does a branch in Spain pay tax on profits sent to the parent?

It can. A 19% supplementary tax applies to profits transferred abroad. It does not apply if the parent is resident in another EU Member State, or in a treaty country whose treaty does not provide otherwise and which treats Spanish companies reciprocally. The UK treaty excludes it; the US treaty allows it at up to 5%.