Do you want to do business in Spain? There are many opportunities and several ways for foreign companies to start doing business in Spain. The most commonly known ways for foreign companies to set up in Spain is as a branch office or as a subsidiary (plc or ltd). However, in this post we are going to talk about another alternative, which is to set up a representative office.
What is a representative office?
A representative office is a liaison office that, as such:
- Does not constitute a separate legal entity independent from the parent company
- Does not have a governing body, but rather carries out business through an authorised representative
- Cannot trade as such (making this the biggest difference between a representative office and a branch office) and its main purpose is to coordinate and collaborate. Its business activities include: market research, drawing up contracts and administrative assistance.
- Depends upon the parent company for any debts that it, as representative office, undertakes in Spain.
- Does not hold capital independently from the parent company, although it may be given funds by such.
How is a representative office set up?
A representative office can be opened in Spain through a public deed (or a document executed before a foreign public notary which is certified with the Hague Convention apostille or similar legalization system)
The public deed can be used for tax purposes, employment paperwork, social security formalities and as such should include:
- Confirmation of the decision to open a representative office
- Appointment of the tax representative (this must be an individual or legal entity resident in Spain)
- An outline of the tax representative’s role
- Monies assigned to the office
A representative office does not need to be filed with the Mercantile Registry.
How should the Spanish Tax Authorities be informed about the opening of a representative office?
The tax representative must register their activities with the Spanish Tax Authorities by filling in and signing the 036 form and submitting it with the following documents:
- A public deed naming the tax representative. This deed must have been legalized by a foreign public notary and certified with the Hague Convention apostille or similar.
- DNI or NIE identity card of the tax representative
- A certificate of good standing from the foreign company, which could be:
- Articles of incorporation or byelaws of the company, duly filed with the Mercantile Register of their country.
- A foreign Notary Public statement or documentation from a foreign Treasury department.
Once this form with supporting documentation has been filed with the Spanish Tax Authorities then a Non-Residents Tax Code (NIF) will be issued in order to begin working in Spain.
At LEIALTA we offer legal and tax representative services for your company, provided by a group of experts that cover a wide range of disciplines (tax and corporate lawyers) who can provide advice in several languages. Our services include:
- Advice from day one on how to run a business in Spain
- Conversing with Spanish Tax Authorities on behalf of clients
- Carrying out administrative tasks
- Analysis to confirm compliance with tax regulations
Is the representative office a permanent set up?
With regards to VAT and Corporate Tax, the representative office is not considered to be a permanent set up, however it is important to bear in mind that from the moment employees begin to carry out commercial activity in such a way as to take on new clients, the representative office could be considered to be a permanent set up and, therefore, liable for VAT and Corporate Tax. In such cases, the situation needs to studied in detail to see which international agreements apply in order to avoid double taxation.
Bookkeeping for a representative office is done by the foreign company.
What other ways exist to do business in Spain?
As we mentioned at the beginning, there are several ways to do business in Spain, of which one option is the representative office. Other options include:
- Selling directly from abroad without having a set up in Spain
- Employing an agent in Spain
- Setting up a subsidiary. Here an independent company is set up with its own body corporate separate from the parent company. The subsidiary must pay Spanish taxes and VAT.
- Setting up a branch office. This is not a separate legal entity but should do its own bookkeeping. For example, if the branch office wishes to rent a premises in Spain, the parent company must sign the contract and pay the amounts due. In this case, the branch office must also pay Spanish Corporation Tax and VAT.
Therefore, as you can see, there are many ways to set up a business in Spain. The choice you make depends on your company’s objective in our country. It is possible to begin with a representative office in order to carry out market research and analyse the viability of introducing your company into the Spanish market and, afterwards, open a subsidiary or branch office.
Leialta website: https://www.leialta.com/en/
Blog for doing business in Spain: https://www.leialta.com/en/blog-for-doing-business-in-spain/
