Boasting some of Europe’s most beautiful landscapes, Spain is one of the most important economies in the European Union. Madrid and Barcelona are home to important multinational companies, including Amazon, McDonald’s, Microsoft, and Oracle. Known for its work-life balance, Spain is a talent hotspot for companies looking to hire top talent internationally.
For foreign companies that want to set up a subsidiary in Spain, there are quite a few structural options available. However, the process can take up to 6-8 weeks, so companies should consider using an EOR service like Via, unless they have a strong commitment to establishing a business in-country.
This article gives foreign companies an overview of the subsidiary process in Spain, as well as the alternative options for establishing a subsidiary or entity.
Spain’s subsidiary laws require you to make most of the decisions for incorporations up-front, such as determining the company structure and proving that you have the necessary capital investment to succeed. As a foreign investor, you will also need to research how the Spanish market operates and think about what purposes you have for incorporating.
The four main business options foreign companies for establishing a physical presence in Spain include:
Corporation, which can be divided into S.L.’s or S.A.’s
To determine which path is right for your business, you will need to examine your business activities, registration requirements, minimum capital requirements, and the level of commitment you have to expansion. You should also gather advice and hire attorneys that fit your company's needs for opening a legal entity.
The two most common subsidiary options are the Sociedad de responsabilidad limitada (S.L.) and the Sociedad Anonima (S.A). An S.L. is similar to a private limited liability company (LLC), while an S.A. is similar to a public limited liability company (LLC).
Spain has 3 separate incorporation processes:
Ordinary regime: only applicable for limited liability
Simplified regime: only applicable for limited liability companies that meet requirements for shareholders, share capital, and directors
Super simplified regime: only applicable for limited liability companies that meet certain requirements for shareholder, share capital, and directors
Most companies hoping for global expansion in Spain choose the S.L. option for their subsidiary and company formation. This option has the greatest flexibility and has a much lower capital investment than an S.A.
The basic steps for incorporation in Spain are:
Obtain a certificate of your proposed company’s name from the Mercantile Register
Apply for a Provisional Tax Identification Number (NIF)
Open a bank account in Spain
Administer an anti-money laundering and terrorist financing declaration
Execute a public deed before the Notary Public
Register your office at the Commercial Registry
Obtain a definitive NIF once your companies registration is set up
In Spain, S.L. subsidiaries are required to have a minimum of 3000 EUR as investment capital. This needs to be paid in full at the time of incorporation.
Spain does not allow S.L. shares to be freely transferable and the foreign parent company or subsidiary cannot issue any bonds.
For the board of directors, an S.L. needs a minimum of 3 but no more than 12 members. Spain does not require any specific nationality or that a resident in Spain be on the board. However, Spain has strict laws about tax documents and finances. All companies are promptly required to file their annual financial statements with the Mercantile Register each year.
As a parent company, you have two main options for opening a Spanish business as a foreign investor: branch office or a subsidiary. While subsidiaries tend to be more strategic, setting up a branch office also has its advantages.
A subsidiary can operate as a 100% separate legal entity from the parent company. When businesses open a branch, this option is not available, since it is not technically a resident corporation. Subsidiaries, on the other hand, are viewed as a local Spanish company once they are established. Being a local operation can also give companies access to the most trade opportunities and makes it easier to attract potential employees.
Subsidiaries retain full operating independence from the parent company. This makes it easier to tailor your business practice to Spanish culture. You can even take it further and change the company name to something different than the parent company.
So while setting up a subsidiary in Spain allows you to have a lot of freedom from the parent company, you will still need a lot of investment capital to move the process along. You will also need to account for travel time back and forth between Spain. The incorporation process in Spain can take 2 months or longer, so you will need to set aside time for all the necessary documents to be approved. You will also need to hire attorneys that understand employment law, property law, and tax law.
Most importantly, you will need a team of legal advisors to help guide you through tax laws, subsidiary laws, and employee benefits.
Many expanding companies want to hire employees in Spain, but aren’t sure about where to begin. Using a global EOR service like Via expedites the process and ensures that companies follow all hiring and employment laws correctly without having to establish a subsidiary.
With Via, we help you hire, onboard, pay, and care for remote employees across the world. As your employer-of-record abroad, we take care of the local human resources (HR) logistics, such as salary, payroll, benefits, paid leave, and tax deductions. Maintaining compliance is our responsibility. You simply focus on building your team and running your business.
If you’re looking to test out a market or start building a local talent hub based in Spain, partnering with an EOR like Via (as opposed to opening a subsidiary) is probably the strategic move.
Opening a subsidiary can be costly, as you will need to build out a team of local HR, labor, and legal experts. With Via’s transparent pricing, on the other hand, you can pay full-time employees or contractors in Spain with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace.