Subsidiary Company In Spain: Procedure & Characteristics

Spain, a vibrant country with a rich cultural heritage and a robust economy, offers a promising landscape for foreign entrepreneurs looking to expand their businesses. Setting up a subsidiary in Spain can open doors to the European market, provide access to skilled labor, and take advantage of favorable business conditions. 

In this article, we will explore the process of establishing a subsidiary in Spain, the benefits, and why it might be the right move for your business.

Is a Subsidiary Right for Your Business?

Before diving headfirst, consider your business goals. A subsidiary is a distinct legal organization from its parent company and provides operational independence and limited liability protection. 

This structure is ideal for businesses seeking:

• Market Expansion: Establish a local foothold, cater to specific regional demands, and leverage Spain’s strategic location as a gateway to Europe and North Africa.
• Tax Advantages: Spain boasts competitive corporate tax rates and potentially reduced withholding taxes on dividends distributed to the parent company.
• Enhanced Credibility: A local subsidiary fosters trust with Spanish customers and partners, projecting a commitment to the region.

Benefits of Registering a Subsidiary Company in Spain

Access to the European Market 

Spain is a gateway to Europe due to its advantageous position, which gives companies access to more than 450 million customers.

Skilled Workforce 

Spain has a workforce that is highly educated and talented, especially in fields like technology, engineering, and finance.

Favorable Business Climate 

The Spanish government provides grants and tax breaks among other incentives to international investors.

Robust Infrastructure

Spain boasts first-rate infrastructure, which makes conducting business easier. This includes cutting-edge telecommunications and contemporary transportation networks.

Economic Stability 

Spain offers a solid business environment, being one of the biggest economies in Europe.

Characteristics of a Subsidiary Company in Spain

A subsidiary company in Spain operates under Spanish law and has its own legal identity, separate from the parent company. 

Here are some key characteristics:

• Legal Structure: The most common legal form for a subsidiary is a Sociedad Limitada (S.L.), similar to a limited liability company. A Sociedad Anónima (S.A.) is more suitable for larger companies seeking to raise significant capital. 
• Capital Requirement: An S.L. must have a minimum of €3,000 in share capital, paid in full at the time of establishment.
• Management: The board of directors of a subsidiary is in charge of overseeing the business’s activities and ensuring that it complies with Spanish laws.
• Liability: The amount of liability for the parent firm is restricted to the money contributed to the subsidiary, protecting it from financial risks associated with the subsidiary’s operations.

Procedure for Subsidiary Company Registration in Spain

The process can be broadly summarized as follows:

• Company Name Reservation: Make sure the business name you choose is available.
• Draft Articles of Association: Outline the company’s purpose, structure, and governance.
• Set up a Business Bank Account: Deposit the minimum share capital.
• Notarization: Have the Articles of Association notarized by a Spanish notary public.
• Company Registration: Register the company with the Spanish Commercial Register.
• Tax Registration: Obtain a Tax Identification Number (NIF) for the subsidiary.
• Social Security Registration: Register employees with Spanish social security.

Documents Needed to Set Up a Subsidiary Company in Spain

To successfully set up a subsidiary, yyou must compile and prepare a number of documents:

• NIE for all foreign directors and shareholders.
• Certificate of company name reservation.
• Articles of Association.
• Proof of deposited share capital.
• Notarized incorporation deed.
• Evidence of the registered office’s address.
• CIF application form.
• Social Security registration forms.

Expected Cost of Setting Up a Subsidiary Company in Spain

The cost of establishing a subsidiary in Spain can differ based on a number of variables, such as professional fees and the complexity of the organizational structure. Here’s a breakdown of potential costs:

• NIE Application: Approximately €20-€30 per person.
• Notary Fees: Between €300 and €1,000, depending on the notary and the complexity of the Articles of Association.
• Company Name Registration: Around €15-€30.
• Bank Account Opening and Share Capital Deposit: The minimum share capital for an S.L. is €3,000.
• Mercantile Registry Fees: Approximately €100-€300.
• Legal and Consultancy Fees: These can vary widely, typically ranging from €1,000 to €3,000.

Overall, you should budget around €4,000 to €8,000 for the entire process.

Conclusion

Setting up a subsidiary in Spain can be a strategic move for foreign entrepreneurs and investors looking to expand into the European market. The nation is a desirable location for corporate expansion because it provides a stable infrastructure, a skilled labor pool, and a conducive business environment. By comprehending the legal prerequisites and carrying out the required steps, you can effectively create a subsidiary and take advantage of all the advantages Spain has to offer.

If you are considering expanding your business into Europe, OnDemand International can assist you with setting up your subsidiary in Spain, as well as in other key locations such as Poland, the Netherlands, and Germany. Our knowledgeable staff is committed to making sure the incorporation process goes smoothly and quickly. Get in touch with OnDemand International right now to start your journey towards successful business expansion in Europe.