In spite of the facts mentioned above, in order to develop international business in Spain and to open a representative office, one should do the following:
Step 1. Record the opening by means of a notarized deed of establishment for the representative office and the appointment of a tax representative. Moreover, it is of utmost importance to submit the founding agreement and charter of the parent company, apostilled (notarized by the stamp of the Apostille of Spain) and translated into Spanish by a sworn (government-recognized) translator. The list of required documents includes:
- Certificate of Establishment of a Representative Office. As a rule, the phrase, ‘Branch in Spain’ (Sucursal en España), is added to the company name;
- The address where the representative office will be established;
- The nature of activities conducted at the office;
- Names and duties of employees who will work in the representative office on a permanent basis;
- Valid charter of the foreign company;
- Identity documents of the foreign company’s directors (an up-to-date record issued by the Commercial Register, or a certificate that confirms the fact that the company and its management exist, issued by a competent governmental authority);
- In case issues related to the establishment of a foreign company’s representative office in Spain are entrusted to an insufficiently authorized person, the documents presented to the authorities must be duly sealed with the stamp of an appropriate foreign company and translated into Spanish by an official translator;
Step 2. Request a company tax registration number with the Spanish Tax Agency (Número de Identificación Fiscal – NIF). Along with an application requesting NIF (Declaración censal, Modelo 036) Form 036, signed by a tax representative, one needs to attach an official notarial deed of establishment for the representative office and the appointment of the tax representative, together with a copy of his or her identity document or the residence permit of a person who is authorized to act on behalf of the parent company in the territory of Spain. Also, one must submit the contact information of a representative, including phone number and mailing address. As soon as the registration of documents connected with the tax agency is finished, the representative office may begin its activities;
Step 3. Request a company number with the Social Security Agency (número de seguridad social) by submitting the application Modelo TA.1. The most important thing to remember when opening an international business in Spain and during its period of operation on Spanish territory is that its activities are limited by the official informational functions documented, such as market research, organization of promotional events, product presentation, and organization of negotiations. The representative office may hire workers as well as accrue representative expenses, including office rent, transport and advertisement costs, all of which are covered by the parent company.
Non-resident companies that have international business branches in Spain pay a tax in the amount of 25% of the income the branch obtains. This tax is imposed neither on countries that have signed double taxation agreements with Spain nor on the European Union countries (UE).
One should remember that when establishing international business in Spain, the representative office is not created with the purpose of making profits. Once the company gains its first potential clients and revenues, it is important to register as a permanent establishment or an independent legal entity quickly.
Permanent establishments (Establecimiento permanente) take the following forms: headquarters for management, branches, offices, factories, workshops, storages, shops or other commercial institutions; mines, oil and gas wells, quarries; farming, forestry, and livestock households, or any other site of exploitation and natural resource extraction; as well as construction, installation and assembly works, with a general duration of activities exceeding six months.
‘Permanent establishment’ (Establecimiento permanente) is also a taxation and economic classification used to define the tax mode applied to organization types that differ from independent legal entities (OJSC, joint-stock company, or cooperative). When a taxpayer has multiple centers of activities that represent various permanent establishments on Spanish territory, it is necessary to establish separate names for each of them and to obtain tax registration numbers (NIF) particular to each permanent establishment. There are not many differences in terms of social security between the formation of a legal entity and the establishment of a permanent establishment – in both cases an administrator is required to manage this branch.
Regarding taxation of a representative office of international business in Spain, because its activities do not presuppose making profits, there are no specific taxes on the company and its income (IS). If the company has workers and expenses at the representative office, its taxation includes only these factors. The included VAT on the representative office expenditures can be returned through a special procedure for non-residents.
When opening an international business in Spain, we highly recommend that you define clearly all the objectives of your future organization, conduct a detailed analysis of your options, and plan for taxation before opening a representative office, permanent establishment, or independent legal entity in Spain. Contact the specialists of «INEEDSpain» service center for a more detailed consultation or for help in preparing any documents related to doing business in Spain. The phone numbers can be found on our website.