Operating in Spain as a foreign company requires defining in advance the form of presence in the country and understanding the main tax, employment and corporate obligations that may arise.
The chosen structure will depend on the type of activity, its duration and the intended level of establishment in Spain.
1. Ways of operating in Spain
The main options are a subsidiary, a branch, or the existence of a permanent establishment.
A subsidiary is a Spanish company with its own legal personality, usually a limited liability company. It allows risks to be separated from the parent company.
A branch does not have independent legal personality and operates as an extension of the foreign company, which retains full responsibility for its activities.
A permanent establishment may arise when a non-resident company carries out ongoing activity in Spain through physical or human means, which may trigger taxation in Spain.
2. Main tax obligations
Starting activity in Spain requires obtaining a tax identification number (NIF) and filing form 036, used to register in the tax census and report the relevant business details.
The most common tax obligations include:
- Corporate Income Tax: general rate of 25%, with possible special regimes depending on the case
- VAT: periodic filing through form 303
- Withholding taxes: on employment or professional income
- Non-Resident Income Tax: where aplicable.
In addition, depending on the business activity, further reporting obligations may apply:
- Form 349: intra-Community transactions
- Form 347: transactions with third parties exceeding €3,005.06 per year.
3. Employment obligations when hiring staff
If the company hires employees in Spain, it must register with the Social Security system and obtain a Social Security contribution account number before starting employment activity.
From that point onwards, the main obligations include:
- Registering employees before they start working
- Formalising employment contracts
- Applying the relevant collective bargaining agreement
- Preparing payroll and paying Social Security contributions
- Deducting and paying personal income tax (PAYE withholding).
In addition, companies must comply with obligations regarding working time registration, occupational risk prevention, data protection, and, depending on workforce size, equality regulations and internal protocols.
4. Corporate and accounting obligations
Companies operating in Spain must maintain proper accounting records in accordance with Spanish accounting standards and retain supporting documentation for all transactions.
Mandatory books include:
- General ledger (daily journal)
- Inventory and annual accounts ledger
- Minutes book
- Shareholders’ register book (where applicable).
Subsidiaries must prepare, approve and file annual accounts with the Commercial Registry.
Branches also have accounting and registration obligations, although their scope may vary depending on the parent company’s structure and the accounting information available in the country of origin.
5. Common mistakes
Some of the most frequent mistakes include:
- Starting operations without assessing whether a permanent establishment exists
- Invoicing from abroad when business activity is already carried out in Spain
- Failing to apply correct withholding taxes or reporting obligations
- Ignoring applicable collective bargaining agreements when hiring staff
- Poor documentation of intra-group transactions.
Conclusion
Before starting operations in Spain, it is essential to define the appropriate structure and ensure compliance with tax, employment and corporate obligations from the outset.
Proper planning helps reduce risks and ensures a legally secure and efficient entry into the Spanish market.
