Making investments in Spain: an overview of the legal formalities

Are you a foreign business owner and wish to invest in Spain? Not sure of the options available and seek advice? There are several ways to make an investment in Spain. Read on to find out why it is important to work with a business advisor to help with the paperwork and make sure the legal formalities are met.

Investing in Spain could be an opportunity to give your foreign business an international portfolio, whilst investing in such a country that offers a wide range of opportunities due to its healthy economy and strategic position in Europe is a wise move, not to mention the added bonus of our good weather!

Ways to invest in Spain as a foreign business

If you have decided you would like to make an investment in Spain, these are the ways this can be done:

• Set up a permanent presence. This can be done by creating a subsidiary or an affiliated branch. The differences between the two options are as follows:
  • Subsidiary: a subsidiary is a standard business corporation, that has an independent legal identity, can demonstrate that it holds a minimum of 3000 euros capital if it is a limited liability company (Sociedad limitada – L.)or 60,000 euros capital if it is a joint stock company (Sociedad Anónima – S.A.). A subsidiary is governed by the shareholders general meeting and is overseen by a sole business administrator, nominated joint and several directors, nominated joint directors or a board of directors. The responsibility of the subsidiary is limited to the capital investment therein.
  • Affiliated Branch: an affiliated branch does not have corporate status and depends on the foreign parent company, it does not hold any minimal capital, y acts through a nominated legal representative who has been appointed by the parent company (a foreign business) which assumes total responsibility for the affiliate branch.

(for more detailed information, read the reply to question 14 here)

• Open a representative office. A representative office is similar to an affiliated branch in that it does not have a corporate identity, nor does it hold capital. It should appoint a fiscal representative in Spain. The administrator of the parent company must have a NIE (foreign nationals identity card), there should be a tax code ID number (CIF) for the non-resident company and the representative office must be registered with the Tax Authorities via modelo These circumstances occur when, for example, the administrator of a foreign business visits Spain, or appoints a legal and fiscal representative in the company’s name, because the company wishes to enter into negotiations with several Spanish entities to become suppliers (such as, for example, Italian food suppliers who wish to sell their produce in Spanish supermarkets such as Alcampo, Mercadona or Carrefour).

In these cases, as mentioned above, the business must act through a fiscal representative, in accordance with the following regulations: Law 58/2003, of 17 december on General Taxation.

1. Artículo 46.1 de la Ley General Tributaria: All persons liable for tax payments and with the ability to act in law can operate through a legal representative, through whom the following administrative procedures will be carried out, unless a statement is made to the contrary.
2. Article 10 of the Non-Residents Income Tax (IRNR): Those who pay this tax must appoint, prior to the end of the tax year in which the income has been generated, a legal representative that is resident in Spain, to act on their behalf with the tax agencies in relation to income tax, when they operate through a permanent establishment (…) For more information, look at page 6 of the following publication (section II.4) https://www.uv.es/ibanezs/SpanishTLRG.pdf
3. Invest in Spanish property, companies, investment funds. Law 14/2013 dated 27th of September (available here in English) in support of entrepreneurs and their internationalization, regulates the visas available for non-resident foreigners who wish to make a significant investment in Spain, such as:

• An initial investment in the amount of or superior to:
  • 2 million Euros in Spanish government bonds.
  • 1 million Euros in shares or equity holdings in companies built on Spanish capital.
  • 1 million Euros in an investment fund, a closed-end fund (CEF) or a private equity fund built in Spain.
  • 1 million Euros deposited in Spanish bank accounts.

• Purchasing real estate in Spain worth 500,000 Euros or more.
• Developing a business project considered to be of general interest.

This law understands that the foreigner requesting a visa has invested a considerable amount of capital via the legal representative resident in a place not deemed to be a fiscal paradise, and that the foreigner has the majority vote share and has the power to appoint or dismiss the majority of the members in the governing body.

How can LEIALTA help?

Through our business advisory service we help all sorts of foreign companies wishing to set up a business in Spain to establish themselves in this country and provide them with expert advice in English.

Business advice for setting up a company in Spain is divided into three sections:

Leialta can carry out a preliminary study before setting up the business

Leialta can provide legal and fiscal representation in Spain

Leialta can offer the service of Cash Handling

We can provide you with made-to-measure advice to suit your needs, so that you can make a move and start doing business as soon as possible in Spain.

Leialta website: https://www.leialta.com/en/

Blog for doing business in Spain: https://www.leialta.com/en/blog-for-doing-business-in-spain/