First of all, the way in which a foreign company will establish itself in Spain must be taken into account, either as a subsidiary, branch, or representative office, depending on the activity it plans to carry out in our country.
What are the characteristics of a Spanish representative office?
The representative office does not have its own legal personality and is characterized mainly by the fact that it does not directly carry out any economic activity, but rather has an “auxiliary” character with respect to the activity carried out by the company abroad.
For example, some of the functions that a representative office could carry out are:
- Carrying out studies of market conditions for the development of business activity.
- Advertising, promotion, or information supply activities.
- Carrying out scientific or similar activities.
If the functions that the Representative Office performs in Spain exceed those of an auxiliary office and resemble those of the main activity, the Tax Agency could interpret that the foreign company has a permanent establishment in our country, and not a representative office, and this would imply that the foreign company be required to pay tax in Spain according to its economic activity.
Procedure for creating a representative office in Spain
First, the agreement by the corresponding corporate body of the foreign company on the decision to register the representative office in Spain is required.
If it has been granted before a foreign notary, this document must be legalized with a Hague Apostille or legalized at a consulate, and translated into Spanish.
The following needs to be seen in this document:
- The agreement of the corresponding corporate body mentioned above.
- The appointment and powers of the representative in Spain; this representative must be a resident in Spain. As such, it should be noted that the representative offices do not have administrative bodies. They only have a representative of the parent company to whom certain powers are granted, mainly related to collaboration and coordination functions.
- If the notary has not validated the existence and activity of the company: the certificate from the registry or corresponding body of the foreign country where the company is registered that proves its existence and the validity of the positions within the company.
This document will be sent to the Tax Agency together with official Form 036.
With regards to tax, the representative office is called a non-resident entity, and therefore certain aspects must be taken into account, such as:
- The entity is taxed due to its profit in its country of origin, and not in Spain.
- The Value Added Tax (IVA) is recoverable in the country of origin.
In short, you must pay special attention to the activity to be carried out by the representative office and take into account the procedure creating it if you want to do business in Spain acting as a non-resident.
As we can see, registering a company in Spain through a representative office is a delicate process; in most cases it requires personalized international tax advice.
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