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Representative office in Spain

representative office spain

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 is a representative office and what is it for in Spain?

The representative office does not have its own legal personality with respect to its parent company nor formal management bodies.

We are talking about a type of establishment where a non-resident company operates and in which auxiliary or preparatory activities are carried out to contribute value to the business.

It is therefore mainly characterized by not developing the economic activity of the foreign company.

Functions of a representative office

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.
  • Company activities not related to the economic purpose of the foreign company.

Bear in mind that 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.

If such a thing were to occur, the Conventions to avoid double taxation for this tax in Spain would need to be analyzed and studied.

In short, if a foreign company wants to carry out auxiliary, informative, or preparatory activities in Spain, creating a representative office is the most appropriate option for these situations.

Tax aspects to take into account

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.
  • Value Added Tax (VAT) is recoverable from the country of origin provided that it is a country in the European Union or a country with which there are agreements to that effect.
  • The social security contributions and withholdings of employees working in Spain in the representative office must be paid into Spanish Social Security and the AEAT respectively.

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 can be a delicate process; in most cases it requires personalized international tax advice.

Representative office in Spain

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