Doing Business in Spain as a Foreign Company?
Spain welcomes foreign investment but taxation can get complex. Whether you’re setting up a branch, subsidiary, or just doing cross-border business, understanding your tax obligations is critical to compliance and profitability.
This guide breaks down what foreign companies must pay in taxes, and when.
🏛️ Key Tax Types for Foreign Companies
| Tax Type | Applies to | Rate |
|---|---|---|
| Corporate Income Tax (CIT) | Spanish subsidiaries and branches | 25% standard rate |
| Withholding Tax | Dividends, interest, royalties paid abroad | 19%-24% (reduced by DTTs) |
| VAT (IVA) | Sales of goods/services in Spain | 21% standard rate |
| Non-Resident Income Tax (NRIT) | Income earned in Spain by non-resident entities | 24% (19% for EU/EEA residents) |
📌 Permanent Establishment (PE) in Spain
A foreign company is taxed in Spain if it has a Permanent Establishment (PE), meaning:
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A branch or office
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A construction site over 6–12 months
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A dependent agent in Spain
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Regular commercial activity
✅ If you have a PE, you must register for taxes in Spain and submit corporate tax returns.
🧾 Corporate Tax for Subsidiaries vs Branches
| Feature | Subsidiary | Branch |
|---|---|---|
| Taxable Entity | Separate legal entity | Parent company (PE) |
| Tax Filing | Annual CIT return | NRIT or CIT, depending on setup |
| Tax Rate | 25% | 25% on Spanish-source income |
| Losses | Can be carried forward | Treated in parent’s tax jurisdiction |
💡 Subsidiaries benefit from more flexibility in tax planning, while branches may avoid withholding tax on profit transfers.
🔄 Withholding Taxes
| Payment Type | Standard Rate | With DTT |
|---|---|---|
| Dividends | 19% | Often reduced to 5%-15% |
| Interest | 19% | 0%-10% with treaty |
| Royalties | 24% | Reduced or exempt under treaties |
➡️ Spain is part of a wide network of Double Tax Treaties (DTTs) which help reduce or eliminate double taxation.
📑 VAT Registration for Foreign Businesses
If your company sells or provides services in Spain, you may need to register for VAT (IVA).
You must register for VAT if you:
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Import goods into Spain
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Sell to Spanish customers
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Provide electronic/digital services
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Hold inventory in Spain
🇪🇸 Standard VAT rate: 21%
Reduced rates: 10% (food, transport), 4% (books, medicine)
💼 Other Spanish Tax Obligations
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Tax ID (NIF) for legal compliance
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Accounting records must be kept in Spanish GAAP
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Annual declarations: Form 200 (CIT), Form 303 (VAT), Form 349 (EU transactions)
Non-compliance leads to penalties, interest, and inspections.
🤝 How Borderless Lawyers Helps Foreign Companies
We assist international businesses in:
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⚖️ Determining tax residency and PE status
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🧾 Corporate and VAT registration
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📚 Accounting and compliance with Spanish rules
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🔍 Withholding tax and treaty relief applications
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🏛️ Setting up branches, subsidiaries, or reps
💬 Real Client Experience
“We entered Spain without a clear idea of the tax setup. Borderless Lawyers helped us register correctly, apply tax treaties, and avoid fines. Highly recommend.”
— Julien M., France
🚀 Enter Spain with Tax Certainty
Don’t let taxes hold your expansion back. Whether you’re opening an office or just doing business remotely, understanding Spanish taxation is critical.