New market entry: legal aspects

It is important to take into account certain legal aspects when planning entry into new markets. These include the tax system to be applied, the incorporation and management of legal forms and the labour regime of the destination country.

How to import a business to Spain?

As in any other country, when importing a business to Spain, the choice is between setting up a new company or bringing the foreign company. Although the first option may be more flexible, the second option allows you to take advantage of the company’s track record (brand, corporate identity, assets, etc.), so it is the most common option.

Incorporating a company in Spain

In Spain you can operate as an individual entrepreneur (self-employed) or through a company (company or cooperative, generally).

Self-employed workers usually do not have their own organisational structure and are personally responsible for their business. This makes it the most common form of self-employment at the start of a project, but it is often replaced by any corporate form once the project is established.

However, there is nothing to prevent a foreign service provider from providing services here (subject to our tax regime and the applicable regulatory framework), so it is an option rarely used by foreign entrepreneurs, unless they establish themselves as residents in Spain.

More common is the incorporation of a company, especially Limited Liability Companies and Public Limited Companies. It is also possible to set up a cooperative and, in some cases, even foundations or associations. It is therefore advisable that a lawyer specialising in company law provides advice before choosing the legal form to be incorporated.

Importing companies into Spain

When it comes to importing businesses to Spain, the most common situation is that the foreign headquarters are retained. In these cases, there is the option of opening branches, subsidiaries, representative offices or agencies and permanent establishments.

Each of these figures represents a different degree of integration, so their incorporation procedures and obligations are also different.

Permanent establishments, for example, carry on the parent company’s business in Spain. It is sufficient to designate a tax representative to open them, as this is a concept that corresponds to tax law, not commercial law.

Representatives in Spain are also usually responsible for the management of representative offices and agencies. These are entities without legal personality, established to provide ancillary services to the main activity or to prepare the definitive importation of the business.

More integrated are the subsidiaries, which have their own legal personality and therefore constitute a legal separation from the parent company. However, they are still controlled by the parent company.

But the company can also choose to open a branch, which does not have its own legal personality, but carries out the activities of the parent company. They therefore combine ease of incorporation with flexibility in operation.

Permanent establishments

The AEAT defines a permanent establishment as a continuous or habitual operation in Spain through installations or workplaces of any kind. In these establishments, the foreign legal entity may carry out all or part of its activity. Moreover, it may act by itself or through an agent authorised to contract in its name and on its behalf.

In fact, it is most common in the case of permanent establishments to act through a representative. This is because the establishment itself does not have a separate legal personality from the parent company.

Examples of permanent establishments are branches, offices, factories, workshops, warehouses, shops, mines, wells, quarries, farms, etc. It is sufficient that the operation exceeds six months.

Each permanent establishment is subject to its own taxes, at least insofar as its management or activity is distinguishable. Therefore, in such cases, income cannot be set off between different permanent establishments.

Representative offices and agencies

Like permanent establishments, representative offices and agencies have no legal personality separate from the foreign parent company. As they do not have any administrative bodies either, they are managed by an authorised representative, hence their name.

Their main characteristic is that they cannot carry out economic activities, and are limited to coordination and collaboration activities. These include market studies and the preparation and review of contracts, which is why they are often used as a preliminary step to importing businesses to Spain or as mere support for the activities provided here.

To open a representative office, a public deed must be executed before a notary, or the deed executed abroad must be legalised. Form 036 must then be filed in order for the AEAT to grant a Tax Identification Number (NIF) with which to operate in Spain.

Note that if the AEAT considers that the representative office is providing services and, therefore, falls into the category of permanent establishment, it may require the self-assessment and payment of VAT and Corporate Income Tax.

The agency contract, on the other hand, allows the foreign entity to have the services of an agent in Spain. The agent will promote the acts and operations of the foreign company, without assuming its risk and peril (unless otherwise agreed) in exchange for remuneration.


Branches are governed by their own internal regulations. However, as they do not have legal personality, they must also follow the regulations of the parent company, which manages them.

Although the branch does not have its own legal personality, it keeps its own accounts and can represent the parent company in local procurement. It is therefore less limited than the permanent establishment or the representative office.


A subsidiary is a company that is directly or indirectly controlled by a foreign company. This control usually derives from the ownership of the majority of the voting rights.

The parent company’s control over its subsidiary may or may not be absolute. In either case, as the latter is dependent on the former, its results will be consolidated in the latter. On the other hand, the subsidiary will be subject to Spanish tax laws, which implies the obligation to self-assess and pay VAT and corporate income tax.

As they have their own legal personality, subsidiaries are a privileged figure when it comes to implementing a business in Spain. In fact, it is the most commonly used form when the foreign company has consolidated here.

As in the case of the incorporation of companies, it is advisable that a specialist in corporate law advises the foreign company before implementing its business in Spain. OBN& can offer you the legal advice you need.