There are different formulas for acquiring a company in Spain, including using an existing foreign company to operate in Spain (either with permanent establishment – CON EP, or without permanent establishment – NON PE), or creating a Spanish company expressly for the acquisition of real estate in Spain.
Likewise, as we have commented above, we are talking about the fact that, in order to acquire a property in Spain in the name of a company to develop a real estate investment activity, it is not necessary to incorporate a Spanish company for the acquisition of real estate, since this can be done through an already existing foreign company, which through a registration process in Spain, can operate perfectly well as an investment instrument in Spain, without the need to incorporate a Spanish company.
In this article we are going to deal precisely with the case of an existing foreign company, which wishes to operate in Spain and intervene in real estate purchase and sale operations, or the development of real estate activities, such as renting, sale, reform, construction, etc. It is not necessary to incorporate a Spanish company.
For these purposes, we will discuss the following:
1.- PRELIMINARY CONCEPTS
FOREIGN COMPANY : The foreign company that wishes to operate in Spain, must contemplate in its statutes that the activity to be carried out in Spain (purchase and sale, construction, intermediation, rental management, etc.) is covered by the statutes of this company. Therefore, before deciding to buy in Spain through this company, it is necessary to review the bylaws of this company to confirm whether they contemplate such activity and, if not, to carry out the appropriate procedures in the country of origin. The company must be registered with the commercial registry of the country of origin in order to include this type of activity in its bylaws.
PERMANENT ESTABLISHMENT : Secondly, we must be clear about the type of business structure we will need in Spain for the development of the activity.
That is to say, if we are going to have material resources (offices, cars, etc.) or human resources (employees, etc.) in Spain for the development of this activity.
For example, let’s take the case of a foreign company. Location. Point that decides to invest in Spain for the acquisition of a property and that wishes to obtain profitability through the rental activity.
In this case, if the rental activity does not require any material resources (offices, reception, cars, etc.) or human resources (employee resident in Spain for cleaning, maintenance, reception of keys, etc.), but it is simply the acquisition of the property to put it for rent through a platform, and, as we said, without the allocation of any type of resources located in Spain.
In this case, we would be talking about the case of a Foreign Company registered in Spain WITHOUT a Permanent Establishment (NON PE Company).
Or, on the contrary, if the foreign company needs for this type of investment projects to have personnel resident in Spain, its own local means of transportation, or customer service offices, etc.
In this case, we would be talking about the case of a Foreign Company domiciled in Spain WITH Permanent Establishment (PE Company).
This point is very important since the tax and management treatment is different in both cases.
- In the event that no material or human resources are needed in Spain for the development of the activity, we would be talking about a foreign company domiciled in Spain that operates WITHOUT a Permanent Establishment (NO PE). In this case, the activity to be carried out in Spain would be subject to non-resident personal income tax, taxed at 19% if it is a company resident in a European Union country, or at 24% in the rest. of the cases, with management and maintenance tax obligations different from those of CON PE companies.
- On the other hand, if it is an activity or an investment project for which human or material resources are needed in Spain, in this case we would be talking about a foreign company with a permanent establishment, which would be subject to Spanish corporate income tax, with a tax rate of 25%, and with a different management treatment than non-permanent foreign entities.
Given the difference in tax and management consideration involved in being considered a company with a permanent establishment in Spain, or without a permanent establishment, it is important to be clear about this from the beginning, and it is not always clearly defined. For this reason, it is often necessary to resort to the double taxation agreement established between the country of residence of the company and Spain.
To see which are the Agreements signed between Spain and the rest of the countries with which it has agreements to avoid International Double Taxation, Click here!
- In the country of origin:
Regardless of the structure needed in Spain to carry out the activity, and whether the company has a status with permanent establishment or without permanent establishment, as defined above, such foreign company must go through a registration process. in Spain that goes through the following:
- Obtaining the company’s ORIGINAL documents:
- Company’s articles of incorporation.
- Company’s tax identification document
- bylaws of the company
- Report from the commercial registry certifying that the company is registered.
And in these documents it must be very clear who are the administrators or managers authorized to represent the company, as well as the social participations of the partners or shareholders.
In addition, this documentation, which must always be in confectionery companies , or, if the original documents are not provided, authorized and notarized copies must be provided, i.e. authenticated by a local notary at origin.
- All these documents must be translated into Spanish by a registered official translator, either in the country of origin or in Spain.
- All this documentation must be legalized and officially recognized, with recognized enforceability to be used in Spain, and this is done by obtaining the Apostille. The Apostille is a seal obtained through an authentication procedure established in the Hague Convention of 1961, and applies to all those countries that have signed this convention. Click here for more information about the Apostille.
In the case of a company resident in a country not adhered to the Hague Apostille Convention, all such documentation must be legalized and certified by the Ministry of Foreign Affairs of that country.
Once all the documentation indicated above has been obtained, in Spain we must proceed as follows:
- Obtaining the NIE (foreigner’s identification number) of the manager or administrator of the company. This document is a tax identification number through the registration of the administrator in the Spanish bureaucratic and administrative system.
This document is obtained:
- Either through the Spanish Offices and Consulates in the country of origin ( Click here for information on Spanish Consulates abroad ), which you can find attached below.
- Or, by appearing directly, or through your attorney/representative in Spain with powers of attorney, at any of the territorial immigration offices in Spain.
- Obtaining the Spanish NIF of the foreign company. In the same way that the administrator of the company will be obliged to obtain a tax identification number from the Spanish administration, the foreign company, in order to operate in Spain and be able to carry out real estate operations, must be registered with the administration. Spanish NIF, to obtain a NIF, which will be the one you will use to carry out any type of transaction in Spanish territory. This number is known as the
This document is obtained by presenting the company’s documentation legalized and apostilled in the manner established in the previous paragraph to the Spanish Tax Agency, which, after reviewing all the documentation, will assign a tax identification number to the company, which will be its best identification for any type of transaction in Spanish territory.
- Fiscal representative . One of the differences between foreign companies domiciled in Spain with permanent establishment (with PE) and without permanent establishment (NO PE), lies precisely in the obligation to appoint a tax representative in Spain.
As for companies without permanent establishment (NO PE), they are subject to Non-Resident Personal Income Tax (IRPFNR), being necessary to appoint a tax representative in Spain to carry out the projected real estate activities, and to have an address for notifications in Spain, which can be used by the Spanish administration to notify and communicate any type of tax issue related to the activity to be developed.
This fiscal domicile is usually that of the manager, or lawyer who directs and maintains the operation of the company in Spain.
However, and here comes the big difference with the PE Companies, the tax representatives of these companies are NOT jointly and severally liable for the tax obligations incurred by the Company. In other words, the tax representative, usually the manager or lawyer who manages the company’s tax activity in Spain, is not liable in case of non-compliance with the companies’ tax obligations in Spain.
On the other hand, in the case of foreign companies with permanent establishment (CON EP), which, as we have said, are subject to Spanish corporate income tax, and for whose operation and development in Spain they need a structure that requires greater complexity, and the assumption of greater tax and legal obligations in Spain than companies without permanent establishment, implies that the tax representative in Spain of such companies assumes the “joint and several” liability of the company before the Spanish administration.
The figure of the tax representative is a very important figure, since he/she will be “jointly and severally” liable, i.e. at the same level and with the same responsibility as the company, for all tax obligations incurred in Spain. That is to say, the tax representative will be the one required by the Spanish administration to comply with such obligations, in case the foreign company does not comply with them. Therefore, as we can see, it is a position of great responsibility, since the tax representative will be jointly and severally liable for all these types of obligations. Therefore, it is a corporate position of high responsibility and functions.
In this regard, it should be noted that for many years Spanish law has required that the tax representative of foreign companies or companies with a permanent establishment be a tax resident in Spain. In other words, for a foreign company to be recognized in Spain with a permanent establishment, it was required to appoint a tax representative domiciled in Spain. This has normally been an obstacle for the establishment of foreign companies in Spain, since in many cases the lawyers or managers in charge of managing the activity of these foreign companies were not always willing to assume such degree of responsibility, which translated into a real obstacle for the development of activities and implementation of international companies in Spain.
However, recently progress has been made in this regard, and the Spanish administration interprets that, for companies or corporations domiciled in any of the countries of the European Union, they may designate the directors or managers of such companies as tax representatives.
Thus, for example, a German company, which wants to establish a permanent establishment in Spain, can appoint as its tax representative the German manager or the German administrator, who will be responsible for the obligations of the company, without the need to appoint a representative with domicile or residence in Spain.
However, this obstacle has not been resolved for resident foreign companies with origin in other countries outside the European Union, which, in these cases, as we have said, makes their establishment in Spanish territory difficult, since local managers have limited availability to assume such a high degree of responsibility for these companies.
- Bank account . In order for non-resident foreign companies domiciled in Spain, with or without a permanent establishment, to operate in Spain, they must have a bank account opened in their name. Therefore, once the legalizations of all the documents of the company have been obtained, as well as the NIF of the manager or administrator, the NIF of the company, and the designation of the fiscal representative, these documents must be delivered to the bank so that it can proceed. to the opening of a bank account in the name of the foreign company.
For this purpose, the bank will require, in addition to the documentation indicated above, all types of information and documentation that accredits the financial aspects of the company, as well as the origin of the funds that will be used to carry out the planned operations in Spain. . For this, you will need accounting reports, corporate tax returns, etc. from the country of origin. This type of information will depend or will be different depending on the financial entity in question, and will help to pass the filter of the law for the prevention of money laundering in Spain, an essential requirement to operate in Spain through a corporate structure.
- Act of real ownership . In addition to all of the above, in order to carry out the real estate transaction in question, the acting notary will require, in addition to all of the company’s documentation as stipulated above, the declaration of the actual owners of the company.
A “beneficial owner” is one who owns more than 25% of the shares or stock of the company. Therefore, it will be necessary to verify the origin of the funds used for the acquisition of the property, as well as to comply with the law of measures to prevent money laundering in Spain, in order to inform who are the partners of the Company that hold a stake of more than 25% of the same.
- Need for powers of attorney . Given the complexity, and the tax and legal implications derived from the registration of a foreign company in Spain, it is highly recommended to grant power of attorney to your lawyer, or manager, so that he/she can carry out all these procedures on your behalf and the need for you to do so in person.
From Emporda Immo – luxury real estate we invite you to contact us for any matter or service related to your installation/investment projects in Spain.