Spanish Subsidiary vs Branch vs Representative Office: Which Structure Fits

The subsidiary: your own separate Spanish company

A subsidiary is a Spanish company, almost always an SL, that your foreign business owns as shareholder, exactly the structure covered start to finish on our Company Formation Spain page. It has its own legal personality, its own NIF, and its own liability, which stays ringfenced to the subsidiary’s own assets with only narrow exceptions. That separation is the entire point: if the Spanish operation runs into a bad contract, an employment dispute, or a debt it can’t cover, the exposure generally stops at the subsidiary’s own balance sheet rather than reaching back to the parent company’s assets elsewhere.

Tax-wise, a subsidiary is a fully independent Spanish taxpayer: standard 25 percent corporate tax, with a reduced 15 percent rate available on first-year taxable profits and the year after for newly created companies meeting the conditions. It needs the same substance any real trading company needs, a registered office, its own management activity, and if it’s hiring, the payroll and Social Security registrations that come with employment. Formation follows the CIRCE or traditional route exactly as described on our formation page: 3 to 4 weeks for a straightforward CIRCE-route SL, 5 to 8 weeks if you need custom bylaws for shareholder agreements or governance terms CIRCE’s standard template doesn’t support.

The branch (sucursal): lighter, but no liability shield

A branch is not a separate company at all. It’s your foreign company itself, operating directly in Spain through a registered local presence, represented by someone holding a notarised power of attorney (poder) from the parent. It still registers at the Mercantile Registry and still needs a fiscal identification number for Spanish tax purposes, but legally, the branch and the parent are the same entity. Whatever the branch does in Spain, contracts it signs, debts it incurs, disputes it generates, the parent company is directly liable for, with no ringfencing at all.

Tax treatment follows a different track too: a branch is taxed under Spain’s non-resident income tax rules for a permanent establishment (Impuesto sobre la Renta de No Residentes, IRNR, con establecimiento permanente), applying a broadly comparable rate to the profits attributable to the Spanish activity, but calculated under PE attribution rules rather than as an independent corporate taxpayer filing its own Impuesto sobre Sociedades return. A branch avoids a separate share capital requirement, since it isn’t a company with its own shareholders, which is the main practical saving over a subsidiary. In practice, the time and paperwork difference against a straightforward CIRCE-route SL is often smaller than the “branch is faster” pitch implies, since Mercantile Registry filing and a properly notarised power of attorney still take real time to assemble correctly.

The representative office: liaison only, not a trading vehicle

A representative office (oficina de representacion) sits a step below both of the above. It exists to do market research, maintain relationships, and represent the parent company’s interests in Spain, without independent legal or tax personality for actually trading. It cannot generate revenue, sign binding commercial contracts, or close sales in its own right. This is the lowest-substance, lowest-cost option of the three, and it genuinely fits a company that wants a real Spanish presence before committing capital to a subsidiary or branch.

The risk with a representative office is not legal complexity, it’s mission creep. The moment local staff start habitually negotiating final terms or concluding contracts rather than purely liaising, Spanish tax authorities can treat the arrangement as a genuine permanent establishment under Article 13 of the Corporate Income Tax Law, regardless of what the office calls itself on paper. This is the same substance-over-form logic covered in more depth on our EOR vs Entity Spain guide, including the DGT’s V0066-22 ruling on what genuinely counts as a fixed place of business “at the company’s disposal.” A representative office that quietly starts acting like a branch gets taxed like one, without ever having been set up to handle that.

Banking, compared honestly

Banking is where the theoretical differences between these structures become a practical one. A subsidiary applies for its own business account as its own legal entity, with its own NIF, its own accounts, and its own trading history to build from scratch, which our Company Formation Spain guide covers in detail, including the extra friction non-resident directors specifically tend to hit. A branch asks a Spanish bank to open an account on behalf of a foreign parent company directly, which usually means more due diligence on the parent’s own financials, ownership structure, and standing, since the bank’s actual counterparty risk sits with a company it may know comparatively little about. A representative office, since it isn’t trading, often doesn’t need a full commercial banking relationship at all, just enough of an account to cover local operating costs.

	Subsidiary (SL)	Branch (sucursal)	Representative office
Legal personality	Separate from parent	Same entity as parent	No trading personality
Parent liability	Ringfenced, narrow exceptions	Full, direct exposure	Minimal, cannot trade
Tax treatment	Independent IS taxpayer, 25%/15%	IRNR permanent establishment rules	No trading income to tax
Capital requirement	From €1, most capitalise higher	None, no separate shares	None
Banking friction	Standard, own NIF	Higher, parent underwritten	Low, non-trading account

Which structure actually fits your plans

There’s no universal right answer, only the right answer for what you’re actually doing in Spain:

• Choose a subsidiary if you’re hiring staff, signing local contracts, want the parent company’s liability ringfenced, or are acquiring an existing Spanish business, most acquisitions run through a subsidiary as either the direct buyer or a newly formed holding vehicle, see our Buying a Business in Spain guide for the share deal versus asset deal decision itself
• Choose a branch if you’re comfortable carrying liability at the parent level in exchange for skipping a separate share capital requirement, or your sector specifically expects a PE presence without a new legal entity
• Choose a representative office if you’re still scouting the Spanish market and not ready to trade, with a clear plan to convert into a subsidiary once that changes

Whichever structure you land on, the ongoing compliance, bookkeeping, corporate tax or IRNR filing, payroll if you’re hiring, doesn’t stop once the entity is registered; see our Corporate Services Spain hub for what runs afterward. And if part of the reason you’re weighing these structures is that you’re currently hiring in Spain through an Employer of Record platform, our EOR vs Entity Spain guide covers that specific decision, including the real legal risk, in full.