Foreign companies have several options when setting up a business presence in Spain. Depending on the activity, level of establishment and preferred legal structure, they may operate through a representative office, branch, permanent establishment or subsidiary.
When a foreign company decides to incorporate a subsidiary in Spain, it must bear in mind that the subsidiary has its own legal personality and is subject to Spanish law. Therefore, incorporation is only the first step. The company must also comply with corporate, accounting, tax, registration and, where applicable, employment obligations.
In this article, we explain the main obligations of a subsidiary in Spain. We also cover the books it must keep, annual accounts, single-member subsidiaries and common mistakes to avoid when operating in Spain.
What is a subsidiary in Spain?
A subsidiary in Spain is a company incorporated under Spanish law and owned or controlled by a parent company, usually a foreign company.
Unlike a branch, a subsidiary has its own legal personality. In other words, it operates as an independent Spanish entity for corporate, accounting and tax purposes, even though it forms part of a foreign corporate group.
For this reason, when a foreign company establishes a subsidiary in Spain, it must comply with the obligations applicable to any Spanish company. These include keeping accounting records, legalising books, preparing and filing annual accounts, meeting tax obligations and keeping corporate information up to date.
If you are still considering which structure to use for your operations in Spain, you can also read our article on the main differences between a permanent establishment, branch and subsidiary.
What obligations does a subsidiary have in Spain?
A Spanish subsidiary must comply with corporate, accounting, tax and company-law obligations. Employment obligations will also apply if it has employees.
Although the subsidiary is controlled by a foreign parent company, it remains subject to Spanish regulations. In practice, it must operate as a Spanish company with its own obligations before the Spanish Commercial Registry, Spanish Tax Agency, Spanish Social Security and other public authorities.
| Type of obligation | What it includes |
|---|---|
| Corporate | Annual accounts, corporate books, shareholders’ resolutions and filings with the Spanish Commercial Registry. |
| Accounting | Proper accounting records, Journal, Inventory and Annual Accounts Book, and supporting documentation. |
| Tax | Corporate Income Tax, VAT, withholding taxes, instalment payments and information returns. |
| Company law | Directors, powers of attorney, articles of association, sole shareholder, registered office and corporate changes. |
| Employment | Employee registrations, payroll, Spanish Social Security contributions, occupational risk prevention and employment contracts, where applicable. |
This comprehensive approach is important because many issues do not arise from incorporating the company incorrectly. Instead, problems often appear when its ongoing obligations are not properly managed.
Corporate obligations of a subsidiary in Spain
The corporate obligations of a subsidiary in Spain relate to its ongoing corporate affairs and the information that must remain up to date with the Spanish Commercial Registry.
Key obligations include registering the company, documenting corporate resolutions, maintaining corporate books, preparing and approving annual accounts, filing those accounts and registering certain corporate changes.
Companies must also properly document or register matters such as:
- Changes of directors.
- Amendments to the articles of association.
- Changes of registered office.
- Share capital increases or reductions.
- Powers of attorney granted or revoked.
- Single-member company status.
These obligations are particularly important for subsidiaries of foreign parent companies because several levels of decision-making are often involved. This may include the Spanish company, foreign parent company, local directors and international advisers.
For this reason, corporate management should be properly coordinated from the outset.
Accounting obligations of a subsidiary in Spain
A subsidiary in Spain must maintain orderly accounting records appropriate to its activity and in accordance with Spanish accounting and corporate regulations.
The main mandatory accounting books are the Journal and the Inventory and Annual Accounts Book. These records must reflect the company’s activity, financial position, transactions and results for the financial year.
In addition, the subsidiary must retain supporting documentation for its transactions, including:
- Issued and received invoices.
- Bank records.
- Payroll documentation.
- Agreements with the parent company.
- Related-party transaction documentation.
- Any other documentation relevant to its accounting records.
This is particularly important for subsidiaries belonging to international groups.
Internal reporting to the foreign parent company may be necessary for group management purposes. However, it does not replace the obligation to maintain Spanish accounting records in accordance with the regulations applicable in Spain.
Annual accounts of a subsidiary in Spain
One of the main corporate obligations of a Spanish subsidiary is to prepare, approve and file its annual accounts.
The annual accounts must provide a true and fair view of the company’s assets, financial position and results.
As a rule, they include the balance sheet, profit and loss account and notes to the financial statements. Depending on the company’s size and characteristics, additional accounting documents may also be required.
When the financial year coincides with the calendar year and ends on 31 December, the usual timetable is as follows:
| Obligation | Usual deadline |
|---|---|
| Preparation of annual accounts by the directors | By 31 March |
| Legalisation of accounting and corporate books | By 30 April |
| Approval of annual accounts by the General Meeting | By 30 June |
| Filing of annual accounts with the Spanish Commercial Registry | By 30 July |
If the subsidiary’s financial year does not coincide with the calendar year, these deadlines must be calculated according to its specific year-end date.
Failure to comply can result in registration issues, penalties and difficulties completing certain corporate procedures.
For example, failure to file annual accounts may lead to a registry closure, restricting the company’s ability to register new corporate acts with the Spanish Commercial Registry.
Mandatory books for a subsidiary
A subsidiary must maintain both accounting and corporate books.
The main accounting books are the Journal and the Inventory and Annual Accounts Book. These reflect the company’s economic activity, transactions and accounting position.
In addition, the company must maintain the relevant corporate books. These may include:
- Minutes Book.
- Shareholders’ Register for limited liability companies.
- Registered Shares Register for public limited companies.
- Where applicable, Register of Agreements with the Sole Shareholder.
These books must be legalised electronically with the competent Spanish Commercial Registry within four months of the end of the financial year.
In practice, properly maintaining these records allows the company to document corporate resolutions, share capital ownership, General Meeting decisions, transactions with the sole shareholder and other relevant aspects of the subsidiary’s corporate life.
What happens if the Spanish subsidiary has a sole shareholder?
Many Spanish subsidiaries of international groups are incorporated as single-member companies because the foreign parent company owns 100% of the share capital.
In these cases, the company must formally declare its single-member status. This situation must be recorded in a public deed and registered with the Spanish Commercial Registry.
If this status continues, the company must also state that it is a single-member company in its documentation, correspondence, invoices, order forms and legal notices.
For this reason, Spanish limited liability companies commonly use the designation “Sociedad Limitada Unipersonal” or “S.L.U.”
Contracts between the company and its sole shareholder must also be properly documented. This requirement is particularly relevant when a Spanish subsidiary carries out transactions with its foreign parent company.
Failure to register single-member status correctly can have significant consequences.
If the legal deadline passes without the situation being recorded with the Commercial Registry, the sole shareholder may become liable for certain company debts incurred during that period.
Basic tax obligations of a subsidiary in Spain
Although this article focuses primarily on corporate and company-law obligations, a Spanish subsidiary must also comply with its tax obligations.
The most common include:
- Corporate Income Tax.
- VAT returns.
- Withholding taxes.
- Corporate Income Tax instalment payments.
- Certain information returns.
Transactions between the Spanish subsidiary and its foreign parent company also require particular attention.
These transactions are generally considered related-party transactions. Therefore, they must be valued at market value and properly documented.
This may affect payments for:
- Intra-group services.
- Interest-
- Royalties.
- Transfers of assets.
- Licences.
- Financing.
- Management fees.
Other transactions between the subsidiary and its parent company.
For this reason, companies should not assume that all payments made to the parent company are automatically tax deductible.
The nature of the transaction, its justification, valuation, documentation and tax treatment must be properly analysed.
Common mistakes when managing a subsidiary in Spain
A subsidiary may have been correctly incorporated and still generate risks if it is not properly managed afterwards.
Some common mistakes include:
- Assuming that corporate and accounting obligations are managed exclusively from the parent company’s country. A Spanish subsidiary must comply with its own obligations in Spain.
- Failing to coordinate Spanish accounting records with group reporting.
- Failing to document transactions with the parent company correctly.
- Not updating powers of attorney or directors with the Spanish Commercial Registry.
- Failing to maintain corporate books correctly.
- Not reviewing single-member company status when applicable.
- Neglecting obligations because the subsidiary has limited activity, even though accounting, corporate and tax obligations may still apply.
Therefore, a subsidiary in Spain should be managed on an ongoing basis, not only when it is incorporated.
Frequently asked questions about the obligations of a subsidiary in Spain
Does a foreign-owned subsidiary in Spain have its own legal personality?
Yes. A subsidiary incorporated in Spain has its own legal personality and is governed by Spanish law, even if it is owned or controlled by a foreign parent company.
What corporate obligations does a subsidiary have in Spain?
It must comply with obligations such as maintaining corporate books, preparing and approving annual accounts, filing them with the Spanish Commercial Registry, documenting corporate resolutions and registering certain corporate changes.
Does a subsidiary have to file annual accounts?
Yes. Generally, a Spanish subsidiary must prepare, approve and file its annual accounts with the Spanish Commercial Registry within the applicable deadlines.
What books must a Spanish subsidiary maintain?
It must maintain accounting books such as the Journal and the Inventory and Annual Accounts Book.
It must also maintain corporate books, including the Minutes Book and the Shareholders’ Register or Registered Shares Register, depending on the type of company.
What is the difference between a subsidiary and a branch?
- A subsidiary has its own legal personality and operates as an independent Spanish company.
- A branch does not have a legal personality separate from its parent company.
If you would like to explore this distinction in more detail, you can read our article on the differences between a permanent establishment, branch and subsidiary.
Comprehensive management for subsidiaries in Spain with LEIALTA
Establishing a subsidiary in Spain allows a foreign company to operate in the Spanish market through its own corporate structure.
However, it also involves a range of corporate, accounting, tax and company-law obligations that must be managed in a coordinated way.
At LEIALTA, we support foreign companies looking to establish, operate or consolidate their business activity in Spain.
Our approach combines legal and corporate, tax, accounting and labour advice to help subsidiaries comply correctly with their obligations and reduce risks from the outset.
