What is a branch and how does it differ from a subsidiary?
A branch is a permanent establishment of your Spanish company in another country. It has no legal personality of its own: it is an extension of the parent, which is liable with all its assets for the branch's debts.
The subsidiary, by contrast, is an independent company registered in the destination country (an LDA in Portugal, an SAS in France, a GmbH in Germany or an SRL in Italy). It has its own legal personality and limited liability, but involves more costs and formalities.
This difference is key to the decision: the branch is cheaper and faster to open, but does not protect you from liabilities.
Requirements for opening a branch in Europe
In all cases it is advisable to have local advice: the registries require apostilled documentation and, in some cases, sworn translation of the parent company's articles of association.
- Portugal: registration in the Commercial Register and registration with the Tax Authority (AT), with a Portuguese tax ID. Timeline of 4 to 8 weeks; opening from €1,199.
- France: registration in the RCS (Registre du Commerce et des Sociétés) and registration with the DGFiP. Timeline of 3 to 6 weeks; opening from €4,599.
- Germany: registration in the Handelsregister and with the Gewerbeamt. Timeline of 6 to 14 weeks; opening from €5,999.
- Italy: registration in the Registro delle Imprese and registration with the Agenzia delle Entrate. Timeline of 4 to 10 weeks; opening from €2,199.
Tax registration and VAT number
The branch must register with the country's tax authority and obtain its own tax ID, different from that of the Spanish parent. For tax purposes, it is taxed on the income it generates in that territory.
If you are going to operate with other EU countries, you also need an intra-Community VAT number, validated in the VIES system. This is the number that allows you to issue invoices without VAT on intra-Community transactions.
Accounting obligations of the branch
The branch keeps separate accounts from the establishment, files annual accounts in the country and declares corporate tax and VAT on a regular basis.
If it hires employees, it is also responsible for income tax (IRPF) withholdings and local social security contributions, with the country's own employment obligations.
What taxes does a branch pay in Europe?
To avoid paying twice on the same profit, Spain has double taxation treaties with the four countries, which determine where each income is taxed.
- Portugal: corporate tax (IRC) of 21% and VAT of 23%
- France: corporate tax (IS) of 25% and VAT of 20%
- Germany: combined corporate rate of 30-33% and VAT of 19%
- Italy: IRES of 24% (plus regional IRAP) and VAT of 22%
Branch or subsidiary? How to decide
The branch fits if you want to test the market with a light structure, invoice quickly and without paying out the share capital that a company requires (for example, the €25,000 of a German GmbH).
The subsidiary suits you if you are going to take on significant risks, want to protect the parent's assets, or need a local structure with partners or investors. Each form has its local equivalent: LDA or Unipessoal in Portugal, SAS or SASU in France, GmbH in Germany, and SRL or SRLS in Italy.
Ready to take the leap?
We assign you a local advisor who speaks English and walks you through the whole process.
Start now