What is a representative office and what is its purpose?

First of all, it is important to consider that the way a foreign company will establish itself in Spain—whether as a subsidiary, branch, or representative office—will depend on the activity it intends to carry out in our country.

What is a Representative Office?

A representative office has neither legal personality of its own separate from its parent company nor formal management bodies.

We are talking about a type of establishment where a non-resident company operates, carrying out auxiliary or preparatory activities to add value to the business.

It is therefore mainly characterized by not carrying out the foreign company’s economic activity.

 

I want to open a representative office

 

Functions:

For example, some of the functions that it could perform include:

• Conducting market condition studies to support business development.
• Advertising, promotion, or information-supplying activities.
• Carrying out scientific or similar activities.
• Activities unrelated to the foreign company’s main economic purpose.

To keep in mind: if the functions performed by the Representative Office in Spain go beyond auxiliary tasks and resemble the main activity, the Tax Agency could interpret that the foreign company has a permanent establishment (PE) in Spain rather than a representative office, which would require the foreign company to pay taxes in Spain according to its economic activity.

In such a case, it would be necessary to analyze and review the Double Taxation Agreements for this taxation in Spain.

In short, if a foreign company wants to carry out auxiliary, informational, or preparatory activities in Spain, creating a representative office is the most suitable option for this situation.

Tax Aspects to Consider

In the tax scenario, the representative office is considered a non-resident entity, and therefore certain aspects must be considered, such as:

✅ The entity pays taxes on its profits in its country of origin, not in Spain.

✅ Value Added Tax (VAT) can be reclaimed from the country of origin, as long as it is an EU country or a country with which agreements exist for that purpose.

✅ Social security contributions and employee withholdings for staff working in Spain at the representative office must be paid to the Spanish Social Security and the AEAT, respectively.

In short, special attention must be paid to the activities to be carried out by the representative office, as well as to the procedure to establish it if you want to do business in Spain as a non-resident.

As we can see, registering a company in Spain through a representative office can be a delicate matter; in most cases, it requires personalized international tax advice.

 

✅​ Do You Want to Do Business in Spain?

At Adlanter, we have an expert team ready to cover all your needs when it comes to setting up a representative office in Spain.

We are experts in serving international clients. If you want to start business in Spain and have any doubts, you can contact our professionals directly.

We speak your language and understand the needs of your business.