Spain Corporate Tax 2026: SL vs Branch vs Sucursal Comparison

Foreign businesses entering Spain face an early structural choice: incorporate a Spanish subsidiary (typically an SL — Sociedad Limitada) or operate through a branch (sucursal) of the foreign parent. Both are legitimate; both pay Spanish corporate tax on Spanish-source profits at the standard 25% rate. The differences sit in legal personality, liability, banking access, and the operational mechanics of running a Spanish business — and the right choice depends on your scale, risk profile, and time horizon in the Spanish market.

The Tax Headline: 25%, 15%, or 23%

The standard corporate tax rate (Impuesto de Sociedades) in Spain is 25%. New companies pay 15% for their first two profitable years — a meaningful incentive when launching a Spanish operation. Small businesses with turnover under 1,000,000 EUR pay an effective rate of 23%. VAT (IVA) at 21% applies separately, and quarterly returns are required. Both an SL and a Spanish branch of a foreign company face this same headline schedule on Spanish-source profits — the structural choice does not change the rate.

Sociedad Limitada (SL): Spanish Subsidiary

An SL is a separate Spanish legal entity, owned by the foreign parent (and possibly other partners). Liability is limited to the SL’s capital — the foreign parent is shielded from Spanish creditors beyond what it has invested in the SL. Minimum share capital is 3,000 EUR. The SL is taxed in Spain on its worldwide profits at 25% (or the reduced rates above), files its own corporate tax return (Modelo 200), and operates its own Spanish bank accounts and contracts. Dividends paid back to the foreign parent are subject to withholding tax, although Spain’s network of double tax treaties usually reduces or eliminates this in practice.

Branch (Sucursal): Extension of the Foreign Parent

A Spanish branch is not a separate legal entity — it is the foreign parent operating directly in Spain through a registered local establishment. The foreign company itself is liable in Spain; there is no protective Spanish corporate veil. The branch pays Spanish corporate tax on profits attributed to the Spanish establishment, files Modelo 200 like an SL, and registers with the Spanish tax authorities. Profits remitted back to the foreign parent are not subject to dividend withholding tax (because they are not dividends — there is no separate Spanish entity to declare them) but treaty-based branch profits tax may apply in some scenarios.

Which Structure Fits Which Situation

Choose an SL when you need limited liability protection in Spain, when you plan to grow with Spanish employees and Spanish-resident directors, when you anticipate selling the Spanish operation independently, or when Spanish counterparties prefer dealing with a Spanish entity. Choose a branch when the operation is small or experimental, when you want a single global tax filing for the group, or when the foreign parent’s structure prefers consolidating Spanish results without a separate Spanish entity. A common pattern is to start as a branch and convert to an SL once the operation reaches material scale.

Setup Mechanics — What’s Different

SL incorporation requires: certificate of name reservation from the Central Mercantile Registry, deposit of the 3,000 EUR minimum capital in a Spanish bank, signature of the deed of incorporation before a Spanish notary, and registration at the local Mercantile Registry. The branch route requires: notarised resolution of the foreign parent authorising the Spanish branch, registration of the branch at the local Mercantile Registry, and a Spanish tax representative. Both require NIE for the directors or representatives, an NIF for the entity, and registration with the Tax Agency for IVA and corporate tax. Setup time for either runs around 4 to 8 weeks once documents are ready.

Frequently Asked Questions

Can I use an SL to qualify for the 15% new-company rate?

Yes — newly incorporated SLs qualify for the 15% rate on the first two years that the company turns a profit (not the first two calendar years). The reduced rate caps at a defined profit threshold beyond which the standard 25% applies. Branches do not qualify as new companies because they are extensions of an existing foreign entity.

Does my Spanish SL have to file VAT?

Yes — both SLs and branches must register for IVA at 21% (or reduced rates for specific goods and services), charge IVA on Spanish-source supplies, and file quarterly IVA returns regardless of structure choice. VAT compliance is independent of corporate tax structure.

Can a Spanish SL be owned 100% by a foreign parent?

Yes — Spain does not require Spanish-resident shareholders. Wholly foreign-owned SLs are common. The administrator (director) does not need to be a Spanish resident, although having a local administrator simplifies day-to-day operations.

Reviewed by: Maria Luisa de Castro, Expert in Off-plan Property Investment, CostaLuz Lawyers. Last updated: May 2026.

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