Expanding into Spain

For Italian companies, Spain represents not only a dynamic and rapidly growing consumer market but also a fundamental strategic platform towards Latin American markets (Mercosur area and Mexico) and North Africa.

However, the Spanish legal system presents a complex structural peculiarity: it is divided into 17 Comunità Autonome that enjoy extensive regulatory and fiscal powers. Therefore, the choice of geographical location (Madrid, Catalogna, Andalusia, Isole Canarie, etc.) directly affects the level of local taxation and bureaucratic timelines.

1. Choosing the appropriate corporate structure

The Spanish legal system allows Italian companies to operate through several methods:

• Representative Office: a lightweight solution, lacking legal personality, suitable exclusively for an exploratory phase of marketing and public relations. Since it cannot enter into contracts, it avoids the risk of creating a permanent establishment for tax purposes.
• Branch office: a permanent establishment of the Italian parent company. It does not require an independent minimum share capital, but entails the unlimited liability of the Italian company for obligations contracted in Spain. It is subject to Spanish corporate income tax (Impuesto sobre Sociedades) on income generated within the territory.
• Limited Liability Company (S.r.l.): the equivalent of the Italian S.r.l. and the most widely used form by SMEs. It requires a minimum capital of only €3,000, fully paid up. It offers flexible governance and can benefit from expedited online incorporation procedures through the CIRCE system.
• Joint-stock company (S.A.): corresponding to the Italian S.p.A., suitable for industrial projects requiring extensive fundraising or a future listing. Minimum capital €60,000.

2. Tax opportunities within the Spanish system

The ordinary rate of the Impuesto sobre Sociedades (IS) is 25%. Nevertheless, Spain provides international investors with special regimes offering high tax efficiency:

• 15% Tax Rate for New Businesses: Newly established companies benefit from a reduced rate of 15% for the first two years in which they report a positive taxable base.
• ETVE Regime (The Spanish Holding Company): is one of the most competitive holding regimes in the world. ETVE companies benefit from a total exemption (100%) on dividends and capital gains derived from shareholdings in foreign subsidiaries. Furthermore, dividends distributed by the ETVE holding company to shareholders resident in Italy are not subject to any withholding tax in Spagna.
• The "Beckham Law" for managers: this special regime for impatriates allows managers and highly qualified workers relocated to Spagna to pay a fixed substitute tax of 24% on employment income up to €600,000, while granting a total exemption on foreign-source income.
• The ZEC regime (Canary Islands): companies that establish themselves in the Zona Especial Canaria and meet specific investment and employment requirements benefit from a reduced corporate tax rate of just 4%.

3. Cross-border Taxation and Transfer Pricing

The interaction between the Italian parent company and the Spanish structure must be carefully monitored in light of the Italy-Spain Double Taxation Convention. Financial flows of dividends, interest, or royalties benefit from reduced or zero withholding rates under European directives, provided that there is real economic substance (substance) within the territory.

Likewise, intercompany transactions (loans, service agreements, transfer of know-how) must strictly comply with the arm's length principle. It is mandatory to prepare Transfer Pricing documentation (Masterfile and Local File) to prevent disputes and heavy penalties from the tax authorities.

Our support for your expansion in Spain

Our Firm supports Italian companies in the process of internationalization in Spain, offering integrated strategic consultancy from Italy to Iberia:

• Geographic and corporate pre-feasibility analysis based on the Autonomous Communities.
• Incorporation and activation of S.L., branch offices, or ETVE structures.
• International tax planning and optimization of dividend and royalty flows.
• Preparation of Transfer Pricing documentation and management of intra-group relations.