The main matters to be considered when setting up a subsidiary in Spain are the investment structure and the flow of funds between the parent company and the subsidiary. The investment structure is crucial to obtain important tax advantages and to avoid any challenge with the Tax Authorities.
From a legal, tax and economical point of view the structure for investment or funding vehicles must be done correctly. We would like to highlight that the flow of funds from the subsidiary to the parent company could be exempt of taxes in Spain if proper tax planning is carried out. The distribution of funds of the subsidiary must be considered in each case individually to optimize the tax benefits.
Finally, the arm’s length principle must be respected and therefore, any transaction made between related companies must be done at a fair market value.
Please take a look at the video below to get to know the basic principles of setting up a subsidiary in Spain.