The holding company in Spain is a legal entity that administers shares in other companies and/or foreign subsidiaries. Usually this type of company does not have other economic activities apart from managing and organizing the financial resources in other legal entities. However, holding companies that want to perform other business activities can do so if they notify the relevant Spanish authorities of their actions.
Our team of agents incompany registration in Spain can help you open a holding company and manage this type of entity. In Spain, a holding company is called Entidad de tenecia de valores extranjeros. Our specialists in company formation in Spain can assist with advice on the documents that must be submitted with the local institutions when registering a Spanish holding company.
Benefits of a Spanish holding company
The Spanish holding company is incorporated as any other type of business entity. It can take the form or a private limited liability company or a public limited liability company. The required minimum share capital and minimum number of shareholders and directors depend on the chosen type of company to form a holding. The required capital is larger for a public limited company than for a private one.
More details on the Spanish holding company are available in the video below:
The Spanish holding company benefits from certain tax exemptions for the received income (dividend and capital gains) if certain conditions are met. Also, the holding company has access to the reduced withholding tax rates available under the double tax treaties signed by Spain and other countries.
Holding company taxation regime in Spain
Dividends and capital gains derived from a foreign source and paid to non-resident companies by a holding company are exempt from the withholding tax only if the recipient is not located in a tax haven. Dividends paid by a Spanish holding company to its parent company abroad do not have a withholding tax imposed on them in Spain.
Because it is a member of the European Union, Spain observes the provisions of the EU Parent-Subsidiary Directive. This means that, if a Spanish holding owns at least 10% of the shares in an EU subsidiary for at least one year, dividends received by the holding from the subsidiary are exempt from the withholding tax. A Spanish holding company still has to observe the corporate income tax on its worldwide income.
What are the formalities for opening a Spanish holding company?
As we presented at the beginning of the article, a Spanish holding company can be formed as a limited liability company or as a public limited company. In the case in which the selected company type will be the limited liability company, the holding company will need a share capital of EUR 3,000, while for a public limited company, the capital is established at EUR 60,000 (the latter business form is addressed to large corporations operating on the local market and our team of specialists in company registration in Spaincan assist with information on its characteristics).
Once the company is founded, it is necessary to apply for a tax identification number and to have the company registered with the Spanish Commercial Registry. A particularity of the procedure of company formation in Spain for a holding company is that the investors have to prepare an assessment form that has to be deposited with the Spanish Treasury.
A holding company in Spain can be registered by local investors, but also by foreign businessmen. In the case in which the holding company will have foreign shareholders, their capital contribution has to be notified with the Spanish Ministry of Finance. From an accounting point of view, this type of company is obliged to follow the standard accounting procedures that are required for other types of companies.
Still, the company’s annual accounts must provide information on the tax liabilities that were paid abroad in a financial year, but also the capital and dividends from foreign sources, as these can have a special assessment scheme. Our team of consultants in Spanish company formation can advise on the specific accounting procedures that are applicable to holding businesses.
What is the tax system applicable to a Spanish holding company?
The holding company in Spain can obtain a set of tax exemptions; although this type of company is not charged with certain taxes that are imposed to commercial companies, it is still liable for taxation in this country. Businessmen who are interested in finding out more details on the taxation regime applicable to this structure must know the following:
•the Spanish holding company is regulated under the Law 43/95, applicable since 1st of January 1996;
•Spain is an attractive tax jurisdiction and it is now amongst the top 8 European countries for the formation of a holding company;
•the taxation of the income of a holding company is imposed with a tax rate of 35%;
•the company can benefit from an exemption on the withholding tax on dividends, as long as the holding company controls at least 25% of another business (registered in the European Union) for a period of minimum 12 months;
•the company can also benefit from a 5% participation exemption for non-resident shareholders, as long as the shares were held for at least 12 months;
•other tax exemptions can be obtained if the holding company owns at least 5% of the capital of a foreign company or if its participation in that company has a minimum value of EUR 6 million.
The tax regulations that are imposed to a Spanish holding company can be found in the Corporate Income Tax Act, Articles 116-119. Other important tax rules are available under the double tax treaties that were signed by the Spanish authorities; investors can request information on the double tax agreements that are in force here from our team of specialists in company registration in Spain.
The shareholders of a Spanish holding company can be natural persons or legal entities, foreign or locals; our team of consultants in Spanish company formation can offer further information on the shareholding requirements available for this company type. The company can also be formed by a single shareholder and it is important to know that there are no limitations concerning the maximum number of shareholders the holding company can have in Spain.
The administration and the management of a holding company in Spain can fall under the responsibility of a single or more representatives, who can be foreigners of local citizens. However, as a general rule, it is recommended to have the holding company administered by a manager who lives in Spain; if this is not possible, the company’s representatives can also grant the power of attorney to a person who has the necessary skills and who is a Spanish resident.
Spain is among the top European countries with the most favorable holding company regimes. If you want to open a holding here you can contact our agents in company registration in Spain. Our representatives can assist with step-to-step advice on the procedures that have to be followed in this case. Investors can also request additional information on other taxes available here, including on the Spanish VAT.
Call us now at +34 915 36 78 06 or +34 938 074 056 to set up an appointment with Federico Richardson, one of our specialists in company formation in Madrid and Barcelona. Alternatively you can incorporate your company without traveling to Spain.
As a Lexidy Law Boutique SLP client, you will benefit from the joint expertize of local lawyers and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in Spain.