A certainly unknown facility is a representative office. It allows expansion of business to foreign markets, yet taking advantage of low fiscal risks.
In this global world, it gets more and more common to strive for business abroad. Sometimes this is even essential for business growth. At the same time, foreign companies are frequently looking for business in Spain, too.
There are several options for a Company to perform business abroad. Of course, the first target to achieve is to source for business before launching it.
Although we are living in a digital world, it is convenient to explore new challenges “at sight”. The costs arising in this context may be one of the first handicaps a SMEs has to face, when it comes to expand to foreign markets. As a matter of facts, besides basic exports transactions (simply selling our product from our own country), it seems risky to set-up a branch or permanent establishment or even a subsidiary company, abroad. This is not just due to the relative establishment costs, but also tax liabilities issued by the Authorities of the foreign country may be of concern.
What is a representative office?
It is an abroad entity established by the non-resident company to develop auxiliary activities (advertising, commercial actions...). Appointment of representative will be compulsory, while no sales are achievable. This entity will enable penetration to new markets, at minimum tax risks.
The representative office does not have legal personality, it does not carry out taxes and it does not present annual accounts. Furthermore, the procedures for its implementation are far easier and less expensive than any permanent establishment or subsidiary branch. Issuance of a public document reporting about the conditions of opening, declaring the representative ... (while there is no obligation to file this document in the Registry), may be of convenience.
Foreign companies that want to establish in Spain may be subject to presentation of certain analogous documents provided with the Apostille of the Hague or similar; particularly when workers are employed.
Representative offices are a simple, fast possibility that avoid unnecessary risks. However, a clear guidance on operative is essential; otherwise Tax authorities of certain countries may consider the representative office as a permanent establishment.
Double taxation agreement
A thorough review of the double taxation agreement between Spain and subject country to explore the conditions under which a part of our business can adjust to a permanent establishment in another country, is essential to avoid unexpected headaches.
If you are considering opening new markets through this feature and in case you need advice, contact us. Our staff at Carrillo Asesores will be pleased to assist you.