The current business context requires taking action in international markets, throughout the adoption of different investment routes, having tax consequences not only in Spain but also overseas.
If you are thinking of internationalizing your business or you have already done so but you are not sure about whether you have chosen the best investment route, it is worth validating which is the most optimal tax-efficient structure deriving from your performance in the overseas markets.
✔The performance in international markets by companies within our context can be done directly from Spain, through the export of products and / or services, or through the creation of a permanent presence in the target country, that permits increasing our visibility in foreign markets.
The maintenance of a permanent presence does not necessarily imply the creation of a new legal entity. There are intermediary formulas in between the direct performance from Spain and the constitution of a foreign subsidiary, that allow simplifying your company’s corporate chart as well as increasing your presence in the foreign market.
✔As an option, one can set up a branch in the foreign jurisdiction, what implies the direct presence of your company in the foreign market (as no new legal entity is created), through an administrative division.
From the tax point of view, it is advisable to look closely at this type of investment route, as it will very likely imply the creation of a so-called permanent establishment, whose tax treatment is equalized to that of a subsidiary.
In practical terms, it results in the obligation to file periodical Corporate income tax and VAT (or similar tax) returns in the country of destination, as a consequence of being considered as a separate taxpayer from the headquarters in the foreign jurisdiction.
As to the refund of profits obtained by the permanent establishment, most countries impose a tax at source, similar to the one that would apply to dividend distributions.
✔ All in all, it is also recommendable to check whether a double tax treaty between Spain and the country of destination exists, to reduce the level of taxation not only upon the return of profits but also upon the remittance of any funds for income derived at the country of source. Last but not least, it is worth mentioning that Spain has a wide range of tax treaties with countries from the whole world, which benefit foreign investments channelled through our country.