What is a subsidiary?
A subsidiary is an independent company incorporated in the destination country. It has its own legal personality, separate assets and is liable for its debts only with its own capital, not with that of your company in Spain.
Your parent company controls the subsidiary through its shareholding (usually 100%), but liability is limited to what you contribute. The most common forms are the LDA-Unipessoal in Portugal, the SASU in France, the GmbH in Germany, the SRLS in Italy or the SL in Andorra.
What is a branch?
A branch has no legal personality of its own: it is an extension of the head office operating in another country under the same legal identity. No new company is created; instead, the branch is registered in the destination country's commercial register with the parent company's details.
The most important consequence is liability: the parent company is liable with all its assets for the debts and obligations the branch generates. In addition, its results are consolidated in your company's accounts in Spain.
Subsidiary vs branch: key differences
The choice between subsidiary vs branch comes down to these differences, which shape your risk and your tax bill.
Key points
- Legal personality: the subsidiary is a company in its own right; the branch shares that of the parent company.
- Liability: in the subsidiary it is limited to the capital contributed; in the branch it is unlimited for the head office.
- Taxation: the subsidiary is taxed as a resident (IRC of 21% in Portugal, corporate tax of 25% in France); the branch is taxed as a permanent establishment and can create double taxation if the treaty is not applied.
- Share capital: the subsidiary requires capital (€25,000 for the German GmbH); the branch does not require its own capital.
- Accounting: the subsidiary keeps separate accounts; the branch consolidates results with the parent company.
- Local image: the subsidiary operates as a local company; the branch may limit access to public tenders or to clients who prefer a local supplier.
Advantages and disadvantages of each structure
A subsidiary limits your liability, projects the image of a local company and gives you access to grants, public contracts and partners in the country. In exchange, it is more expensive and slower to set up, requires its own accounting and taxation and, in some countries, a minimum share capital.
A branch is cheaper and quicker to set up, requires no capital and lets you control everything from the parent company. The cost is assuming unlimited liability and the risk that the tax authority treats it as a permanent establishment and claims taxes in both countries.
When is a subsidiary or a branch advisable?
Choose a subsidiary if you plan to operate long term, want to limit the risk to your Spanish company, are going to hire in the country or need to bid for public tenders and apply for grants. It is the majority option for SMEs that establish themselves for real.
Choose a branch if you are testing the market, have a one-off activity or need to start quickly and with little expense, accepting that the parent company is liable for everything. In practice, many companies start with a branch and migrate to a subsidiary once the business is consolidated.
Costs and timelines for a subsidiary by country
If you opt for a subsidiary, this is what it costs to set it up in each destination (registration, monthly maintenance fee and formalities), with its estimated timeline:
Key points
- Portugal (LDA-Unipessoal): 4-8 weeks. IRC 19%, VAT 23%.
- Andorra (SL/SLU): 2-6 weeks. Corporate tax 10%, IGI 4.5%.
- Dubai (Free Zone or Mainland): 1-3 weeks. Corporate Tax 9%, VAT 5%.
- France (SAS/SASU): 3-6 weeks. Corporate tax 25%, VAT 20%.
- Germany (GmbH): 6-14 weeks. Corporate tax 30-33%, VAT 19%, capital €25,000.
- Italy (SRL/SRLS): 4-10 weeks. IRES 24%, VAT 22%.
Which structure suits you?
A branch is usually cheaper because it requires no capital or as much paperwork, but remember that it does not protect your assets. A subsidiary costs more at the start and gives you a solid base to grow in Europe with limited risk.
If you are unsure which one to choose, write to us at hola@filnet.app and we will advise you on your specific case with no obligation.
