How to Differentiate Between a Social and Fiscal Residence in Spain

A company should have 2 different addresses. One to determine and identify where the business activity itself takes place and another for taxation purposes. As a business owner, you will need to fully and thoroughly understand the difference between the two if you’re wanting to start a company on Spanish soil. 

Domiciles in Spain

So, there are 2 forms of domicile in Spain: a social domicile which corresponds to billing and the tax domicile which is the place of business operation itself.

Social Residence in Spain

This helps to determine the company’s nationality. Consequently, depending on where you company headquarters are located, your firm’s taxation will be different.

Social residence will therefore determine the fiscal address of the company. This address is known, recognised and reserved by the Spanish tax authorities. Therefore, following this address, your company will be subject to the tax regulations of that country.

Domiciling your company abroad can be advantageous for companies that are evolving to an international level or those engaging in import/export business.

Reduced tax is not the only advantage of this. Domiciling your company abroad also helps to protect the financial assets of the company, especially those in offshore centers.

Fiscal Residence in Spain

This address identifies where the business activity takes place. This can in fact be different from the social residence aforementioned.

It’s for this reason that some companies operate in France or the UK but their headquarters are here in Spain. This allows the company to be subject to Spanish tax law making it fairly common practice to reap the fiscal benefits.

However, as soon as you domicile your company in Spain, you will need to register your company in the Spanish commerce registry. If you want to change domicile i.e. move your HQ, the process is relatively simple. You just need to modify the company constitution before a notary.

So, you have now seen why it is really important to distinguish between a social and tax residence. It’s just as important for large corporations as it is for companies organised in franchises.