In the matter of business management in Spain, a recurring question arises among foreign investors regarding the management and administration of their investments. At Gentile Law, experts in corporate advice and investments, we inform you about everything you need to know in this regard.
The Capital Companies Law in Spain establishes that individuals and legal entities can be administrators of a capital company regardless of the origin or nationality of the investor. However, the Directorate General of Registries and Notaries (DGRN), now the Directorate General of Security and Public Faith, requires any foreing individual intending to be an administrator of a company in Spain to have a Foreigner Identification Number (NIE).
What requirements must a foreigner meet to manage a company in Spain?
The Commercial Registry and DGRN, in the exercise of their regulatory powers, have established the requirements to validly act as an administrator of a capital company. This is primarily because according to Spanish law, administrators have subsidiary liability for non-compliance with tax obligations (such as failing to pay a debt in a self-assessment, not submitting complete and correct declarations, making improper claims for tax refunds, benefits, or incentives, etc.) and for acts carried out by the capital company.
Therefore, in Spain, all foreign individuals intending to assume the position of administrator in a capital company must obtain the Foreigner Identification Number (NIE) before taking position.
In most cases, a foreign administrator must also register with the Special Regime for Self-Employed Workers of the Social Security (RETA), although this may vary depending on different circumstances, mainly related to salary or remuneration and the degree of participation in the company. In general, an administrator must register with the RETA when the position is remunerated. Acording to the Royal Decree 8/2015 of October 30, which establishes the Special Social Security Regime for Self-Employed Workers, the administrator must also register with the RETA in cases where it is presumed (unless proven otherwise) that they have effective control of the company. This includes:
When a foreign administrator of a capital company is not going to assume the position while residing in Spain, they are not obliged to register in the social security system. Although there are exceptions, in principle, the foreign administrator is exempt from certain obligations to the RETA.
It is also necessary to note that if an administrator is also a shareholder in their own company, they must submit the foreign investment form for companies in Spain, as applicable.
What are the consequences of non-compliance with these requirements?
If a foreign administrator is hired, and that person, does not have an NIE, this appointment cannot be effective in the Registry of Companies. This means that it will not be enforceable against third parties, even if the company`s governing body appoints the administrator following all legal and statutory procedures. Also, this administrator cannot celebreat legal acts on behalf of the company, and notaries, will not allow them to sign public deeds on behalf of the company either.
On the other hand, if the foreign administrator does not register with the RETA when required, it will be penalized by the Social Security System. It is important to consider that the consequences will only affect the administrator, without affecting the company in terms of administrative infractions from the mentioned Social Security System.
What risks can arise from being an administrator of a Spanish Capital Company as a foreigner?
Undoubtedly, the greatest risk when being an administrator of a capital company in Spain as a foreigner is the possibility of being declared subsidiarily responsible for the acts or obligations of the represented company. This situation implies that the administrator suffers a direct detriment to their assets.
A second risk is that, as a result of exercising the role of administrator of a Spanish company, the person may meet one of the legal criteria to be considered a tax resident in Spain.
However, Spanish legal regulations prescribe special regimes that favor foreign investors planning to establish or develop activities in Spanish territory. Therefore, a foreign administrator may, at some point, apply for special tax regimes that allow them to lighten their tax burden in the event of being a resident, such as the so-called Beckham Law.
Furthermore, there are possibilities for foreign investors who are also administrators of their own capital companies to enjoy significant tax benefits, such as the Special Tax Regime for Entities Holding Foreign Securities (ETVE). This regime allows companies that accomplish legal requirements to obtain a 95% exemption on dividends and capital gains on which corporate tax would be calculated. In some cases, non-resident partners in Spain may also benefit from not having their dividends subject to withholding tax.