Another aspect to consider when choosing the appropriate business structure is the main residence of the shareholders and, more specifically, of the company's management or, in the case of a sole trader, the business owner. In particular, businesses that provide services or trade in products (outside the traditional manufacturing sector) can often operate or provide services from different countries.

In the case of a sole trader or self-employed person, services are generally taxed at the place where the service provider is established (even if, in certain cases, the obligation to account for VAT lies with the recipient of the service). It is therefore necessary, both for tax and Social Security purposes, to register the business activity in the country of residence.

If a sole proprietorship or partnership is chosen in Spain, the main residence of the owner or Autónomo should be in Spain. Registering a sole proprietorship in Germany while residing in Spain would generally only be possible through a permanent establishment where there is an actual business need, for example restaurants, factories and local production facilities, or an office and employees located there.

Companies limited by shares or share capital, on the other hand, are legal entities that are completely independent of their shareholders and have their own registered office. Shareholders and, under certain circumstances, even the company's management may therefore reside in another country without this necessarily requiring the company to relocate its registered office. In such cases, specific aspects such as the arm's-length principle, the substance of the company and the effective exercise of management functions must be assessed.

In order to properly assess the relevance of residence when choosing the appropriate business structure, the first step is to determine the individual's residence (main residence or tax residence).

Determining the Residence of Shareholders and Directors

As a general rule, residence corresponds to the Spanish concept of "Residencia". If you are resident in Spain, you will generally be considered a resident or "Residente" for administrative and tax purposes. Further information on this subject can be found in our article Taxation in Spain: Main or Secondary Residence

Use our legal form self-assessment tool to obtain an initial recommendation when choosing between self-employment and a company.

In our blog "Autónomo or Company" you will find further articles on liability, timeframes, costs, shareholders' residence and other relevant aspects.

Our firm will be pleased to assist you in analysing your specific situation, carrying out the necessary administrative procedures and preparing and filing the relevant tax returns on your behalf. If you are interested in our services or have specific questions regarding this topic, please do not hesitate to contact us by email or telephone.

Author:

Christoph Sander
Lawyer and Tax Advisor
CEO, Partner, Director
info@sspartners.es
Tel: (+34) 951 12 13 06
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