Post-Brexit: your British company operating in Spain with the right structure

The real impact of Brexit for British companies in Spain

Brexit was not a one-off event: it was the start of a regulatory adaptation process that, more than four years later, continues to generate friction for many UK companies with operations in Spain. Those that resolved the transition with provisional solutions in 2021 now find themselves with suboptimal structures that generate tax, employment or compliance risk.

The impact varies considerably depending on the type of company and its business model in Spain, but there are four areas where virtually every UK company with activity in Spain has had to adapt: the legal structure of its presence, VAT and customs treatment, employee permits, and personal data management.

Structure of presence: the models that work post-Brexit

Before Brexit, many UK companies operated in Spain without a local entity, protected by the EU passport or simply by the freedom to provide services within the European internal market. This route is no longer available for the UK as a third country. The presence structures that work are:

Spanish Sociedad de Responsabilidad Limitada (SL): the most frequent option for companies with substantial activity in Spain. It allows direct employment, invoicing with a Spanish tax number (NIF), access to local bank financing and the independent development of a Spanish brand. Maintenance costs are higher (accounting, audit where required, tax and employment compliance), but visibility with Spanish clients and suppliers is greater.

Branch: an alternative to the SL when the company does not want to create a separate legal entity. The branch has no independent legal personality and the parent is liable for its debts. Incorporation is simpler than an SL, but its profile with Spanish clients and suppliers may be lower and the tax treatment less favourable.

Fiscal representative: mandatory for EU companies and advisable for third-country companies carrying out VAT-able transactions in Spain without a permanent establishment. The fiscal representative does not replace the entity but acts as jointly and severally liable before the AEAT for VAT obligations.

Independent agent: allows operations in Spain through a local distributor, agent or representative without creating a direct presence. The risk is that if the agent habitually has the authority to conclude contracts on behalf of the UK company, a permanent establishment may arise.

Trade in goods: the new customs reality

Trade in goods between the UK and Spain now requires import and export declarations involving:

• Tariff code (TARIC): each product has a code that determines the applicable duty. The UK-EU Trade and Cooperation Agreement eliminates tariffs on goods with sufficient UK or EU origin, but the origin criterion must be documented.
• VAT on importation: goods imported from the UK to Spain are subject to VAT at the Spanish border. In many cases, VAT can be deferred to the monthly tax period if the Spanish company is enrolled in the deferral regime.
• EORI number: essential for carrying out export operations from the UK and import operations into Spain.
• Customs representative: many companies choose to delegate customs procedures to a freight forwarder acting on behalf of the importing/exporting company.

British employees in Spain: the updated guide

British citizens who started working in Spain before 1 January 2021 and registered under the Withdrawal Agreement have a regularised status. The problem affects those who arrived afterwards or those who never formalised their situation.

To hire a British citizen in Spain from scratch, the usual process is:

1. The Spanish company obtains a residence and work authorisation for the worker (general regime or, for highly qualified profiles, the EU Blue Card route).
2. The worker processes the long-stay visa at the Spanish consulate in the UK.
3. Once in Spain, they register with the local municipality (padrón) and obtain the TIE (Tarjeta de Identidad de Extranjero).

For executives and highly qualified professionals, the Beckham Law can be a very relevant tax tool that makes the Spanish company’s remuneration package more competitive against market alternatives.

UK-Spain tax treaty: what remains after Brexit

One of the positive elements for British companies with interests in Spain is that the Convention for the Avoidance of Double Taxation between Spain and the United Kingdom was not affected by Brexit. Tax treaties are bilateral agreements that do not depend on EU membership. The 2013 UK-Spain CDI remains in force and governs:

• The taxation of business profits: only in the country of residence of the company unless a permanent establishment exists in the other state.
• Withholding on dividends: maximum 15% at source.
• Withholding on interest: maximum 5%.
• Withholding on royalties: 0% for certain royalties (literary, artistic and scientific copyright) and 5% for others.
• The treatment of capital gains and employment income.

A well-designed structure that takes advantage of the treaty can significantly optimise the repatriation of profits from the Spanish SL to the UK parent and reduce the overall tax burden of the group.

Data protection: the post-Brexit situation and its risks

The European Commission has recognised the UK as an adequate country for GDPR purposes, which means that transfers of personal data from Spain to the UK do not require additional measures beyond those that would apply to an intra-EU transfer. However, this Adequacy Decision can be reviewed or revoked if the UK GDPR begins to diverge significantly from the European standard.

Companies with significant personal data flows between their Spanish operations and their UK headquarters should:

• Document the data flow in the records of processing activities.
• Verify that the legal basis for processing is appropriate in both jurisdictions.
• Have Standard Contractual Clauses ready as a contingency plan in case the Adequacy Decision ceases to be in force.
• Check whether a Data Protection Officer (DPO) or EU representative is required for the Spanish entity.

Why act now rather than wait

Many UK companies operating in Spain have adopted a wait-and-see approach since Brexit, assuming that the situation will resolve itself or that the risk is not immediate. This approach has an increasing cost: the AEAT has intensified its action on undeclared permanent establishments, the Labour Inspectorate has increased controls on foreign workers without permits, and GDPR fines are becoming increasingly significant. Regularising the situation proactively is always cheaper and less disruptive than doing so under the pressure of an inspection or administrative requirement.