Foreign investors who are seeking to open a foundation in Spain are advised to know the legislation applicable in this field. According to the Spanish legislation, a foundation can be set up for general purposes, under the Art. 34 of the Constitution. If you want to open a foundation, you may request for assistance from our company formation agents in Spain, who can provide you with information related to legal and fiscal obligations that must be met for this type of legal entity.
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What is the legislation on Spanish foundations?
One of the main rules of law available for Spanish foundations is the Constitution of Spain. However, also other regulations are applicable. For example, the latest rule of law specifically addressed to Spanish foundations is the Foundation Act 50/2002, which replaced the previous legislation on the matter, the Foundation Act 30/1994.
Those who want to open a company in Spain operating as a foundation must know that there are specific rules of law that are created by the regional authorities operating in this country. Thus, additional regulations on foundations can be found in regions such as Navarra, Galicia or Cataluña.
Regardless of the incorporation place of the Spanish foundation, the central government of Spain has full authority in creating regulations concerning the taxation of this type of structure; our team of consultants in company registration in Spain can provide an extensive presentation on the taxation system available for a Spanish foundation.
The main purposes of a foundation in Spain
Foundations are defined under the Act 50/2002 as non-profit organizations set up to serve a “general interest purpose”. The Act also covers the legislation under which foreign foundations can function in Spain, such as:
- The investors must prove that the foundations are incorporated under the law of the origin country.
- Foreign foundations fall under the supervision of the local authorities by respecting the same legal procedures applicable to Spanish foundations.
- The assets of the foundation will be allocated in such way that will serve to the purpose for which the entity has been incorporated.
The following video offers a short presentation on the Spanish foundation:
According to the Spanish legislation, the general purposes for which a foundation can function are related to any public benefits, such as:
- social issues,
- cooperation for development,
- environment, scientific work
- volunteer work.
Our team of specialists in company formation in Spain can provide more information on the purposes a Spanish foundation can have.
How can one incorporate a Spanish foundation?
There are specific legal procedures that must be followed when starting the company formation in Spain for a local foundation. Since the entity is not incorporated for commercial purposes, its registration requirements differ from the ones available in the case of a commercial entity; our team of specialists in company formation in Spain can provide legal assistance on the following procedures:
- the Spanish foundation can be registered by both natural persons and legal entities;
- the founding document of a Spanish foundation can be a notary deed or a will;
- regardless of the type of founding document selected, it must include important incorporation details;
- for example, it is necessary to stipulate the purpose of the foundation, the type of assets owned by the foundation and the structure of the board;
- in order to be legally recognized, the foundation must be registered with the Register of Foundations in Spain.
Can one register a foreign foundation in Spain?
Yes, this procedure can be done by setting up an office of the foreign foundation. In order to do so, the foreign foundation must apply for an authorization that will be issued by the Spanish Register of Foundations. It is necessary to know that a foreign foundation wishing to expand its activities in Spain must conduct other types of operations besides fundraising. Provided that the foreign foundation has as a sole purpose fundraising in Spain, its incorporation will not be possible, as stated by the regulations of the Spanish civil legislation.
What is the tax system available for foreign foundations in Spain?
The taxation of a foreign foundation in Spain follows the same tax system that is applicable to a foundation incorporated in this country. The tax regulations are stipulated under the Tax Act and our team of specialists in company registration in Spain can provide a full presentation on the main tax obligations and benefits available for this structure.
When we refer to the Spanish office of a foreign foundation, it will be taxed following the regulations available for permanent establishments and this means that the taxes will apply only on the income obtained through the respective permanent establishment. However, since the foundation is entitled to be registered as a non-profit institution, it can obtain a set of tax deductions.
Thus, a foundation can benefit on the exemption on the corporate income tax, but this will apply for specific types of income. For example, it can qualify for the exemption as long as the income is obtained from inheritance, gifts, public grants, dividends and others, which can be presented by our team of consultants in Spanish company formation.
Main activities developed by Spanish foundations
As we mentioned above, Spanish foundations can start their operations in a wide range of activities that have as a main purpose the development of a given region and which are addressed to specific categories of persons. As a general rule, most of the foundations are set up with the purpose of assisting the needs of groups of individuals; some of the main data on Spanish foundations is presented below:
- 74.6% of the Spanish foundations prefer creating their own projects and programs;
- 18.6% of the Spanish foundations are created with the purpose of raising the awareness regarding a specific social issue;
- 46.5% of them develop activities that are related to culture and recreation;
- 25.7% are involved in education activities, while 36.6% are related to research;
- 21% of the Spanish foundations are involved in health related activities.
Incorporation of a Spanish foundation – legal aspects
If you want to set up a foundation here, the Spanish legislation requires that at least 70% of the income obtained throughout the year by the foundation has to be used for the purpose stated in the statutory documents. When opening a foundation in Spain, a businessman is required to invest EUR 30,000. The foundation can establish economic activities related to the field of interest for which the entity was set up.
Foundations in Spain can be set up by individuals or by companies and, according to the Art. 10 of the Foundation Act, the founding document must contain the name and the address of the founder, as well as the purpose of the foundation and the board members.
Frequently asked questions about foundations in Spain
To better understand the concept of foundation in Spain, we have prepared some questions and answers. You will be able to find out the conditions for registering and setting up a foundation, with the mention that you can benefit from the support of our local agents.
1. What is the starting capital for a foundation in Spain?
Normally, EUR 30,000 represents the starting capital for a foundation in Spain. A local bank account can be solicited.
2. Who can establish a foundation in Spain?
Both legal entities and individuals can set up a foundation in Spain. The rules regarding its registration require obtaining an authorization from the Spanish Register of Foundations. Formalities can be managed by one of our company formation agents in Spain.
3. What kind of documents can a foundation be set up in Spain with?
Notary deed or will are the documents underlying the establishment of a charity in Spain. They must contain information about the purposes of the foundation, activities, the names of those who set it up, and other important details.
4. What are the reasons why a foundation can be registered in Spain?
Foundations in Spain can support various causes. These can be used to raise funds for social causes, sports, education, culture, development, scientific research, healthcare, and more. If you have decided on the purpose of your foundation, please contact our local agents for registration in Spain.
5. How is annual income used in a foundation in Spain?
Those who set up such an entity are required by law to use at least 70% of their annual income for public benefits purposes. It is forbidden to use the finances directly by the families of those who set up the foundation.
6. Can other types of charity activities be developed in Spain?
Yes, in addition to raising funds for charitable purposes, those who set up the foundation may also consider other activities or projects for its development.
7. Is a foundation a non-profit entity in Spain?
Foundations in Spain are not for profit. As a result, these entities are non-profit and develop exclusive activities related to social purposes. One or more people can set up a foundation in Spain to raise funds for charity.
8. Is there a management board for a charity in Spain?
Yes, charities in Spain are easy to set up, right after the board of management is established. Directors or managers must ensure the smooth running of the foundation, the day-to-day activities, and the projects in which it can be involved in order to achieve the desired objectives.
9. Who can make decisions in a foundation in Spain?
The board of the entity is the one that adopts and implements the decisions in a foundation. But the founding members also have a say in ensuring the smooth running of the foundation in Spain.
10. Is charity easy to set up in Spain?
There are no complexities in setting up a charity in Spain. In terms of documents and other formalities, it is advisable to consult a specialist in the field. One of our local agents can take care of these to ensure that the foundation is established in accordance with the laws.
Donations received must be declared
Another obligation regarding charities in Spain refers to the declaration of donations received. An accounting book will be kept and donations will be registered at the Mercantile Registry in Spain. You can choose our accounting services to ensure that you are in compliance with this requirement.
If you need further information on the legislation applicable to foundations in Spain, please contact our firm.