Incorporation of companies
At UR Global we work to provide the best advice on the incorporation of companies in Spain, Mexico, Colombia, Peru, Brazil, Chile and Portugal or the incorporation of subsidiaries anywhere in the world.
The incorporation of a company in the country of destination is one of the key decisions for the development of an internationalization project. This step requires the knowledge of professionals in this field, in order to make the best decisions. As part of our corporate consultancy we will advise you on the type of company, capital stock and best company location, among other things.
The subsidiary company is an independent legal entity, autonomous and different from its foreign parent company, even though all of its corporate control may be held by that parent company and/or business group. In addition, if your goal is to enter a foreign market, there are other forms of entry such as a branch, joint-venture, commercial representation, permanent site, etc.; however, in most cases we recommend the creation of a subsidiary.
How does UR Global support the incorporation of companies?
At UR Global we support and advise companies on the incorporation of companies or subsidiaries in Spain, Mexico, Colombia, Peru, Brazil, Portugal and Chile.
We do it with a turnkey project. After our tax legal advice we leave the company ready and 100% operational and with bank account, to be able to invoice, import, get paid and hire personnel, everything within a period of approximately 30 to 45 days, depending on the country.
As part of our corporate consultancy services, we advise the company on the company incorporation process regarding:
- Number of partners the subsidiary should have, which depends on each country
- Type of company
- How to obtain the name
- Trademark registration
- Which bank works best or worst in each country
- Labor advice
- Legal advice
- Tax advice
- Advice on project financing etc.
Why UR Global for the incorporation of companies?
We have more than 18 years’ experience establishing and successfully setting up more than 400 subsidiaries in a wide range of sectors in Spain, Mexico, Colombia, Peru, Brazil, Chile and Portugal. Therefore, we carry out our corporate consultancy services well aware of the stages, problems, needs and solutions a company faces or requires when internationalizing.
We also provide an important “country factor” value, since we have offices and work teams in each country. Thus, we know each country’s particularities quite well.
We know the importance of clear and precise advice when facing new and unknown markets, and the necessity of an exhaustive follow-up on the incorporation process, step by step. It is essential to have a deep knowledge and support by local staff, with projects that will have different stages and durations according to the country, since each market has different peculiarities.
Frequently asked questions about company incorporation
The decision to start the incorporation of a subsidiary will depend on many factors. Obviously, the main one is the reality of a market opportunity and an attractive project, but there are some others that we would like to highlight and for which companies need tax legal advice in company incorporation to make the best decisions:
- Need to hire personnel in the country of destination: although this could be solved by using our personnel outsourcing service, so that the company has personnel hired on our payroll.
- Requirement to be locally incorporated to develop the project (public bidding, local invoicing, etc.).
- Importance of having local presence, to show proximity to the client.
- Impossibility of being competitive as compared to local companies, especially for tax reasons
The provision of services in the country can be done through a subsidiary (incorporation of a new company with its own legal entity) or through a branch or representative office (permanent site without its own legal personality). The branch is, for all purposes, a foreign company. On the contrary, the subsidiary is a local trading company (Mexican, Colombian, Chilean, etc.), even if it has foreign capital.
Even if the incorporation of companies has not been formalized, a Permanent Site exists when there are facilities or workplaces of any kind in the territory, on a continuous or habitual basis, in which the activity or part of it is carried out, or when acting through a proxy agent to contract in the name and on behalf of the taxpayer. You will be informed of this at UR Global’s corporate consultancy meeting.
The first limitation, and possibly the most important one, is that the Permanent Site, lacking its own legal personality, does not allow the separation of responsibilities between the site and its parent company, so that any commercial, tax or labor contingency will generate responsibilities for the head office.
The second limitation, of a fiscal nature, responds to the fact that the taxation (for example, in Mexico) of the profits of the subsidiary or branch (30% corporate tax in Mexico) is higher than that which will be effective in Spain, so it is very convenient to use mechanisms to reduce the taxation at origin.
In this aspect, the taxable basis of the Permanent Site will always be higher than that of the branch, since the Permanent Site is taxed on the total income obtained, and payments to the head office for fees, commissions, technical assistance, transfer of assets, interest, return on equity capital, etc., are not deductible. In other words, the Permanent Site can only deduct the expenses effectively assigned to its activity.
On the other hand, the branch can deduct the services received from the parent company, thus reducing its profit and thus its corporate income tax liability.
The parent-branch operations most frequently carried out are:
- Technical assistance (paid with fees)
- Loans (paid off with interest)
- Administrative management support services
- Trade of goods
It should be analyzed on a case-by-case basis whether it is possible to use double taxation agreements between the Permanent Site and the parent company to enhance tax optimization strategies at the time of incorporation of companies.
To the above, it should be added that Permanent Sites face limitations and additional problems when carrying out certain procedures with the Tax Authorities (obtaining the importers’ registry, opening bank accounts, etc.), due to the fact that they are non-resident entities.
Finally, if one intends to operate with third countries, it should be kept in mind that (in general) the branch cannot benefit from the Double Taxation Agreements that the State where it resides has signed with those third countries.
- Higher competitiveness in price, since the distributor’s margin makes the product more expensive.
- Better control of customers and first-hand knowledge of the market.
- Stronger financial position to make advance payments on behalf of the imported product and VAT, which sometimes is an impediment for distributors to sell more, since they may have financial limitations.
- Preventing distributors from, after having gained customer trust, replacing parent company with a local competitor company.