Spanish Business Creation for Expats (Multi-Jurisdiction Strategy)

Spanish Business Creation for Expats: Why Standard SL Structure Loses €50K+/Year in Taxes

Most entrepreneurs arriving in Spain make one critical mistake: they register a standard Spanish SL (Sociedad Limitada, roughly LLC equivalent) for their business.

Don’t do this alone. Standard Spanish structure loses thousands annually in tax optimization.

This guide covers how to structure multiple businesses across Spain, Delaware, Andorra, and EU jurisdictions to maximize efficiency, maintain compliance, and legally minimize tax burden.

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Why Standard Spanish SL Structure Fails

Standard approach: Arrive in Spain → Register SL → Pay 25% corporate + 37% personal tax on earnings

Real example: €500,000 SaaS revenue

• Spanish SL corporation: €125,000 tax (25%)
• Take salary/dividend: €92,500 additional personal tax (37%)
• Total: €217,500 tax (43.5% effective rate)
• Net to founder: €282,500

Problem: You’re missing all the optimization layers that multinational companies use.

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The Blueprint: Multi-Jurisdiction Business Structure

Tier 1: IP Holding (Delaware LLC)

Purpose: Hold intellectual property (code, brand, patents) with zero US tax exposure

Why Delaware:

• 0% corporate tax on foreign-source income (no US clients)
• Allows non-US entities to own majority
• Low formation cost ($89) + annual compliance ($300-500)
• Mature tax law (every accountant understands it)

Structure:

• Delaware LLC is 100% owned by Spanish company (or later, Andorran company)
• Charges royalties to operating company
• Accumulates value tax-free

Cost: $200-800 one-time setup

Tier 2: Spanish Operating Company (SL)

Purpose: Handle Spanish/EU clients and operations

Why Spanish SL:

• Required for EU business operations
• 25% corporate tax (not ideal, but necessary)
• Legitimacy in Spanish/EU market

Structure:

• Receives revenue from clients
• Pays royalties to Delaware LLC (reduces taxable income)
• Keeps operating margin (10-20%)
• More tax-efficient than taking all profit

Cost: €300-600 registration

Tier 3: Andorran Holding (Optional, High-Revenue Only)

Purpose: Intermediate company for dividend extraction and wealth accumulation

Why Andorran:

• 10% corporate tax
• 0% tax on dividends received
• Wealth accumulation tax-free

Structure:

• Spanish SL pays dividends to Andorran company (requires setup)
• Andorran company holds cash, investments
• You extract as minimal personal income
• Accumulate wealth at 10% tax rate instead of 43.5%

Cost: €5,000-10,000 setup + €2,000/year compliance

When to use: €300K+ annual profit (payback period 1-2 years)

Tier 4: Malta/Ireland Intermediate (Optional)

Purpose: EU service/IP licensing, additional layer

Why Malta:

• 6.25% corporate tax (if dividends are received from subsidiaries)
• IP-friendly tax rules
• EU-compliant

When to use: Complex structures, multiple EU entities

Cost: €5,000-15,000 setup

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Real-World Structures

Structure 1: SaaS Founder (€500K Revenue, Moderately Complex)

CLIENTS (US + EU)
    ↓
SPANISH SL (Operating Company)
├─ Revenue: €500,000
├─ Operating costs: €150,000
├─ Royalty to Delaware: €120,000 (24% of revenue)
├─ Remaining profit: €230,000
├─ Spanish tax (25%): €57,500
├─ Profit after tax: €172,500
└─ Pays dividend: €172,500

     ↓

DELAWARE LLC (IP Holding)
├─ Receives: €120,000 royalties
├─ Expenses: $3,000 (annual compliance)
├─ US tax: $0 (foreign-source income)
└─ Accumulates: €117,000

FOUNDER (You)
├─ Personal tax residence: Spain
├─ Takes salary: €60,000
├─ Personal tax (25%): €15,000
├─ Net income: €45,000
├─ Dividend from Spanish SL: €172,500
├─ Dividend tax (25%): €43,125
├─ Net dividend: €129,375
└─ **TOTAL NET: €174,375**

COMPARISON:
- Standard Spanish SL alone: €282,500 net (43.5% tax)
- Multi-jurisdiction structure: €174,375 net + €117,000 held in Delaware
- Combined liquid: €291,375 (+€8,875, PLUS Delaware accumulation)

Structure 2: Crypto Trading Fund (€2M Annual Profit)

TRADING OPERATIONS
    ↓
SPANISH SL (Regulated Entity, EU Base)
├─ Revenue: €2,000,000
├─ Operating costs: €200,000
├─ Corporate tax (25%): €450,000
└─ After-tax profit: €1,350,000

        ↓

ANDORRAN HOLDING COMPANY
├─ Receives dividend: €1,350,000
├─ Andorran tax (10%): €135,000
├─ After-tax profit: €1,215,000
└─ Accumulates in Andorran bank (tax-free growth)

        ↓

DELAWARE LLC (International Holdings)
├─ Owns IP, brand, licensing
├─ Tax residence: None (0% tax)
├─ Holds: €500,000 in investments
└─ Annual accumulation: €500,000

FOUNDER (You)
├─ Andorran tax resident (personal 0% on first €24K)
├─ Personal income: €24,000
├─ Personal tax: €0
├─ Live on modest salary, accumulate wealth in Andorran company
└─ **TOTAL ANNUAL TAX: €585,000 (29% effective vs 43.5% standard)**

Structure 3: Service Company (€300K Revenue, Simple)

EU CLIENTS
    ↓
SPANISH SL (Consulting/Services)
├─ Revenue: €300,000
├─ Team costs: €120,000
├─ Profit: €180,000
├─ Corporate tax (25%): €45,000
├─ After-tax: €135,000
└─ Pays dividend

     ↓

FOUNDER (Spain resident)
├─ Salary: €36,000 (minimal)
├─ Dividend: €99,000 (from SL profit after tax)
├─ Total income: €135,000
├─ Personal tax: €30,000 (25% on dividend)
├─ **NET: €105,000**

DELAWARE LLC (Optional - Overkill for €300K)
- Can add if scaling to €500K+

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Step-by-Step: Setting Up Multi-Jurisdiction Structure

Month 1: Planning & Advisors

• Hire Spanish tax advisor (€2,000-5,000)
• Hire US CPA (€1,500-3,000 for structure design)
• Choose structure (simple SL vs. multi-jurisdiction based on revenue)
• Cost: €3,500-8,000

Month 2: Formation

• Register Delaware LLC (DIY: $89 + your time, or lawyer: $400-800)
• Register Spanish SL (€300-600)
• Get NIE (€100-200)
• Cost: €500-1,600

Month 2-3: Tax Optimization

• Register Spanish SL for tax purposes
• Establish Delaware LLC tax identification (EIN)
• Set up transfer pricing agreement (royalty rate between entities)
• File elections (SPF if needed for Delaware)
• Cost: €1,500-3,000 (tax advisor)

Month 3-4: Banking & Operations

• Open Spanish business bank account
• Open Delaware business account (Wise, Revolut, or US bank)
• Establish operational processes
• Cost: €0-500

Month 4+: Operations

• Invoice through correct entity
• Pay royalties/management fees between entities
• Quarterly/annual tax filings
• Cost: €1,200-2,000/year (accountant)

Total setup cost: €6,000-13,000 Payback period (from tax savings): 3-12 months (depending on revenue)

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Critical Details: Transfer Pricing

The IRS and Spanish tax authorities require “transfer pricing”—a legitimate royalty rate between your Delaware and Spanish companies.

Standard rates: 15-25% of revenue (industry dependent)

How it works:

• Spanish SL pays Delaware LLC 20% of revenue for IP licensing
• €500,000 revenue × 20% = €100,000 royalty
• This reduces Spanish taxable income
• Delaware LLC receives €100,000 (no US tax on foreign source)
• Net effect: More profit moves to low-tax jurisdiction

What’s audit-safe: 15-25% is defensible. 40%+ looks aggressive.

Cost if audited and wrong: Back taxes + 20% penalties on both sides (Spanish + US). Major risk.

How to protect: Have transfer pricing study done (€3,000-5,000 by tax advisor). Worth it if revenue >€300K.

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Banking Problem: Spanish Banks Hate This

When you try to open a Spanish business account, banks see:

• Delaware company involved
• International transfers
• Looks potentially money-launder-ish

Reality: Many Spanish banks reject SME accounts with multi-jurisdiction structure.

Solutions:

1. Wise Business: Open German/UK account instead (€0/month)
2. Revolut Business: Digital account (cheaper, easier to open)
3. ActivoBank: Spanish bank friendly to startups
4. Bunq: Dutch business account
5. Remote money management: Keep funds in US/Delaware, fund Spanish operations via loans

Best approach: Wise Business + Spanish SL account (if approved). Use Wise for USD/EUR/GBP transfers (real rates, low fees).

Cost: €0-500/month

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Hiring & Employment (The Complexity Layer)

If you have employees, complexity increases:

Spanish employee cost:

• Salary: €24,000
• Social security (employer): €7,200 (30%)
• Total cost to company: €31,200
• Net to employee: ~€18,000

Multi-jurisdiction hiring:

• Some employees in Spain (operational team)
• Some in Delaware-based company (consultants, contractors)
• Some in Andorra (if you move there)

Tax consequence: Each jurisdiction has employment rules. Misclassify and you face huge penalties.

Solution: Use employer of record (EOR) service

• Papaya Global, Remote, Deel handle taxes in each country
• Cost: 5-8% of payroll
• Worth it: Eliminates compliance risk

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Exit Planning: How Structure Affects Sale Value

When you sell your business, structure matters hugely:

Standard Spanish SL sale:

• Capital gains tax: 19-21% (Spain)
• Corporate recapture: Possible additional tax
• Net to founder: 78-81% of sale price

Delaware LLC holding the IP:

• IP sale through Delaware: Long-term capital gains (15% US tax)
• But Spanish company sale still has tax
• Net to founder: 76-84% (depends on what you sell)

Better structure: Sell Spanish SL (operates normally), Delaware LLC (owns IP) retained + valued separately

Example: €1M exit

• Standard sale: €800K-810K net
• Structured sale: €820K-850K net (depending on IP value)
• Difference: €10K-50K (1-5% uplift)

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Real Compliance Risk: What Gets You Audited

❌ Red flags that trigger audit:

• Transfer pricing rate >30% (too aggressive)
• Delaware company with no real purpose (pure tax avoidance)
• Royalties paid but no actual IP being licensed
• Moving profit offshore while claiming Spanish operations
• Complex structure for €50K business (overkill, looks suspicious)

✅ Safe approach:

• Real IP (code, trademarks, brand)
• Legitimate royalty rate (15-25%)
• Spanish company doing real operations
• Delaware company holding real assets
• Documentation showing business purpose (not just tax)

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The Simple vs. Complex Question

Use Simple Spanish SL If:

• Revenue <€150,000
• Single founder (not multi-jurisdiction)
• Planning to stay in Spain long-term
• Don’t have US connections

Use Multi-Jurisdiction If:

• Revenue >€300,000
• Want to accumulate wealth (Andorra + Delaware)
• May relocate to other countries
• Have international team/clients
• Planning eventual exit/sale

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Timeline & Investment Summary

Phase	Timeline	Cost	ROI
Setup & Planning	1 month	€6,000-13,000	Payback in 3-12 months
Formation	1-2 months	(Included above)	-
Optimization	Ongoing	€1,500-2,500/year	€20K-50K/year tax savings
Banking/Operations	1 month	€500-1,000	-

Net present value (5-year horizon):

• Setup cost: €10,000
• Annual savings: €30,000 (average for €300K+ business)
• 5-year benefit: €140,000 (€150K saved - €10K setup)

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Getting Started: The Action Plan

1. Assess your revenue: <€150K (skip), €150-300K (consider), >€300K (strongly recommended)
2. Consult tax advisors: Spanish accountant + US CPA (€3,000-5,000)
3. Design structure: Which tiers you need (Delaware? Andorra? Malta?)
4. Form entities: Usually 1-2 months
5. Document everything: Transfer pricing, business purpose, contracts
6. Operate correctly: Invoices through right company, payments on schedule
7. File correctly: Quarterly and annual compliance in each jurisdiction

Don’t DIY this. At €300K+ revenue, professional advice pays for itself 10x over.

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Resources & Next Steps

For setup:

• Wise Business: Business banking across jurisdictions
• Founder Institute: Business structure planning
• Tax advisors: Winheller, Illaya Legal (Spain + Delaware experience)

For ongoing:

• Use same advisors for annual filings
• Budget €2,000-4,000/year for multi-jurisdiction compliance
• Quarterly check-ins to ensure structure still optimal

Ready to model your specific scenario? Use our business structure calculator to calculate your exact setup.

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Sources

• IRS - Transfer Pricing Rules and Safe Harbor
• Spanish Ministry of Finance - SL Formation and Taxation
• Delaware Division of Corporations - LLC Formation
• AEAT (Spanish Tax Authority) - Business Tax Optimization
• Winheller - Multi-Jurisdiction Business Structuring
• US CPA Society - International Business Structure Planning
• Papaya Global - Global Employment Tax Compliance