How to Set Up a Subsidiary in India from Spain: The 2026 Guide

This guide is written for the founders, finance directors and operations leads of Spanish companies deciding how to enter India, including groups in renewable energy, infrastructure, auto components, industrial engineering, ceramics, fashion and retail, and technology. It follows the order of the decisions: the investment route, the structure, the incorporation, the money, the tax treaty, the Spanish-side duties, annual compliance and people. Each section links to a deeper guide. Indian tax law changed on 1 April 2026, when the Income-tax Act, 2025 replaced the 1961 Act, so where a form has a new name we show the new name with the earlier one in brackets.

India subsidiary at a glance

Step one: the investment route and why Press Note 3 does not apply

India lets foreign investors put money into most sectors without asking the government first. This is the Automatic Route under the Consolidated FDI Policy and the Non-Debt Instruments Rules, 2019 made under the Foreign Exchange Management Act. A Spanish company that invests in a sector under the Automatic Route needs no approval, and only has to report the investment to the Reserve Bank of India after the shares are issued. Some sectors have caps or conditions that apply to every foreign investor: defence above 74% needs approval, multi-brand retail is restricted, insurance and some media activities have limits, and a few activities are closed to foreign investment altogether. The first job on any project is therefore to identify the sector code of the Indian business and check the route against the current policy.

Press Note 3 of 2020 is the rule that worries many first-time investors. It requires government approval for an investment from a country that shares a land border with India, or where the beneficial owner of the investor is a citizen of or based in such a country. Spain shares no land border with India, so a Spanish company is not caught by nationality. It can be caught by ownership: if a Spanish holding company is ultimately owned by a person or fund from a land-border country, the rule looks through the structure. Indian banks and the authorised dealer bank ask for the full ownership chain to individuals for this reason, and the Spanish parent should prepare an up-to-date chart before the first filing.

What does matter for a Spanish investor is the pricing and reporting discipline that follows. Shares issued to a non-resident cannot be priced below fair value, shares sold by a non-resident to a resident cannot be priced above fair value, and every step is reported on a form with a deadline. These rules are set out in the guide on Funding and FEMA, and they decide most of the practical work.

What has changed in 2025 and 2026

Five developments make 2026 a good moment to plan, and each affects a Spanish group differently.

• The EU-India trade agreement. Negotiations were concluded on 27 January 2026. According to a September 2026 law firm briefing, signature is expected in December 2026 and entry into force in early 2027, after European Parliament consent and Indian ratification. It is reported to cover goods, services and the temporary movement of professionals, with investment protection negotiated separately. Plan on current rules and treat the agreement as upside. See EU-India trade agreement.
• The Income-tax Act, 2025. It replaced the 1961 Act from 1 April 2026. Withholding on payments to non-residents now sits in Section 393 and salary tax in Section 392, and several forms were renamed: Form 41 replaces Form 10F, and Forms 145 and 146 replace Forms 15CA and 15CB. The treaty rates are unchanged.
• The labour codes. India's four labour codes were reported in force from 21 November 2025, with rules and state implementation following. They change wage definitions, fixed-term employment and social security coverage. See Hiring in India.
• Data protection. The Digital Personal Data Protection Rules were notified on 13 November 2025, and the main duties start on 13 May 2027, with penalties of up to INR 250 crore. A Spanish group already working under the GDPR has a head start, but the two regimes differ. See GDPR and the DPDP Act.
• The treaty notification on royalties and technical fees. A notification in March 2024 gave effect to a 10% rate under the most-favoured-nation clause, applying from assessment year 2024-25. A Spanish group that is still deducting at a higher rate should review its files. See India-Spain tax treaty, article by article.

What is specific to Spanish companies

Which structure should a Spanish company choose?

For most operating businesses the answer is a private limited company. It is a separate legal person, it limits the parent's liability, it can hire, lease, borrow and hold licences, and its tax position is clear. The shareholders can be the Spanish parent alone, or the parent together with an Indian partner in a joint venture. A limited liability partnership can suit professional services in sectors with no foreign investment conditions. A branch office is available only to a company with a net worth of USD 100,000 and five years of profit, can carry out a limited list of activities and is taxed at the higher foreign-company rate. A liaison office needs USD 50,000 and three years of profit and cannot earn income. A project office serves a single contract.

Spanish groups often come with a sector in mind, and the sector shapes the structure. Renewable energy and infrastructure developers usually form a special purpose company for each project, with a holding company above. Auto-component and engineering suppliers tend to follow a customer and use a manufacturing subsidiary. Fashion and retail groups need to check the single-brand retail conditions, including local sourcing rules above a threshold. Technology and services groups often start with a small team and an employer-of-record arrangement, then move to a subsidiary. The detailed comparison, with the tax and permanent establishment consequences of each option, is in Structure options.

One more point on structure belongs here. Indian officers apply the General Anti-Avoidance Rule, and the treaty applies a limitation of benefits clause and the principal purpose test. A Spanish company that holds the Indian shares because it has real management and people in Spain is on safe ground. A Spanish shell inserted only to reach the treaty is not. If your group has an intermediate holding company, document why it exists.

How to incorporate, step by step

Incorporation is online and does not require anyone to travel to India. The Ministry of Corporate Affairs' SPICe+ form reserves the name, registers the company and, with AGILE-PRO-S, applies for the tax account numbers, provident fund and state insurance registrations at the same time. The steps in order are:

1. Confirm the sector and the route, and choose the structure.
2. Prepare the Spanish documents: Mercantile Registry certificate, board resolution, power of attorney, beneficial ownership papers and passport copies, with apostille and sworn English translation.
3. Obtain a Director Identification Number and a Digital Signature Certificate for each director, including the Resident Director.
4. Reserve the name and draft the Memorandum and Articles of Association with an object clause that matches the business.
5. File SPICe+ with AGILE-PRO-S and answer any registrar queries.
6. Receive the certificate of incorporation, PAN and TAN, then hold the first board meeting and appoint the first auditor within 30 days.
7. Open the bank account and remit the share capital from Spain.
8. Allot the shares within 60 days of receiving the money, and file FC-GPR within 30 days of allotment.
9. File the declaration of commencement of business, Form INC-20A, within 180 days of incorporation.

The calendar is simple but unforgiving, because each deadline starts from a different event. The full walk-through is in Incorporation steps, and a week-by-week schedule with the causes of delay is in How long it takes. The two steps that slow most Spanish projects are the apostille and translation of the Spanish documents, which take two to four weeks, and the opening of the Indian bank account, which can take a month. Start both in the first week, in parallel with the name and director steps. The documents guide, Documents, apostille and sworn translation, explains how to keep names and numbers consistent across every paper, which is the most common cause of rework.

The Resident Director and the board

Every Indian company needs at least one director who has stayed in India for 182 days or more in the financial year, and a private company needs at least two directors. A Spanish group has four ways to meet the rule: relocate a Spanish executive, hire an Indian managing director, use a professional director supplied by an adviser, or appoint an Indian partner or co-founder. The seat carries personal liability under the Companies Act, so choose the person for their real role in the business. A professional director must have a written scope, access to information and the ability to refuse a decision; a signature without a role is not a safe arrangement for anyone. The board must meet at least four times a year, with no more than 120 days between meetings, subject to relaxations for small companies. See Resident director.

How money moves between Spain and the Indian subsidiary

Money goes into India as equity in nearly every case. The Spanish parent remits euros through an authorised dealer bank, the Indian bank issues an inward remittance certificate, and the company allots shares at or above fair value within 60 days. At incorporation the face value is usually the fair value. For a later round a valuation by a Chartered Accountant or merchant banker is needed. Loans are possible under the external commercial borrowing framework, with limits on the lender, the cost, the minimum maturity and the use of the money, and interest bears 15% withholding tax under the treaty. Convertible preference shares and debentures count as equity only if they are fully and mandatorily convertible.

Money comes out of India by five routes: dividends, service fees, royalties, interest and loan repayment, and a buyback or capital reduction on exit. Dividends can be paid only from distributable profit after audit, so a young subsidiary pays none. Service fees and royalties give the parent cash earlier but need a contract, evidence of delivery and an arm's length price. Each payment needs Forms 145 and 146 and withholding at the treaty rate, and the Indian company can apply the treaty only if it holds the Spanish tax residency certificate and Form 41 on the payment date. ₹10 lakh is about EUR 9,400 at an indicative ₹106 per euro (2 November 2026 market rate; check the live rate before remitting). The comparison of the routes, with a suggested mix over the first five years, is in Repatriating profits.

The key point for planning is that the pricing rule works in both directions. A non-resident cannot subscribe below fair value and cannot sell above it. That rule, and the deadlines of 60 days for allotment, 30 days for FC-GPR and 60 days for FC-TRS, explain most of the penalties that foreign investors pay. A late filing is cured by a late submission fee or by compounding, but a missed date is easy to avoid with a diary.

The India-Spain tax treaty in one page

The treaty was signed on 8 February 1993 and entered into force on 12 January 1995. It was amended by a Protocol in 2012 and is modified by the Multilateral Instrument, which took effect for India on 1 October 2019 and for Spain on 1 January 2022. Read with India as the source state and Spain as the residence state, it gives the following rates on payments from India to a Spanish beneficial owner:

Three practical points follow from the table. First, the dividend rate has no lower tier for large shareholders, so a parent should not expect the 10% found in some newer treaties. Second, the rate on royalties and technical fees depends on a clause and a notification, so keep both in the file. Third, the treaty gives relief only if the paperwork is in place on the day of payment: a tax residency certificate from the Agencia Tributaria, Form 41, a beneficial ownership declaration and a declaration of no permanent establishment in India. Spain relieves double taxation by credit, and its participation exemption usually removes the dividend and exit gain from Spanish tax for a qualifying holding. The treaty figures in this guide come from secondary summaries of the treaty and its notifications; confirm them against the treaty text before you rely on them. The full article-by-article guide is India-Spain tax treaty, article by article.

Tax and transfer pricing: what the Spanish parent should know

An Indian company pays corporate income tax at about 25.17% once surcharge and cess are included, on profits computed under Indian rules. It deducts tax at source from salary, from payments to contractors and from cross-border payments, and it collects and pays goods and services tax on its supplies. Advance tax is paid on 15 June, 15 September, 15 December and 15 March. The company files a tax return, and where it has international transactions with the Spanish group it files Form 3CEB, an accountant's report on transfer pricing.

Transfer pricing is the area of highest scrutiny. Both India and Spain test related-party prices against the arm's length principle, and the Indian officer will look first at management fees, royalties, loans and guarantees. The protection is a written agreement for each flow, evidence that the service was delivered and a benchmarking study, kept in line with the file the Spanish parent prepares under Spanish rules. If the Spanish group is large enough for country-by-country reporting, the Indian subsidiary should know what the parent files. The Spanish side also matters for tax: the Spanish parent's controlled foreign company rules, its documentation duties and the EU minimum tax regime sit outside Indian law but affect the net result. See Transfer pricing and Spanish parent obligations.

Spanish rules that follow the group into India

A Spanish company does not need prior permission to invest in India, but it must declare the investment. The official guide to Spanish foreign investment describes a declaration to the Registro de Inversiones Exteriores for an investment of 10% or more of the capital or votes of a foreign company, made on form D-5A within one month of the transaction. Disposals are declared on D-5B. Intra-group loans above EUR 1 million with a term over a year are declared, and so are repayments. An annual report on form D-8 is due within seven months of the foreign company's year end where the holding is at least 10% and the foreign capital or net equity exceeds EUR 1.5 million, or where the investee is a holding company. Because the Indian year ends on 31 March, the D-8 date falls on 31 October. The guide is not binding and thresholds change, so a Spanish adviser must confirm them.

The Spanish parent also needs a board decision that records the commercial reason for the investment, the correct corporate records and notarial documents for the powers of attorney used in India. The data side matters too: moving employee or customer data to India needs a GDPR transfer tool, and India has no EU adequacy decision, so standard contractual clauses are the usual choice. See GDPR and the DPDP Act. For disputes, a Spanish court judgment is hard to enforce in India, so contracts normally use arbitration with a seat such as Madrid, Singapore, London or Paris. See Contracts and arbitration.

Annual compliance: what the subsidiary files

An Indian subsidiary has a steady rhythm of filings, whether or not it earns revenue. Tax deducted at source is deposited by the 7th of each month. Goods and services tax returns fall on the 11th and the 20th. Provident fund and state insurance are due by the 15th. Advance tax follows the four dates above. After the 31 March year end, the Foreign Liabilities and Assets return is due by 15 July, the annual general meeting by 30 September, the financial statements within 30 days and the annual return within 60 days of the meeting, and the tax return by 31 October (30 November where transfer pricing applies). Each director completes an annual KYC by 30 September.

The Spanish parent has its own calendar, with the D-8 report, its corporate tax return and related-party documentation. The two calendars collide in three places: the Indian and Spanish year ends differ, the D-8 date matches the Indian tax return date, and Indian dividends arrive after the Indian audit and the annual meeting. Put both calendars in one file, with an owner against every line. The combined calendar is in Two-country compliance calendar.

People: hiring, visas and provident fund

A Spanish company can hire through its Indian subsidiary or through an employer of record. The subsidiary is the employer, deducts tax under Section 392, contributes to provident fund and, for lower wage levels, to state insurance, and follows the four labour codes reported in force from 21 November 2025. Notice, probation, bonus, working hours and termination rules differ from Spain's, and a post-employment non-compete is narrowly enforced in India. The guide Hiring in India covers contracts and payroll.

A Spanish employee who moves to India needs an employment visa, with a minimum annual salary of USD 25,000 for the main category, and must register with the Foreigners Regional Registration Office within 14 days if the stay exceeds 180 days. Salary for work done in India is taxed in India from the first day in most secondments, and a stay of 182 days or more can make the employee an Indian tax resident. Spain's personal income tax law has an exemption for qualifying work abroad up to EUR 60,100 a year, which may offset the double tax. The list of operating Indian social security agreements published by the provident fund organisation in 2022 does not include Spain, so Spanish staff are generally covered by the Indian provident fund rules for international workers and may also stay in the Spanish system. Budget for both. See Spanish employees in India and Relocating Spanish staff.

What it costs and how long it takes

Cost has three parts that should not be added together: the one-time cost of setting up the company, the recurring cost of keeping it compliant, and the capital you invest in shares. One-time costs include the professional fee, government and stamp charges, digital signatures, Spanish notary, apostille and translation, and bank charges on the first remittance. Recurring costs include the registered office, accounting, goods and services tax and payroll filings, the statutory audit, annual company filings, the tax return and, where it applies, the transfer pricing report. The capital is sized from a 12 to 18 month cash plan; there is no statutory minimum.

Indicative set-up fee: AU Corporate's fee for setting up the subsidiary is USD 750 to USD 1,000 for share capital up to ₹10 lakh (₹10 lakh is about EUR 9,400 at an indicative ₹106 per euro (2 November 2026 market rate; check the live rate before remitting)). It covers incorporation only. We quote the other lines against your plan, so please ask for a costing and not a rate card.

On timing, allow two to four weeks for the Spanish documents, two to three weeks for incorporation and one to four weeks for the bank account, with much of it in parallel, for a total of about two to three months. The detail is in Cost of setting up and How long it takes.

Eight mistakes Spanish companies make

1. Starting the bank account late. The remittance cannot begin until the account is open, and onboarding takes weeks. Start the conversation before incorporation.
2. Inconsistent names and numbers. A director's name that differs between passport, registry certificate and power of attorney stops filings. Use the passport spelling everywhere.
3. Missing the 60-day and 30-day deadlines. Shares must be allotted within 60 days of receiving the money and FC-GPR filed within 30 days of allotment.
4. Deducting at the wrong rate. Without the residency certificate and Form 41 on the payment date, the Indian payer must deduct at the domestic rate. Treaty relief cannot be added afterwards without a slow refund claim.
5. Paying fees without evidence. Management fees with no contract, time records or deliverables are disallowed, and the Spanish parent still suffered the tax.
6. Forgetting the Spanish declaration. The D-5A is due within one month and the D-8 within seven months of the Indian year end; both should agree with the Indian filings.
7. A nominee Resident Director. A director who signs but takes no part in decisions is a risk to the director, the company and the group. Choose a real role.
8. Planning the exit last. The 10% share-gain rule, the pricing rule and the structure chosen at entry decide which exit routes are open. See Exit and restructuring.

Sector notes for Spanish investors

Spanish investment in India is concentrated in a few sectors, and each has its own pressure points. Reported figures for 2023 put bilateral trade at about USD 8.25 billion and cumulative Spanish investment at about USD 3.94 billion to December 2023, with roughly 280 to 300 Spanish companies operating in India. The list of names includes groups in renewables, auto components, ceramics, infrastructure, industrial engineering, information technology and fashion. These numbers come from a secondary source and are given only for context.

If your sector is not listed, the first step is the same: identify the sector under the FDI Policy, confirm the route and any cap, and check whether a licence is needed before the company can trade. The structure guide, Structure options, gives more sector notes.

Banking and onboarding: the step that decides the timetable

Opening the Indian bank account is the least predictable step of the project. Indian banks apply know-your-customer checks to the company, to each director and to the beneficial owners of the Spanish parent, and they ask for the source of the funds, the purpose of the account and evidence of the registered office. Some banks ask a director to attend in person or to verify identity at a branch or through a video call. The authorised dealer bank must also be able to receive euros and issue the inward remittance certificate that supports FC-GPR.

• Choose the bank early and ask for its checklist before incorporation.
• Prepare a beneficial ownership chart that runs from the Indian company to the individuals who ultimately own the Spanish parent.
• Keep the Spanish bank informed so that it does not hold the remittance for questions about purpose.
• Use consistent names across every document, as the bank will compare them line by line.
• Plan a second account, for example in a different currency or with a different bank, once the first is working.

A Spanish group with a relationship with a bank that has Indian branches can sometimes speed the process, but the regulatory checks are the same. We usually start the conversation in week one, in parallel with the apostille, so that the account is open when the certificate of incorporation arrives.

Questions a Spanish board usually asks

Boards tend to ask the same five questions at the approval stage, and the answers are worth having in the paper that goes to them.

1. What can go wrong, and what does it cost? The main risks are late filings, the wrong treaty rate, disallowed fees and a weak Resident Director arrangement. Each is avoidable with a calendar and a documented policy.
2. How much cash do we need, and when does it come back? Size capital from a 12 to 18 month plan. Expect fees and royalties before dividends, and dividends only after audited profit.
3. Who runs it? Decide the Resident Director and the managing director before filing, and write down their authority limits.
4. Do we need to tell anyone in Spain? Yes: the D-5A declaration within one month, the D-8 report where it applies and the group's tax and transfer pricing files.
5. What if it does not work? A solvent company can be sold, bought back, merged or wound up, each with tax and pricing rules. The exit routes are set out in Exit and restructuring.

The full guide series

Each guide stands alone and links to the others. Start with the one that matches your next decision.

How AU Corporate can help

AU Corporate is a pan-India advisory firm, established in 2016, that supports foreign companies at every stage of an Indian subsidiary. We work with Spanish finance teams and advisers so that the Indian and Spanish positions agree.

Scope note: we handle the Indian side. Spanish tax, Spanish company law and the Spanish foreign investment declarations come from your Spanish advisers, and we coordinate with them.

Official sources

Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, Agencia Tributaria (Spain), Spanish Ministry of Economy, Trade and Business and the Ministry of External Affairs (India).

Frequently asked questions

Sources and how this page is maintained

Last updated 2 November 2026. General information only, not legal or tax advice. Indian and Spanish rules change often; confirm current requirements before acting.