Advantages and disadvantages of buying a property in Spain using a Limited Company

  • Rosa
    Rosa
    Rosa is an experienced English-speaking lawyer in Mallorca and provides expert legal advice and assistance in the following legal areas: Property conveyances, Inheritance, Family, Criminal, Business, Employment and Tax law.

There certainly are advantages to purchasing the property in the name of a foreign or Spanish based Company in Spain. You can either create a Spanish Limited Company and own the property indirectly by owning shares in the said Company.

This option is recommended when there is a need for relative anonymity, in which case you obviously cannot be administrator of the company –all information about administrators is public and can be easily found in the Spanish Mercantile Registry-.

 

Inheritance Taxes

It has also been asserted that purchasing via a company may reduce the liability to pay inheritance taxes in the future. However it should be borne in mind that the European Court of Justice has recently ruled that the Spanish tax authorities cannot charge different rates of inheritance tax for residents and non-residents and the relevant Spanish Laws have been modified accordingly, by Ley 26/2014, which came into force on January 1st, 2015.

The new legislation provides that European Union citizens, ordinarily resident in another European country, may benefit from the same deductions as are available to residents of the region in Spain in which their assets are located. Therefore, this tax liability may already be much lower than previously was the case.

It is also worth bearing in mind that, if you put the property in the name of a foreign company that does nothing other than merely hold this property in Spain, it is possible that the beneficiaries will need to pay inheritance taxes in Spain for having inherited a Spanish property, even though the property is transmitted in the country of origin together with the shares, if it is construed that the only objective of the company is to evade taxes. There would also be potential liability to fines in such as case.

 

Fiscal Obligations of Owning a Company

If buying via a corporate entity, you will also need to consider the following factors:

  1. Non-resident individuals or companies that are owners of a property in Spain that is not offered for rent to third parties (eg holiday makers), must pay a yearly “non resident” tax to the Spanish Tax authorities which is an amount equal to 24% of 1% of the rateable value of the said property. Meanwhile, Spanish Limited Companies that accrue a property pay corporation tax that varies between 0 and 30% of the profits, depending on how high they are. In both cases, there are other annual taxes, ie local tax for having a property in Spain -IBI- etc…
  2. Spanish companies are obliged to keep some records, such as shareholder’s registry, balance sheets, inventories, daily journals and to deposit annual reports and balances in the Spanish Mercantile Registry. You will therefore most likely need to budget for this to be managed on your behalf.
  3. Foreign companies need to name a tax representative in Spain and pay yearly tax representation.

 

Taxes Payable When Purchasing a Property

Taxes when purchasing a property in Spain are the same for individuals and Spanish companies, and they normally represent approximately 12% of the value of the property.

  • Capital gains tax: typically, paid by the seller to the central government
  • Government Transfer tax: may vary but normally 8% of the value of the property
  • Notary fees
  • Lawyer’s fees
  • Land Registry fees.
  • Capital Gains Tax (plusvalía), this is paid by the seller to the local administration if they are a Spanish resident -or retained from the price by the buyer if they are not.

 

Summary

To summarise:

– Purchasing a property in the name of a foreign company is a good choice if this company operates in Spain -ie, for renting or selling properties here, etc…- but not if the only reason for this is paying lower inheritance taxes in the future, since the Spanish law has been changed as a result of the recent European Court of Justice decisión.

– Purchasing the property in the name of a Spanish company for mere enjoyment involves the payment of annual taxes and reporting obligations. This will almost certainly require that the purchaser retains the services of a tax specialist to manage this responsibility, thereby incurring additional fees.

When taking into consideration all of the above, including the benefits and the drawbacks, if you are planning to buy a home in Spain for mere enjoyment, I would advise to do so in your own name.

Client Testimonials

Below is a list of recent reviews received from our clients, obtained via the Wufoo client survey platform:

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    David W Baker, Malaga
    Tuesday, November 06, 2018
    We were extremely satisfied with Alvaro: He explained the law to us and gave us a solution to our problem. He could not have been more helpful and we will definitely use him again.
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    Thom Koller, London
    Monday, November 05, 2018
    Francisca provided a perfect service!

    She is professional, dedicated and took care to understand the needs of my situation. Her service offers exceptional value for money and gives complete peace o...f mind.
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    Michael O'Sullivan, Ibiza
    Thursday, November 01, 2018
    Understanding Spanish law regarding buying and selling properties is a minefield for English speakers. Cristina provided the legal expertise, the translation of legal documents, explanations for all i...ssues, and solutions for our challenges.

    Also, she provides confidence and reassurance that what we are doing is in our best interests and within the law - very important when working in a foreign country.

    In summary, she is an excellent professional that we are so pleased we found and will continue to use for all our legal matters.

    I think you have a perfect solution for supporting people abroad. I was lucky to find you on the internet. Perhaps you could promote your services to all estate agents abroad, so more people can get access to your service when buying or selling abroad.
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    Colin Wilson, Australia
    Tuesday, October 30, 2018
    Overall it was great. Rosa always answered all questions asked and provided clear, concise and well explained answers.

    When there was a delay in responding she did offer an apology which was appre...ciated. Rosa always instilled a sense of confidence that she knew exactly what was going on, what I was asking, and what the applicable law was.

    When not a Spanish local and dealing with her remotely, this provided great comfort in a sensitive matter.
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    Campbell Reynolds, Spain
    Monday, October 22, 2018
    We were very satisfied with the service provided by our lawyer Sabela.

    She was very accomodating, quick response to everything while thinking outside the box for solutions. Also, her English was mo...re or less fluent.
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    David Edwards, England
    Wednesday, October 17, 2018
    Very Satisfied with the service provided by Oliver. He was quick, efficient and value for money. Would definitely recommend to friends.
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    Andrew Morecroft, Lubrin
    Monday, October 15, 2018
    Juan was extremely helpful during every part of the purchase. As I was buying an older property there were slight complications but Juan explained every issue and managed to work through the difficult...ies with supreme efficiency.

    Also there was a ridiculous situation with my Spanish bank account where I could not access the money even though it was in the account. Thankfully I had given Juan power of attorney and he managed to sort-out the problem.

    He went above and beyond the call of duty and I am very grateful for all his help. I would strongly recommend him to anyone looking to buy in the Almeria region.
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    Manoochehr Jafari-Nahad, UAE
    Saturday, October 13, 2018
    Jose-Antonio was extremely helpful and prompt and also it was helpful that he could be contacted via social media like Whatsapp
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    Michele Jansen van Vuuren, Benajarafe
    Saturday, October 13, 2018
    Alvaro was extremely helpful, he couldn't have done more. Very quick to respond to my query.

    Only issue was that some of the documents I needed to provide were not mentioned. However, would defini...tely recommend his services to friends.
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    John Fraser Dunfield, San Francisco
    Friday, October 12, 2018
    Good understanding. Applied sufficient pressure as needed to get the issue resolved. Reasonable charge for service provided. Would definitely recommend this service to friends.
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    Rosemarie Byrne and John Cooper, Dublin Ireland
    couple
    Tuesday, October 09, 2018
    We found Francisca extremely helpful with a great amount of knowledge about buying a house and re-locating to Spain.
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    Jane Evanson, London, UK
    female
    Tuesday, October 09, 2018
    Francisco was very helpful and professional. I was very happy with the advice and service.
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    David McChesney, Puerto Banus
    Wednesday, October 03, 2018
    Alvaro was very professional, Knowledgeable of the subject at hand, did not over-charge - in fact cut costs in the best way for me. Very efficient in the entire process. Thank you.
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    Martha Kimes, Scottsdale, Arizona USA
    female
    Tuesday, October 02, 2018
    Francisco was incredibly responsive (and quickly).

    Unlike American attorneys (and I know, because I am one), he didn't even bill me for a few follow-up emails/calls that he made on my behalf which... he easily could have done.

    I was supremely happy with his legal services.
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    David Roots, England
    Monday, October 01, 2018
    We were very satisfied with the service we received. Rosa dealt with the matter in hand promptly and efficiently.
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    David Knors, Barcelona
    Wednesday, September 26, 2018
    Oscar was very kind, professional and fair. He was able to help me with my problem and he was very determined that he would.

    Oscar is very competent, polite and showed a lot of effort to solve my ...problem. I strongly recommend him.
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    Tauri, Estonia
    female
    Tuesday, September 25, 2018
    Very satisfied with the service. Francisco is bilingual English-Spanish and was always quick to respond and was very professional at all times.
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    Mohamed kheder, Dublin, Ireland
    Monday, September 24, 2018
    Every thing was great ... Rosa was really helpful and understanding. And I see the value for money was good enough.. of course I would recommend it to any of my friends.

    And I would like to have th...e chance to thank Rosa and the whole company for everything.
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    Daniel Elias, New York
    Tuesday, September 18, 2018
    Excellent service, delivered exactly as promised, and at half the cost a different translator had requested for the same project!
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    Darren & Gemma Nesbitt, Valencia
    Tuesday, September 11, 2018
    Inmaculada has been of excellent service to us, as a family and in helping to set up a business in Spain. She has now undertaking several project for us and has delivered high quality on all of them. ...Perfect service!
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    Patsy Valentin, Granada
    Tuesday, September 11, 2018
    Extremely accommodating and highly professional and very pro active. Excellent result and service. Highly recommended.
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    Jovie, Malaga
    Wednesday, September 05, 2018
    My lawyer Alvaro was extremely helpful and very efficient. I would definitely recommend his services to friends.
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    Albert Roldan, France
    Tuesday, September 04, 2018
    Alfonso was extremely helpful, particularly since we requested a quick turnaround for the 18 documents needing to be translated from English and French to Spanish.

    He was fluent in our phone conver...sations and email correspondence, he never misunderstood what our requirements were. He was was clear in explaining how this process works and what the price included.

    I would highly recommend him to anyone needing these services.
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    David Grundy, UK
    Friday, August 24, 2018
    Jose was very polite and we received an excellent service from him. Nothing was to much trouble and his communication was 2nd to none. Highly recommended!
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    Mario Klappholz, Miami, Florida
    Thursday, August 16, 2018
    Inma was very helpful, always happy to assist. I particularly appreciated her professionalism. I would not hesitate to recommend her services to friends.
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    Daniel Spitzhorn, Spain
    Tuesday, August 14, 2018
    Miguel in Oviedo helped us during the process of buying a flat in Asturias. He was just brilliant!
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    Tracey Iliffe Bradley, UK
    female
    Tuesday, August 14, 2018
    Rosa dealt with everything efficiently and promptly and went beyond our expectations by helping us to open a Spanish bank account and deal with other minutiae.
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    Erslaan Ahmed, Bangladesh
    Friday, August 10, 2018
    Gave very good advice and provided an excellent solution. Inma is very professional in her work. I would recommend her services to friends.
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    John Ryan, Derby, England
    Wednesday, August 08, 2018
    A perfect relationship between client and professional. Nothing was too much trouble.

    Went over and above his job and more. I would only use his services if I need legal services. I were very lucky... to find Jose first time round.

    Thank you jose
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    Robert Brownlee, Almeria, Spain
    Wednesday, August 08, 2018
    Everything was as it should be: excellent. Had to pay by bank transfer and maybe would have liked another means of paying.

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