This option of buying real estate offers tax savings along with other advantages. However, buying Spanish property through a company also comes with certain drawbacks. In this article, we list the pros and cons of purchasing in the name of a company. Generally, the advantages only benefit large companies with significant assets and properties managed through asset-based companies.

However, in order to do so, the company must own a minimum of at least eight properties, all of which must have long-term rental contracts, valid for at least three years. In addition, there is the possibility of deducting community fees and council tax IBI in Spanish in their entirety.

None of these deductions is available to private buyers. Read our free guide to buying property in Spain. However, there are also drawbacks to buying through a company rather than as a private individual.

They include:. If the property bought through the company is for your principal or second home, the company must bill you for rent at market rates. You must also apply VAT and taxes such as transfer tax ITP in Spanish. Find out about the buying process in Spain.

When you buy a buy-to-let property through a company, Spanish fiscal law considers that all rental income is profit for the company. If you wish to benefit from this profit, you must declare it in the form of dividends shared out from the company. A company generally has more than one shareholder at least two usually and by extension, the property bought through the company has multiple owners.

In this scenario, you have less control over the property than you would if you had bought it as a private owner. Unless you plan to purchase a large number of assets in Spain, we advise you buy the property as an individual. That said, any purchase through any vehicle requires professional legal advice from a lawyer representing your interests.

At Costaluz Lawyers, we are more than happy to provide this advice to ensure you buy in the way that best benefits you. Get in touch with our team for a free consultation now. I have a Nevis LLC. Is it possible to use this LLC for a cost advantage.

What are the disadvantage verses a purchase in my personal name. Which has the cost advantage 🤔 thank you. Specifically, when the property is intended for personal use or when the company engages in exempt activities not subject to VAT, these deductions may not apply.

One of the most significant benefits of purchasing property through a company in Spain relates to the numerous tax advantages that this method offers.

When the property is sold, individuals typically face capital gains tax on the profits realized from the sale. This approach may reduce or even defer the capital gains tax liability, leading to considerable savings. These expenses may include property management costs, maintenance , and repair costs, potentially reducing the overall tax burden associated with property ownership.

Learn more in our dedicated article on corporate tax rate in Spain. Finally, if the property incurs a loss, such as when rental income does not cover expenses , the company can offset this loss against other taxable income.

In Spain, the application of inheritance tax does not differentiate between residents and non-residents. Historically, there was a distinct disparity in the inheritance tax applied to residents and non-residents.

For this reason, companies were often used to purchase properties in Spain to mitigate the effect of this tax. However, the Spanish Tax Agency is vigilant in detecting such unlawful practices , recognizing them as tax evasion.

Currently, there is no discrimination between those resident in Spain, within the European Union or the European Economic Area EEA regarding inheritance tax. This change has helped to level the playing field, making it more straightforward and fairer for all parties, whether they choose to buy properties through a company or as individuals.

By utilizing a company structure, specifically a Spanish Limited Liability Company Sociedad de Responsabilidad Limitada or S. to buy property in SPain, one can gain a degree of anonymity. This setup preserves the anonymity of the individuals involved in the company, offering an added layer of privacy that may not be available to those who choose to purchase property as individuals.

Buying a property through a company allows more flexibility in management. For instance, it can be easier to transfer ownership by selling company shares rather than dealing with the legal and tax complexities of selling the property itself.

This is particularly beneficial for those with considerable assets, as it provides an additional layer of financial security. Purchasing property in Spain through a company, despite its advantages, also comes with certain disadvantages that potential buyers must weigh carefully.

This approach may not be ideal for every circumstance, and particularly when the property is intended as a primary residence or a second home. In the subsequent sections, we will explore these disadvantages in greater depth to provide a complete picture of the potential challenges associated with buying property in Spain through a company.

In such a scenario, the operation does not generate any personal income tax IRPF. Additionally, the rental charge by the company must include Value Added Tax IVA , thus adding an additional expense for the shareholder.

On top of these, other taxes, such as the Transfer Tax Impuesto de Transmisiones Patrimoniales , may also be applicable. From a fiscal perspective, rental income received from the property is regarded as company income. Therefore, if a shareholder wants to personally benefit from this income, it must be declared as a dividend distributed by the company.

This means the owner will not directly receive rental income. Therefore, it becomes necessary to carefully analyze this operation to ascertain the actual fiscal benefits and implications. Consequently, engaging with a knowledgeable financial advisor or tax consultant to navigate through the complex web of Spanish tax laws is strongly recommended.

Contact our expert tax advisors to understand the tax implications of buying property through a company in Spain.

A tax consultancy is in charge of financial counseling and advising clients about any update or tax requirements. It advice according on how […]. Read More… from Tax Consultancy. When you buy a property in Spain through a company, one potential disadvantage is the issue of legal security. If the property is owned by a company, it inherently has multiple owners — the shareholders of the company.

This multiple ownership can lead to less control for individuals, as decisions related to the property, including potential sale, major repairs, or renovations, will typically require agreement among shareholders.

This can sometimes lead to disagreements or complications, especially if the shareholders have divergent interests or plans for the property. Seeking legal advice and having clear shareholder agreements in place can mitigate some of these potential issues.

This offence carries significant penalties, both financial and potential criminal charges. The Spanish Tax Agency AEAT is vigilant in identifying and penalising such illicit activities.

Therefore, tax authorities have the means to ensure that proper taxes are paid on property owned through a company. In the event of an audit by the AEAT, if they believe a company has been used to evade taxes , substantial financial penalties will be levied.

However, it is important to note that each case and situation is distinct. The topic requires careful consideration and is best navigated with the assistance of tax and legal professionals who are familiar with the nuances of Spanish and international tax law.

There can be various other potential disadvantages to purchasing property in Spain through a company. These can depend greatly on individual circumstances and may need to be evaluated on a case-by-case basis. Some additional challenges can include:.

While it is indeed possible to buy a property in Spain with a foreign company, the process can be somewhat complex and often comes with additional challenges. Here are the general steps:.

Please note, due to the intricacies involved in using a foreign company, we generally advise against it. This is because of increased costs, potential tax implications, and the complex nature of managing foreign documents. Instead, using a Spanish company such as a limited company may make the process smoother, as documents would already be available in Spanish and the company would already be recognized under Spanish law.

At Lawants we can help you start a business in Spain, taking care of all legal matters. We offer comprehensive services to guide you through each step of the business establishment process.

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