Gibraltar Properties - Costa Del Sol Properties - Costa De La Luz Properties - Morocco Properties - Portugal Properties 16th July 2018 
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One of the most difficult aspects of buying property in Spain is getting your head around deciding how to structure the purchase. The buyer, who may be either resident or non-resident, may choose between individual and corporate ownership.

While Spanish Property Tax laws for individuals are complex, those for corporate property owners are only slightly less knotty. Using a corporate vehicle to structure your purchase is a perfectly legitimate way (approved by the Spanish Authorities) to reduce the owner’s tax liabilities.

Residents or non-residents alike may be shareholders and directors of an SL, and there is the additional advantage that should the individual who “owns” the property become involved in litigation, any liability he or she may incur cannot involve the property because legally it belongs to the company.

Deciding whether to use a corporate vehicle for the ownership of your Spanish property will depend largely on what the objective is in buying the property, and in essence ensuring that the tax savings cover the cost of forming and running the company.

We are going to consider using a Spanish holding company, known as a Sociedad Patrimonial (SP). The latter will be taxed as follows:

  • General part: this portion of the tax liability relates to the profit of the less the expenses that can legally be deducted. This amount is taxed at 40%
  • A special part: this portion relates to the proceeds derived from the sale of a company’s assets and is taxed at 15%

Your lawyer will be able to design the most efficient way to structure your company’s assets at purchase or further down the line.

When it comes to selling the property we need to look at what tax regime will be applied to the shareholders on sale of the property. The property may be sold in two distinct ways:

By transferring the shares of the SP

Here, the profit from the sale (which is the difference between the sale and purchase price, as established by the corporate tax rules) is subject to capital gains tax, for which the vendor is liable.

If the shareholder selling the shares is non-resident, the capital gains tax due is established by the rules in the " Taxation for Non-Residents Law". Where the vendor actually pays the tax will depend upon the existence of double taxation treaties between their country of residence and Spain.

By selling the property

If we choose to sell the property the SP would pay 15% capital gains tax. It will then distribute dividends to the shareholders; the tax rate applied is subject to the shareholder’s tax residency.

The dividends distributed by the SP to the shareholder who is a Spanish resident for tax purposes are not taxed again in the Spanish personal income tax. Withholding will apply, however; the individual can deduct this withholding paid in his tax return. There is also a deduction in the quota of the tax; it is called deduction for double taxation.

In the event that the shareholder of the SP is non-resident in Spain, he will need to see if there is a double tax treaty between his country and Spain in order to determine the tax rate that will apply to the dividends or if there is any withholding tax. When there is no international tax treaty, the dividend will be subject to the general rate of 15%.

Although the above gives you a fairly good idea of the basic concepts of owning property through a corporate vehicle, it is important that every case is studied in isolation in order to ensure that that your assets are owned in the most tax efficient way. This will include incorporating the financing of the property into the structure, etc.

Related articles:

Click here to view our full list of articles containing information essential to anyone who has purchased (or is considering purchasing) property in Spain.