What are the options when buying Spanish property in a company name
Buying property in a company name is possible in Spain. There are two ways this can be managed one is via a resident SL company and the other is as a non resident company. In the past Companies have been used to purchase property as advised by Lawyers in Spain as a means to avoiding capital gains and other taxes. The reality is that legally it is not possible to avoid property taxes and never has been. Whether the Spanish property is held by a company or personally unless the property is your main residence capital gains of 21% is still legally payable at sale, as is Inheritance tax on death. There can be valid reasons for buying a property in Spain in a variety of ownership structures but legal advice from a qualified lawyer in Spain should be taken to check that the benefits outweigh the drawbacks based on the particular situation of the buyer.
Buying in a resident Spanish SL
It is possible to purchase a property in a Spanish Limited company. Generally the company is a new company set up purely to hold the asset. If the property is to be used to generate an income from regular rentals and is held in a company structure rather than personally it can be easier to ensure the offsetting of running costs against income are accepted by the tax authorities and to get a rebate on IVA where applicable. If a property is bought in company structure the tax authority in Spain will however assume it is being run as a business and income is being generated and assumed income liable for tax will be applicable whether an income is generated or not.
What are the benefits and drawbacks
The cost of setting up an SL is in the region of € 3.000 and ongoing costs of making quarterly and yearly returns must also be considered. If buying a property already held in a company it is important that extensive legal checks are done to be sure the existing company has no outstanding legal matters against it and no ongoing court actions as once the company is bought the new shareholder inherits any outstanding issues. It is not possible in Spain or other European countries to obtain a mortgage to buy the shares of the a Company that holds a property asset. Whether the company is new or existing in the current environment it can be difficult to obtain Spanish mortgage to finance the purchase so in general this type of ownership requires the property is bought cash.
What financing options will be available
Spanish Banks have in general moved away from offering Spanish Mortgages to entities preferring to only offer finance where a property is held directly by an individual. The Bank of Spain require that a higher level of funds are passed to the Banks balance sheets to cover risk where a company is involved which makes loans to companies less cost profitable for the Bank. Where Spanish Banks still offer loans the shareholders will be required to act as guarantors.
Buying in a non resident company
Purchase of Spanish property can be made via a non resident company. This can be an existing company owned by the individual and can be a trading company or a new company set up to hold the asset. The nonresident company can either hold the property directly or put in between a Spanish SL whose shares are in turn owned by a non resident company. Advice from a Spanish lawyer should be taken to check the most appropriate ownership structure for the Spanish purchase based on the buyers circumstances.
What structure is best for a non resident company
Which holding structure should be used is best is assessed very much on a case by case basis and in conjunction with advice from a qualified lawyer in Spain. In order to buy with a non resident Company the company must obtain a non resident fiscal number in Spain. For individuals this called an NIE and for companies it is called a CIF. In order to obtain the CIF the nonresident company must produce the memorandum of articles or shareholders certificate, certificate of incorporation, and a certificate from the relevant company house confirming the company is set up according to the laws of that country.
How must the company documents be presented.
All the documents relating to the company that will buy the real estate asset will be required to be officially translated into Spanish and hold the stamp of the Hague Apostille. One shareholder of the company will need to have from the company a wide scoped Power of Attorney allowing for them to act on behalf of the company in all matters relating to the purchase. The individual will be required to obtain an NIE.
The Power of Attorney must be carefully worded to ensure all areas are covered and must be in Spanish, again with the stamp of the Apostille. If the company is set up in an offshore jurisdiction the process becomes more complex and under current money laundering regulations an individual may find it extremely difficult to get the transaction to completion. As with Spanish SL companies a non resident company purchase will find obtaining finances from a Spanish Bank will be difficult and providers few and far between.
Should property be bought in a Company structure.
Careful consideration and expert legal advice should always be taken from a Spanish Lawyer when considering ownership structures and generally unless the purchase is at a high price tag level or is being bought for business purposes only, it is rare the benefit of buying in a company outweighs the initial and ongoing costs.