Buying Property in Spain Through a Company: Pros and Cons

Buying property in Spain through a company: when it makes sense

For high-value properties or several units, the question often arises: should you buy property in Spain through a company, such as a Spanish SL or an existing foreign company? The answer depends on how you will use the property, on tax in both countries and on your long-term plans.

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The options

Buying as an individual

The most common route for holiday and own-use properties: simple, transparent and with low running costs.

Buying through a Spanish SL

The Sociedad Limitada is the Spanish limited company. It is suited mainly to commercial letting, several properties or development projects. See creating an SL.

Buying through a foreign company

A foreign limited company or holding is possible, but special Spanish tax rules apply.

Advantages of a company

Letting as a business: costs and depreciation count for corporate tax.
Several properties: one structure and one administration.
Succession: transferring shares instead of property.
Liability: limited in commercial activity.

Disadvantages and risks

Private use by a shareholder can be treated as a hidden distribution or benefit in kind.
Running costs: accounts, filings and register duties.
Special tax on companies in tax havens that own Spanish property.
Sale of shares: anti-avoidance rules can tax the sale of property-rich companies like a property sale.
Financing and transparency: different bank conditions and disclosure of beneficial owners.

Tax aspects

Purchase taxes are generally the same as for individuals (transfer tax, or VAT and stamp duty). Profits pay corporate tax instead of non-resident income tax; dividends bear withholding tax and are taxed in the shareholder's country; and shares may be treated differently from the property on inheritance. Always review this together with the tax law of your home country; see tax lawyers.

When is a company worthwhile?

Usually for commercial letting of several properties, developments or professionally structured investments. For a holiday home used mainly by the owner, buying personally is usually better.

An example

An entrepreneur wants to buy three apartments in Palma for long-term letting and a finca for his family. Holding the apartments in a Spanish SL and buying the finca personally can be sensible: rents are taxed in the company with all costs deducted, while private use of the finca causes no conflict. Financing, distributions and succession should be planned from the start. See property investment in Mallorca.

Ongoing duties of a Spanish SL

Keeping books, quarterly tax returns, the annual corporate tax return and filing accounts with the Commercial Registry; appointing a director who can act in Spain; and declaring beneficial owners. Neglecting them leads to fines and problems when selling the property or the shares.

Castell.law is the English and German-speaking practice of Castell Abogados, a law firm in Palma de Mallorca. This page is general information, not advice on a specific case: laws and procedures change, so check your situation with us before acting.

Questions about buying Spanish property through a company

How quickly can an SL be set up?

With documents ready, usually within a few weeks.

Can I buy an existing company that owns a property?

Yes, but it requires thorough due diligence of the company and its tax history.

Is a foreign company a good buyer?

Only after a careful review of the tax consequences in both countries.