Business investment in Spain and the taxman

For Sale in Marbella

Purchase of house by a company

Do you want to buy a business property or investment object in Spain? Your English-speaking estate agent will explain.

Spanish company

- Income tax and wealth tax

The property can also be purchased by a Spanish company (a Spanish SL - SociedadLimitada - ), whereby the shares in the Spanish SL are held by a number of foreign companies. If only the house is sold by the company, it will owe 25-30 per cent tax on the profit it makes as a result. At the sale of the Spanish company (instead of the house) this tax will not be due in the first place. After all, shares are sold.
However, when determining the price of the shares at the sale of the company, the future tax claim on the capital gain of the company's property will be taken into account. However, if you or the buyer of the shares has incurred or will incur a lot of costs (maintenance and repairs) or if the rental income is somewhat disappointing, or the interest costs for e.g. a private loan for the purchase of new furniture by the company are somewhat high, it is very likely that this taxable profit will be reduced again.

Cost structure

The purchase of a second Spanish home can be interesting from a tax point of view to have this take place via a Spanish company. However, there must be a considerable interest in setting up such a company structure. Setting up the structure is not only costly; annual costs for the company must also be taken into account. In addition, we have noticed a tendency in Spain for the Spanish tax authorities to increasingly try to combat 'improper' structures. In the case of the cooperating estate agents, this is less of a problem, as the properties are rented out commercially and transparently.

Sales tax

Entrepreneur for the IVA (VAT)
VAT (or turnover tax) is called IVA in Spain. To become liable for VAT on the letting of a holiday home, there must be an IVA entrepreneurship. One of the requirements for this is that the holiday home is purchased with the intention of letting. Entrepreneurship must be tested from case to case. However, if the holiday home is let for a minimum of 140 days per year, the Spanish Tax Authorities will always assume entrepreneurship. In addition, the holiday home has to qualify as such. This means that the holiday home, given its construction, layout, location and facilities, must be clearly intended to be rented out (and actually used for that purpose) to constantly changing persons. There can be entrepreneurship both in the situation where the holiday home is let directly to the users and where the letting takes place through an intermediary organisation.

Consequences entrepreneurship

If the Spanish Tax Authorities consider the owner of a holiday home to be a VAT entrepreneur, he must submit returns and pay 8% IVA on the rental income. Depending on the situation (whether or not the holiday home is rented out via an intermediary organisation), VAT invoices must be issued. In addition, a VAT administration must be kept.

Application for a VAT number

If, as the owner, you qualify as a VAT entrepreneur for the rental of your holiday home, you must register as such with the Tax and Customs Administration.

Own use

An important point to consider is the owner's own use of the holiday home.
This is the case when the owner concludes a rental agreement with the intermediary organisation with regard to his own home. In this situation, the owner is considered a "regular" guest. In that case, the intermediary organisation must charge IVA to the owner. Because the stay in the holiday home is a private matter, the owner will not be able to claim this IVA back from the tax authorities. Refund requests must be in the possession of the foreign tax authority no later than 30 June following the end of the calendar year in which you paid the VAT.

Inheritance Tax

If the shareholders of the Spanish SL are two or three, for example, Dutch companies, then in certain cases it may be the case that no Spanish inheritance tax is due on the value of the property.A Spanish company is a slightly more complex way to keep the property free of Spanish inheritance tax. Especially if you are the sole shareholder of this Spanish SL. Moreover, the right to levy inheritance tax can be transferred to another country. This depends on your specific situation and the value of the property.

In order not to run the risk of getting into trouble with the Spanish tax authorities (and possibly the the tax authorities from your country) and for more information, we advise you to make an appointment with us. We can give you the necessary tips for your tax obligations for your Spanish home.