Buying property in Spain through a company can be an efficient structure for some investors and an expensive mistake for others. The answer depends on the purpose of the acquisition, the investor’s country of residence, the intended use of the property and the long-term plans for sale or succession. Raso Investments analyses these factors with the investor before the purchase, when the structure can still be chosen freely, and puts the selected structure into place.
Changing the holding structure after the purchase is usually costly, because transferring the property from an individual to a company, or the other way round, is itself a taxable transaction. That is why the decision should be taken at the outset.
Options when buying property in Spain through a company
Broadly, an investor can acquire Spanish property:
- Personally, alone or jointly with a spouse or partner.
- Through a Spanish company, typically a limited liability company (sociedad limitada, SL), owned by the investor or a family group.
- Through a foreign company, incorporated in the investor’s home country or elsewhere, which holds the Spanish property directly.
Each option has different consequences for the taxation of rental income, the use of the property by its owners, the sale of the property or of the shares, and inheritance. Our page on commercial and corporate law describes the company law side of these structures.
What we review
- Purpose of the investment. A property bought to be let on a professional basis, or as part of a portfolio, is treated very differently from a holiday home used by the family.
- Private use by shareholders. When directors or shareholders use a company-owned property, tax rules on related-party transactions and benefits in kind may apply, both in Spain and in the investor’s country of residence.
- Corporate tax and distributions. A Spanish company is subject to corporate income tax, currently at a general rate of 25%, on its profits, and distributions to shareholders are taxed again as dividends, subject to treaty rules.
- Foreign entities. Non-resident entities that own Spanish property may be subject to a special annual levy, currently 3% of the cadastral value of the property, unless they qualify for one of the legal exemptions, which generally require transparency about the ultimate owners or a genuine economic activity.
- Transfer of shares. Selling the shares of a company whose main asset is Spanish property may in certain circumstances be treated for transfer tax purposes as a sale of the property itself.
- Succession and wealth taxes. The structure affects how the investment is valued for wealth tax and how it passes on death.
- Compliance. Beneficial ownership disclosure, annual accounts, bookkeeping and the costs of maintaining the company over time.
How we work
We start by understanding your objectives and your personal tax position, coordinating where necessary with your advisers in your country of residence. We then compare the realistic scenarios over the expected holding period, setting out the tax and administrative implications of each. Once a structure is chosen, we incorporate the Spanish company or review the foreign entity, obtain the tax identification numbers, prepare the corporate resolutions and powers needed to sign, and complete the acquisition in the name of the chosen vehicle. The legal review of the property itself follows the same standards described on our page on buying property in Mallorca.
Common risks and mistakes
- Choosing a company simply because it is common in the investor’s home country, without analysing the Spanish rules.
- Using an offshore company and becoming liable for the special levy on non-resident entities year after year.
- Not documenting the private use of the property by the shareholders, which can lead to adjustments by the tax authorities.
- Underestimating the annual costs of accounts, tax filings and corporate formalities.
- Assuming that a later sale of shares will avoid transfer tax in every case.
Tax aspects
There is no single answer as to whether a company is more efficient. For a family holiday home, personal ownership is often simpler. For investors with several properties let commercially, or with plans to reinvest the income, a company may offer advantages. The outcome depends on the investor’s residence, the applicable double tax treaty, the income generated and the exit strategy. The rates mentioned above are those currently in force and may change. Every case is reviewed individually. You can read about the wider framework on our pages on property investment in Mallorca and wealth tax in the Balearic Islands.
The financing of the acquisition also matters. Loans from shareholders, bank finance and capital contributions have different consequences for the company, for the shareholders and for the deductibility of interest, and Spanish banks apply their own criteria when lending to companies controlled by non-residents. We consider these aspects together with the structure so that the investment can be funded, held and eventually sold or transferred in an orderly manner, and so that the documentation supports the position adopted if the tax authorities review it.
Frequently asked questions
Can a foreign company buy property in Spain?
Yes. It will need a Spanish tax identification number and its representatives must have the authority to sign, usually evidenced by legalised and translated corporate documents.
Is it better to use a Spanish or a foreign company?
It depends on where the investor lives, how the property will be used and the tax treaty between the two countries. A foreign entity may face the special levy unless it qualifies for an exemption.
Can I move a property I already own into a company?
It is possible, but the transfer usually has tax costs. We analyse whether any specific regime is available in your case before recommending it.
Does a company protect the property from inheritance tax?
Not automatically. The shares form part of the estate and their value usually reflects the property. The effect depends on the applicable regional rules and on the heirs’ circumstances.
Next steps
If you are considering buying property in Spain through a company, write to info@raso.law and describe the transaction and the property: location, approximate price, intended use, your country of tax residence and any existing companies you hold. We will review your case individually and reply in writing.