- Why consider a company when buying Spanish property?
- Intended use of the Spanish property
- Buying a property in Spain through a company
- Buying property in Spain as an individual
- Using a Spanish or a foreign company to buy property in Spain
- Can a company get a mortgage in Spain?
- Costs and taxes when buying a property in Spain through a company
- Tax implications of selling company-owned property
- Should you buy a property in Spain through a company?
13 min read
Purchasing property in Spain can be an enticing prospect for both individual buyers and investors. While the majority of property transactions involve private buyers, a significant portion, approximately 10 to 15%, are carried out through private companies. This approach is particularly favoured by large corporations and foreign entities due to various strategic benefits. However, this method comes with its own set of complexities and considerations. Whether your motive is personal or business-oriented, this guide aims to highlight the implications of buying property in Spain through a private company compared to a private individual, thereby enabling you to make an informed decision.

Why consider a company when buying Spanish property?
Buying real estate through a company is not as common in Spain as it is in some other jurisdictions like the United States. Nevertheless, for those contemplating this investment strategy, it's essential to understand both its advantages and disadvantages.
One of the primary advantages lies in the potential for tax benefits. The property purchase VAT rate in Spain typically stands at 10%, a cost that can be avoided if the acquisition is carried out by a company involved in economic activities. Furthermore, using a company can provide a level of anonymity and increased legal security, which are attractive factors for certain Spanish property investors.
Historically, some buyers opted to acquire real estate in Spain through a company in order to circumvent inheritance tax. However, changes in inheritance tax law have largely neutralised the need for this strategy, especially as inheritance tax for non-residents has been aligned to match that of residents.
Intended use of the Spanish property
Your intended use of the property significantly influences whether you should buy as an individual or through a company. If the property is for personal use, such as a holiday home or a primary residence, individual ownership tends to be simpler and more cost-effective.
However, if the property is an investment for rental income or future resale, buying through a company offers more substantial benefits. A company structure can provide various tax benefits, legal protections, and management flexibility.
Each option presents distinct advantages and disadvantages, heavily influencing the investor's personal circumstances, financial objectives, and the property's intended use. Let's explore the advantages and disadvantages of each route to Spanish property ownership:
Buying a property in Spain through a company
Purchasing a property through a company in Spain can offer significant advantages, especially for real estate investors and businesses.
Advantages of company ownership
- Potential VAT deduction on new properties: Companies can potentially deduct VAT (currently 10% for residential properties) paid on new property purchases, provided the property is intended for economic activities like rental or commercial use. This can result in substantial upfront savings.
- Tax advantages for rental properties: If the property is used for economic activities like renting, all related expenses (repairs, utilities, management fees, insurance, IBI) become tax-deductible, reducing the company's taxable profit. In some cases, a 100% rebate on tax for rental properties might be available.
- Potentially lower corporate tax rate: The general corporate tax rate in Spain is 25%, which might be more favourable for high-net-worth individuals compared to higher personal income tax brackets.
- Limited liability: Company ownership provides a legal separation between personal assets and the company's liabilities, protecting personal wealth from potential debts or lawsuits related to the property.
- Potential avoidance of property transfer tax (ITP): Purchasing property through a Spanish company might, in some cases, allow you to avoid the Property Transfer Tax (ITP) applicable to second-hand properties sold between individuals.
- Anonymity and privacy: The company's name, rather than your personal name, is registered as the property owner in public records, offering a degree of privacy.
- Simplified transfer of ownership: Transferring the property in the future can be simpler by selling the company's shares rather than directly selling the property.
- No non-resident income tax (for Spanish Companies): Property owned by a Spanish company is not subject to the Non-Resident Income Tax.
Disadvantages of company ownership
- Rental income tax if used as a home: If the company-owned property is used as a primary or secondary residence by the owner or a related party, the company must charge market rent, which is taxed as company income at 25%. VAT might also apply.
- Declaration of dividends: Accessing profits from the property might require distribution as dividends, which could be subject to withholding tax depending on tax residency.
- Higher administrative and legal costs: Setting up and maintaining a company involves ongoing administrative and legal costs, including incorporation fees, accounting services, and annual filings.
- Complex legal requirements: The legal requirements for buying property through a company are generally more complex than for individuals.
- Stricter mortgage requirements: Obtaining a mortgage for a company can be more challenging, often requiring higher down payments (30-50%) and potentially higher interest rates, along with personal guarantees from directors.
- Scrutiny by tax agency: The Spanish Tax Agency often scrutinises transactions involving property purchases through companies to prevent tax avoidance.
- Requirement for economic activity: Spanish companies are ideally used for genuine economic activity, such as generating rental income. Tax benefits might be negated if the primary purpose is personal enjoyment without economic activity.

Buying property in Spain as an individual
The most common method is purchasing property as a private individual, particularly for those seeking a primary residence, a holiday home, or a straightforward investment.
Advantages of personal ownership of Spanish property
- Simplicity and lower initial costs: Buying Spanish property as an individual is simpler, involving less paperwork and lower initial costs compared to company formation. This avoids the expenses of setting up a company and the ongoing administrative overhead.
- Straightforward taxation for personal use: Tax obligations for individually-owned primary or secondary residences are typically easier to understand and manage. Spanish tax residents may also benefit from tax advantages when selling their primary residence.
- Easier access to mortgages: Individuals often find it simpler to secure mortgages, with potentially lower down payments (20-30%) and interest rates compared to corporate entities.
- Greater control (for single buyers): Sole buyers of real estate in Spain have complete control over the property without needing to consult with shareholders or adhere to company regulations.
Disadvantages of personal ownership of Spanish property
- Higher personal liability: Personal assets are directly linked to the property, exposing owners to personal liability for any related debts or legal issues.
- Less favourable tax treatment for non-EU rental income: Non-EU residents renting out personally-owned property in Spain may face higher income tax rates and fewer deductible expenses compared to companies.
- Capital gains tax on sale: Profits from selling the property are subject to capital gains tax, ranging from 19% to 28% for residents and a flat rate of 19% for non-residents.
- No VAT deduction: Individuals cannot typically deduct the 10% Value Added Tax (VAT) paid on new property purchases.
- Limited deductibility of expenses: The range of deductible expenses for rental properties is generally narrower compared to company ownership.
Using a Spanish or a foreign company to buy property in Spain
When purchasing property in Spain through a company, a significant decision is whether to use a Spanish-registered company or a foreign company.
Spanish-registered company
Using a Spanish-registered company, like a Sociedad de Responsabilidad Limitada (SL), may offer certain advantages. Property owned by a Spanish company is not subject to the Non-Resident Income Tax (IRNR). Managing Spanish tax obligations might also be simpler with a local entity. However, setting up a new Spanish company incurs initial costs, estimated to be around €2,432, including legal and notary fees, and annual accountancy costs of approximately €1,452.
Foreign company
Non-residents can acquire property in Spain through an existing foreign company, such as a UK Limited Company. This might offer potential tax efficiency in the company's country of origin. However, it typically involves higher costs due to the need to translate corporate documents into Spanish and legalise them. Both the foreign company and its director(s) will need to obtain Spanish tax identification numbers (NIF for the company and NIE for the director(s)). Opening a Spanish bank account can also be more complex for a foreign company. Once the property is registered under a foreign company, it will be necessary to file a non-resident income tax return in Spain annually, even if it is not rented out.
Post-Brexit, UK companies renting out property in Spain are treated as non-EU residents, facing a higher income tax rate of 24% on rental income without the ability to deduct expenses. Foreign companies without a permanent establishment in Spain may also be required to appoint a fiscal representative in Spain to handle tax matters.
In general, using a foreign company to purchase property in Spain introduces greater complexity and higher costs due to the international legal and administrative requirements.
Incorporating a Spanish subsidiary
A potential strategy is for a foreign company to incorporate a Spanish subsidiary in Spain. This approach could combine the benefits of a Spanish company, such as potentially lower tax on rental income and easier management of Spanish tax obligations, while still being under the control of the foreign entity.

Can a company get a mortgage in Spain?
Companies can obtain mortgages in Spain, but the process is more intricate than for individuals, and lender options may be more limited, too. Here are the main aspects to be aware of:
- Higher down payments: Banks generally require higher down payments from companies, often 30-50% of the property value, compared to the 20-30% for individuals.
- Stringent lending criteria: Lending criteria are stricter for companies, involving a thorough assessment of the company's financial health and business plan.
- Higher interest rates: Interest rates for company mortgages may be higher than those for individual borrowers.
- Personal guarantees: Banks often require personal guarantees from company directors or major shareholders as additional security. For a Spanish SL, all shareholders might be required to act as guarantors.
- Extensive documentation: The documentation required for a company mortgage is typically extensive, including detailed financial statements, tax returns, and proof of income for the company and its guarantors. For non-resident companies, this includes providing apostilled and translated incorporation documents.
- Annual financial viability confirmation: Spanish legislation mandates that banks annually confirm the company's financial viability and ensure no bankruptcy proceedings are underway.
Companies purchasing commercial properties might also consider commercial mortgages, which typically have different terms, such as loan duration of 8-15 years and financing amounts ranging from 50-70% of the property's value.
In summary, securing a mortgage in Spain as a company generally requires a stronger financial standing and a larger capital contribution compared to individual mortgages. To navigate the complexities and identify suitable lenders, consult with a Spanish mortgage broker or financial advisor specialising in corporate property purchases.
Costs and taxes when buying a property in Spain through a company
Purchasing property in Spain through a company involves various upfront and ongoing costs that require careful consideration. Thorough financial planning, including budgeting for all acquisition and holding expenses, is crucial for anyone considering this investment strategy in Spain.
Upfront costs
- Property price: The agreed sale price of the property.
- Value Added Tax (VAT/IVA): For new residential properties, VAT is levied at a reduced rate of 10%. A reduced rate of 4% may apply for social housing, while commercial properties are typically subject to 21% VAT. Companies engaged in economic activities may be able to deduct the VAT paid.
- Property transfer tax (ITP): ITP applies to existing or resale properties, with rates varying between 6% and 10% depending on the Autonomous Community. Purchasing through a Spanish company might potentially avoid ITP.
- Stamp duty (AJD): Typically ranging from 0.5% to 1.5% (and up to 2% or 3% in some regions), payable on new properties and certain legal documents.
- Notary fees: Typically around 0.5-1% of the property price.
- Land registration fees: Approximately 0.5% of the property price or a fixed fee of around €1,000.
- Legal fees: The cost of engaging a lawyer typically ranges from 1-2% of the property price (including VAT).
- Bank charges: If financing is required, charges for opening a bank account, mortgage arrangement (around 1% of the loan amount), property valuation (€300-€500), and obtaining a banker's draft (around 0.5% of the value) will apply.
- Translation and legalisation costs: For foreign companies, these costs for corporate documents can be significant.
- Company formation costs: The cost of setting up a new Spanish company is estimated to be around €2,432.
- Estate agent fees: These are usually paid by the seller, but the buyer might contribute in some cases, typically around 3-5%.
Ongoing property taxes
- Property tax - Impuesto sobre bienes inmuebles (IBI): An annual property tax based on the cadastral value of the property, with rates varying by municipality, typically between 0.4% and 1.1% for urban properties.
- Corporate income tax: Levied at a flat rate of 25% on the company's profits, including any rental income generated from the property. Reduced rates might apply to smaller or newly established companies.
- Wealth tax: While generally aimed at individuals, it could indirectly affect companies, and specific requirements exist to avoid being taxed on the value of shares.
- Non-resident income tax: Foreign companies without a permanent establishment in Spain may also be liable for Non-Resident Income Tax on rental income or deemed income, with rates potentially at 19% for EU residents and 24% for non-EU residents.

Tax implications of selling company-owned property
When a company in Spain sells a property, several tax implications arise, depending on whether the company is a Spanish resident or a non-resident entity.
- Spanish resident company: Any profit realised from the sale is subject to the standard Corporate Income Tax rate of 25%. This tax applies to capital gains, which is the difference between the property's sale price and its acquisition cost minus any allowable deductions.
- Non-resident companies: Non-resident companies selling property in Spain are typically taxed at a rate of 19% on the capital gains. Some sources might indicate a rate of 24% for non-EU non-residents.
In addition to corporate income tax, the seller will also be liable for the Tax on the Increase of Value of Urban Land (Plusvalía). This local tax is based on the increase in the value of the land the property occupies during the period of ownership. Notably, the Plusvalía tax paid is a deductible expense for corporate tax purposes.
The applicability of VAT depends on the nature of the property and the seller's VAT status. If the property being sold is considered a "first transfer" by a VATable entity, the sale might be subject to VAT (potentially at 10% or 21%), often with a reverse charge mechanism where the buyer accounts for the VAT. However, the sale of second-hand properties is generally exempt from VAT but might be subject to Property Transfer Tax (ITP) if the seller is not a VATable entity.
As an alternative to directly selling the property, the company owner might consider selling the shares of the company that holds the property. This type of transaction has different tax implications and might potentially avoid property transfer tax. However, Spanish tax law includes provisions to scrutinise such transactions to prevent tax evasion.
Should you buy a property in Spain through a company?
The answer is it depends. The decision to buy property in Spain through a company is a strategic one that offers potential advantages, particularly in tax planning and liability protection. However, it also involves increased complexity and costs compared to individual ownership. The optimal choice depends heavily on the investor's specific circumstances, investment goals, and intended use of the property.
For those considering this route engaging experienced legal and tax advisors in both Spain and their home country is paramount. These professionals can provide tailored guidance on navigating the legal and administrative processes, understanding the intricate tax implications, and structuring the purchase in the most efficient manner. If you are in need of legal advice in Spain, please refer to our directory.
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The information contained in this article is for general information and guidance only. Our articles aim to enrich your understanding of the Spanish property market, not to provide professional legal, tax or financial advice. For specialised guidance, it is wise to consult with professional advisers. While we strive for accuracy, thinkSPAIN cannot guarantee that the information we supply is either complete or fully up to date. Decisions based on our articles are made at your discretion. thinkSPAIN assumes no liability for any actions taken, errors or omissions.
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