There are various options to choose from when deciding how to structure the ownership of a property in Spain:
- Sole ownership
- Joint ownership
- Spanish company
- UK company
- Offshore company
Each option will have different fiscal and inheritance implications, and different running costs. This is a complicated question that needs specialist advice to be properly understood.
Most British people buy the simple way, which is in their own names, or shared with a spouse. In most cases this is a sensible option. However if you have any inheritance concerns – for example you are remarried and want your partner, rather than your children, to inherit the property on your death – then you need to consider one of the other options. You should always discuss your needs and circumstances in the context of Spanish inheritance laws with your lawyer before deciding how to structure the purchase.
If you are going to buy a small and inexpensive property then it is probably not worth your while going to great lengths to optimise the fiscal impact of your purchase. However the more expensive the property you buy, the more you have to gain from spending money on specialist advice to reduce your tax exposure. High net worth individuals with complex financial arrangements and large budgets will have the most to gain from optimising their purchase from a fiscal point of view, and will need to use lawyers who specialise in cross-border tax efficiency. Most British buyers, though, have a budget of 200,000 Euros or under, and may not have much to gain from spending money on specialist cross-border tax lawyers. However if you have children, and depending upon your age and other circumstances, it is usually worth discussing the issue of Spanish inheritance tax and how to minimise it with your lawyer in Spain.
Note that the advent of Self Invested Pension Plans (SIPPs) increases the opportunities for a wider section of society to buy in a tax-efficient manner, but it also increases the complexity of the issues to be considered. SIPPs are such a recent creating that there are few professionals in Spain who understand them, and most lawyers in Spain will never have heard of them. If you wish to use this vehicle for buying in Spain you will need to consult a specialist in the UK.
If you decide that your interests are best served in buying through a Spanish limited company then you will need to make arrangements well in advance of buying the property. Off the shelf companies can be bought in Spain, but in general the process of setting up a company takes longer and is more expensive than in the UK. If you are going to buy through a Spanish company then you will need to hire your lawyer at this stage to help you set up the company. Bear in mind, however, that tax laws in the UK are going through a period of change and may end up penalising UK residents who own property in Spain through a company. If you are tax-resident in the UK you should always consult your financial advisor before deciding how to structure your purchase in Spain. If you are or will be tax resident in Spain then you should consult your lawyer. If you are wealthy and have, or will have, significant assets in both Spain and the UK then you will need to consult a cross-border tax specialist.