May 7, 2005 at 10:57 am #51084
Can anyone list the pro’s and cons of buying a Spanish company off the shelf and then using it to purchase a property.
I’m buying a property to live in with my partner on a joint mortgage and have been told it would be better off for us to own it through a company as we will pay less taxes this way.
Or does anyone have any links to informative web-sites relating to this issue? I know I should really seek specialist legal advice but as our case is fairly basic and straight forward I would like to know whether it’s worth looking into this further or not.
June 15, 2005 at 2:27 pm #58400
As a (we think!) reputable commercial estate agent based in spain, we have a great deal of experience in selling and buying properties under “S.L.´s ( nearest equivilent an english Ltd.) and there are advantages as well as disadvantages. One advantage is being able to sell the company that owns the properties shares, as apposed to selling the property, thereby avoiding most of the 7% tax normally payable by the purchaser, thus allowing a lower resale price in principle. A disadvantage however is that some lawyers will advise that it can be dificult to acurately check for any liabilities that the company may have at the time of sale, and this would obviously pass to the new owner. It can be a very tax efficient way of buying and selling property, but really you would need to asses your personal needs. if you want to contact me personally for a more detailed discussion please feel free to send me a private message.
June 15, 2005 at 6:06 pm #58401
David is right with his comments regarding your consultation, buying on a company’s name might be a good idea…or bad, depends.
As a lawyer I am dealing with a case like that at the moment, my client wants to buy a big farm house with land in Málaga Province and the property is in a company’s name ( Spanish S.L. ), well I have been discussing it with my client and my advice is ti buy the property, NOT the company.
Reasons: just as David says, you can’t be accurate checking the liabilities and debts of the company, not as you can with a property. According with the Spanish Law when you buy a property the Land Registry is automatically closed for embargoes, claims or debts which were directed to the previous owner,( in fact the Spanish Land Registry is a model of efficiency in Europe ) . You can’t do that if you buy the S.L. as there could be hidden debts or legal problems which might reach the S.L. ( and therefore the property) even after it is sold. Another problem is powers of attorney given by the S.L. previous to the sale….very dangerous.
And the definitive reason: If the company has no business activities in Spain and is just incorporated to own a property , when you come to buy trying to avoid the 7% transfer tax ( in theory applicable only when you buy a property not a company) the Tax Office might consider it a “fraude de ley” therefore claiming a 7% tax as it were the transfer of a property ( actually it is ).
Anyway you should meet a spanish tax advisor or a lawyer in your area.
I hope this opinion helps, and excuse my english !
Jose Maria Sánchez Alfonso
Fuengirola, Costa del Sol
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