November 3, 2016 at 3:57 pm #193390
If you would be so kind as to help because I am very confused about the Spanish situation. I am setting up a trust in Nevis and St Kitts for the benefit of my siblings and me. This trust will have investments in various countries and one of these will be a property in Tenerife which will be sublet to tourists. A bit of reading has revealed the following:
– there is a 3% annual tax for properties held in offshore corporate structures.
– trust are not recognized in Spain and therefore the beneficiaries will be seen as the owners of the property by Spanish authorities.
– Transferring ownership by selling the property carries a 6.5% tax plus capital gains tax of 19%
– if the property is held in a Spanish company and the company is sold there is a notary fee of 300 euro to change the ownership plus capital gains but the government keeps 3% from the buyer until this tax is paid.
So here is where I am scratching my head:
I think the trust will offer no asset protection, correct? And it might attract the 3% per year “offshore tax” in the future?
Is the capital gains tax due in Spain if you are not resident in Spain? How is this when the owner is offshore in a zero tax regime?
We are thinking that it might be better to own the property via a Bulgarian company for 3 reasons:
– one of us lives there.
– corporate tax is flat 10%
– operational costs are low
If we do this I understand that if we want to rent the property to tourists the VAT will be payable in Spain (Tenerife 7%), but what about the income tax? Would it be payable in Spain or Bulgaria?
The trust owning the Bulgarian company would probably not be of any use probably? It would just introduce an offshore element without offering any asset protection or tax advantage?
Finally separation of ownership and rental activity. To protect the main asset against liabilities arising from rental activities Would it make sense to own the property in one Bulgarian company and do the rental activity in another?
Probably we have not thought of many of the consequences. Maybe you have a suggestion on how to do it better? Bear in mind the Trust is supposed to own other assets in other countries.
- This topic was modified 2 years, 8 months ago by vole.
November 7, 2016 at 11:38 am #193456
As you say, Spain does not recognise trusts. You can read about the pros and cons of using a company structure here:
But for proper advice you will have to consult a specialist lawyer.
November 7, 2016 at 9:16 pm #193464
Thank you for your Post regarding owning Spanish property in a Company or Trust.
As I am a Spanish Tax Consultant & Managing Director working for one of the leading International Legal / Tax advice Companies in Spain & UK you will receive the full facts from myself listed below.
1: The Spanish Government does not recognise Trusts for owning Spanish property.
2: To own Spanish property you have to have an NIE number for an individual, or CIF number for a Company.
3: Once you have a CIF number then an Offshore, Spanish or Company from a Country that Spain has a treaty with can own Spanish property fully accepted by Spain.
4: You are correct if an Offshore Company like the Isle of Man, Gibraltar or BVI Company owns the Spanish property then there is indeed the annual 3% Tax to pay to Spain Tax Office each year.
5: Owning Spanish property in a Company from a Country Spain has a treaty with like Bulgaria or the UK then there is no annual 3% Tax so it very cost effective. (This treaty has no relevance to the EU as the treaty was in place with Spain pre EU so no laws are to change with Spain if UK out of EU)
6: The International Organisation I am the Managing Director of manages over 500 UK Companies that own Spanish property all over Spain including Tenerife where your property is located and most of them submit annual Zero Tax Returns to Spanish Tax office.
7: When we place a Spanish property into a UK / Bulgaria Company there is no Transfer Tax of 6-10% as the property is placed into the UK Company in exchange of shares, so no sale or transfer takes places.
8: There is also no Spain Capital Gains Tax as the property is placed into the UK Company based on the original property deed value so no increase in value.
9: The Spain property rental income may need to be declared in Spain, but in most cases it can just be declared back in the UK if the Company is set-up correctly from the beginning with the correct Companies Act documents and Certificate of Residence.
10: Any Company that operates in Spain requires a Fiscal Representative which is an approved Spanish Accountancy / Taxation firm dealing with the Spanish Tax Office (Hacienda). Once the Spanish property is owned by a UK Company there is no further requirement for the Non Resident owners to submit personal non Resident Tax Returns in Spain each year as they do not own the property directly but own the UK Company that owns the Spanish property.
I hope the specific written reply to your comments and questions are helpful and if you would like any further information please post to this page?
November 8, 2016 at 3:57 pm #193483
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