Buying through an SL

This topic contains 9 replies, has 6 voices, and was last updated by  Yolanda P. – Ypama Abogados 6 months, 1 week ago.

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  • #198862

    Anonymous1
    Participant

    According to several sources it seems that if you buy property using an SL the tax rate is about 3% instead of about 12.5% if you buy personally.  Is that true?  It does mention however, that you need to sell the property you buy through the SL with the 3% tax within 5 years or else you need to pay the difference to match the 12.5%.

    This sounds too good to be true. I know there are some contingencies such as that you need a minimum cash amount on your business account, have an ‘administrator,’ pay different taxes (with official auditor report), etc.

    It would be great to learn more from you in case you have more information around this topic.

  • #198911

    strudelbaum
    Participant

    The usual transfer tax is 8% but when you buy for an SL  the rate is 2%. This is, however, not meant to apply to your own residence but rather to rentals. The SL has to be a specifically real estate investment company. Talk to a lawyer before you jump into this.

  • #198912

    Anonymous1
    Participant

    Great. Thanks for the reply. That is much appreciated. I definitely will talk to a lawyer on this. Moreover, I heard that you need to sell the apartment you bought at 2% within 5 years. If you have any other tips/thoughts then please do share. Thanks.

  • #198913

    strudelbaum
    Participant

    As far as I understand (please check this) you don’t have to sell unless you have proof of rental for the period. Of course, this would apply to long-term owners only.

    If you’re into making a quick profit on a fixer-upper project or the like they’d tax you accordingly for it. So if you’re buying cheap make sure they accept all the money is above the board.

    Good luck!

  • #198915

    SurveySpain
    Participant

    Even if you don’t rent it out, you can be taxed on the notional income that you would have gained. Same for the car ling in the garage. Its a rental company and so the tax man assumed that’s what’s happening.

  • #198920

    strudelbaum
    Participant

    I think the original question was about the funds transfer tax. Taxation of your rental income is another thing. So whatever you do the taxman will have his share. You do save a lot of money, though, by operating with a real estate investment company. Long-term planning is essential here.

  • #198923

    Anonymous1
    Participant

    Thank you all. If anyone has additional thoughts/knowledge on this topic then please do share.

  • #200133

    Hello Anonymous1,

    There are 3 types of Companies you can own a Spanish property within.

    1: There is the Spanish SL Company you suggest that keeps you within the Spain Tax system so the Property Transfer Tax has to be paid in Spain as you talk about, and also Spanish Inheritance Taxes on death if owned in an SL.

    2: You can own a Spain property in an offshore Company like Gibraltar, Isle of man, Jersey, to name a few, but these are classed as Tax heavens by Spain. Each year these Companies pay annual property Tax of 3% to Spain on the Spain property owned, so very costly.

    3: If you own or Buy the Spain property in a UK Limited Company then it not only protects from Spanish Inheritance Tax, but there is no annual 3% Offshore Company Tax. Also if you buy a Resale Spain property into a UK Company there is no 8-10% Spain Property Purchase Tax, or to future Buyer when the UK Company is resold in future.

    • #200743

      Chris M
      Participant

      I have always wondered WHY? don’t more people buy through an English company, it seems to make by far the most sense to me on every level. So why don’t more people set one up and do exactly that?

  • #201799

    I’m not a tax specialist, but when I have doubts about this issue I go to the AEAT webpage (tax administration) in English:

    http://www.agenciatributaria.es/AEAT.internet/en_gb/Inicio/La_Agencia_Tributaria/Campanas/No_residentes/Impuesto_sobre_la_Renta_de_No_Residentes/No_residentes_sin_establecimiento_permanente/Cuestiones_basicas_sobre_tributacion/Rentas_inmobiliarias_obtenidas_por_sociedades_no_residentes.shtml

    It is said in the webpage: In general, non-resident companies which are proprietors of or possess under any title in Spain any real estate properties or real rights of enjoyment thereon are subject to a special tax. The tax base is constituted by the rateable value, and if this does not exist, the value used will be that determined according to the provisions of the Capital Gains Tax. The tax rate will be 3%. (Although there are exceptions)

    May be the AEAT webpage is wrong?

    Also, if you buy through a company you have to bear in mind other costs of having a company (accountancy, administrator, etc), and you have to think about the consequences in the future, when you plan to sell the property. It may happens that people will not want to buy an existing company (bearing in mind the risks and higher expenses in expert advice) and  the company has to sell the property. The company receives the funds and has to pay corporate taxes. Then you have a company with the money, what would you do with the company? Close it? Would it means more costs and taxes?.

    I suppose the asnwer to Chris is that bearing in mind that it doesn’t seems to save you money in taxes in Spain and that it may make selling more complicate in the future, a lot of people just go for the simplest way to buy a property.

     

     

     

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