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Buying Property in Spain Through a Company: Pros and Cons Explained

Are you considering investing in Spanish real estate? Purchasing property through a company can offer a range of advantages, both financially and strategically. Let's explore how this approach can maximize your investment potential while minimizing risks.
Purchasing property in Spain through a company offers several advantages across financial, legal, and strategic aspects. Here's a breakdown of the benefits:

Benefits of buying property in Spain through a company

  1. Tax Deductions: Property expenses become tax-deductible when intended for economic activity, potentially leading to significant savings.
  2. VAT Deduction: Buying property for economic activity through a company allows for VAT deduction, reducing overall expenses associated with the purchase.
  3. Tax Efficiency: Companies in Spain are subject to a flat corporate tax rate of 25%, which may be lower than individual income tax rates, resulting in potential tax savings.
  4. Anonymity: Utilizing a company structure offers a degree of anonymity, as company details are recorded in public registers rather than individual shareholder information.
  5. Flexibility: Transferring ownership through selling company shares is often easier than dealing with the legal complexities of selling the property itself.

Disadvantages of buying property in Spain through a company

  1. No Income Generation: If the property is meant to be a primary or secondary residence, it does not generate income for personal income tax (IRPF). This means there are no tax advantages to offset.
  2. Requirement to Charge Market Rent: If the property is used by a shareholder, the company must charge market-rate rent, taxed at the corporate rate of 25%. This means that you can't not use the property for personal use unless you charge yourself a monthly rent. If you don't rent it out, the government will charge you a "market rent" according to the property cadastre value.
  3. Additional Taxes: Buying through a company may incur additional taxes such as VAT on rent charged and implications for Transfer Tax.
  4. Legal Complexity: Multiple owners within the company structure can lead to diminished control over property-related decisions and potential disagreements among shareholders.
  5. Tax Evasion Risks: Deliberate evasion of Spanish tax liabilities through company ownership could lead to significant penalties and legal consequences.
  6. Lack of Personal Use: Company-owned properties are typically required to be used for business purposes, potentially leading to additional tax liabilities.
  7. Increased Costs: Owning property through a company can involve higher costs, including legal fees, accounting fees, and the cost of setting up and maintaining the company.
We exclusively advise clients to consider purchasing through a company in Spain if their primary objective is real estate rental and they aim to build a diverse property portfolio for rental purposes. However, if the intention is to utilize the property as a second residence, we recommend buying as an individual. It's essential to note that establishing a Spanish company incurs expenses that must be taken into account.
At UTRUST, we specialize in assisting international citizens with their investments in Spanish real estate. Our team analyzes the best strategies tailored to your individual needs. For a complimentary consultation, please feel free to reach out to us at info@utrust.es.