Buying a property in Spain can be an excellent opportunity for generating profits.
The year of the pandemic has changed everyone’s mindset, especially from a business point of view. A lot of people have seen their businesses go bankrupt and others have seen their businesses grow like never before.
Opportunities are opening up in other markets, it’s time to make new decisions, and we are here to remind you that it is possible to purchase and sale a real estate through a brand new Spanish company, but also through foreign companies (incorporated and with registered offices out of Spain).
This matter has raised the curiosity of the investors in the last years and is currently gaining importance as a result of the renaissance of the real estate sector in our country.
Companies (legal entities), both Spanish and with registered offices outside Spain, can purchase real estate located in Spain. And why not invest through a company in the beautiful Costa del Sol paradise, Marbella?!
Why should I invest in a real estate through a company?
This is the most common question we are being addressed when we explain to our clients the purchase process of a real estate on Costa del Sol, no matter if they want to buy a new development property or a resale property.
First of all, and most important, we need to analyze and study the situation in each specific case before taking any legal step.
The logic behind investing in the real estate sector through a company is to pay less taxes that would correspond paying as an individual (natural person), in order to assume others, with the purpose of making the final total cost of the purchase cheaper for the investor.
To give you an example, acting as a company means not paying Transfer Tax or Stamp Duty Tax, Capital Gain Tax, or even facing a lower tax when passing on real estate as an inheritance. On the contrary, we can sum up the payments of all these taxes into the so-called Corporate Tax which, of course, must be paid by every company.
It is important to bear in mind that one formula is not always more profitable than the other and, according to the situation in each specific case, we are here to guide you during the process.
Let’s analyze briefly the steps involved in the process of incorporation of a Spanish S.L.
To be more specific, in Spain, Limited Liability Companies or S.L. represent a high percentage of the total number of companies, behind only the self-employed, nearly 1.200.000 active limited companies in Spain nowadays.
It is necessary, to participate in the normal legal-economic traffic in Spain, the obtention of a NIF or CIF.
Every individual (natural person) or legal entity requires a NIF or CIF.
Foreign individuals must apply for a N.I.E. (Número de identidad de extranjero – EN. Foreigner’s Identification Number), meanwhile the companies must apply for a CIF (Código de identificación fiscal – EN. Tax identification code).
Entering the process:
1. Application for the name of the company
First step is to make sure that the name chosen to identify the SL has not been used by another registered company. Several possible names for the company must be included and the Commercial Registry will issue the Negative Certificate of Company Name which certifies that the name approved is reserved for the applicant, with a validity of 3 months, time frame in which the applicant must register it before the Notary Public.
2. Open the bank account of the company
3. Drafting the Articles of incorporation of the company
Which contain the structure, the internal functioning and regulation on which the company will be managed.
4. Public Deed of incorporation of the company
It has to be signed in front of the Notary Public by all the partners of the limited liability company.
5. Obtaining the CIF (Código de identificación fiscal – EN. Tax identification code)
Of the limited liability company, issued by the Tax Authorities as a provisional CIF.
6. Registration in the Commercial Activities Tax (Impuesto de Actividades Económicas – IAE)
Of the start of the activity to be undertaken by the company, in front of the Tax Authorities.
7. VAT or census declaration
Submission of the form 036, to register in the Register of Businesses, Professionals and Withholders.
This step is mandatory.
8. Registration in the provincial Commercial Registry
The members of the company must register with the Commercial Registry of the province where they have their registered office.
9. Issuance of the definitive CIF
The incorporation of the limited liability company is completed.
Is it worth it to buy a property in Marbella through a company?
Let’s analyze some points:
The purpose of the investment
If the intention is to purchase a real estate for rental purposes, it should be noted that EU residents are entitled to offset most of the rental-related costs and pay an income tax rate of 19% on the net profit. However, non-EU residents cannot offset any costs, but pay an income tax rate of 24% on gross income. UK residents fall into the latter category according to the regulations set in 2021.
The value of the investment
Why? It might be interesting for some residents (for example Sweden, Holland or Russia) to have a corporate structure to own the property, by application of old tax treaties that do not entitle Spain to tax on the value of a company’s shares, even if the only asset is Spanish real estate.
To transfer the funds to a natural person might imply a quite high cost if the funds to be invested are already in a corporate structure.
It makes sense to use a company if the investment is made for business purposes within a corporate structure.
For some wealthy investors, privacy may be relevant.
How to start the process?
Let’s arrange a meeting to discuss further the process of incorporation of a Spanish S.L.
Our Tax Department plays an important role in the process, and we are available to study the situation in each specific case.