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Owning property in Spain through a limited company

This information has been prepared by Sykes Anderson Perry Limited as a general guide only and does not constitute advice on any specific matter. We strongly recommend that you seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of any information or advice given or omitted

Michael and Margaret are two UK nationals living and working in Gibraltar. 10 years ago, they purchased a villa in Sotogrande (Cádiz) for €5 million. At the time, they were advised to purchase the property through a Spanish limited company. The Spanish company carries out no activity as the property is not let out. Michael and Margaret spend their holidays and weekends in Sotogrande. They come to our offices to discuss their wealth planning. Michael and Margaret each hold 50% of the shares.

Michael and Margaret mention that the company declares that it is not making any gain and that they pay little, or no, company tax. We bring to their attention that Spanish tax authorities are carrying an aggressive policy against companies that merely own property in Spain. We advise them to act before the Spanish tax authorities contacts them.

The first step will be to carry out a valuation of the open market rental value of the property. The company will have to pay company tax on the deemed income from a shareholder who has the property at their disposal. We will need to look at their tax position in detail before they are notified by the Spanish tax authorities.

Owning properties in Spain through limited companies can be an expensive exercise and expert advice should be sought prior to purchasing a property through these vehicles as there may be alternative, more tax efficient solutions.

November 2018
Álvaro Aznar Azcárate
Solicitor and Spanish Abogado
Sykes Anderson Perry Limited