Why it doesn’t pay to own property in Spain through a company
By , 27 Jun 17
As tax laws have changed in recent years the disadvantages of owning Spanish property through a company have increased, says Jason Porter, director of European IFA firm Blevins Franks.
Today, clients are unlikely to receive the tax benefits they were once hoping for and may even be worse off than owning the property directly, he said.
Here are some of the key tax implications:
The rules for Spanish residents owning property through a company where it is available for their use are:
The shareholder must pay market rent to the company, for the use of the property. If not, the tax office determines a deemed rent based on its value.
The company has to pay Spanish corporation tax.
Any distribution of profits to the shareholder is subject to Spanish income tax at the savings income rates.
The main residence relief from capital gains tax would not be available, even if it is the shareholder’s home.
The shares in the company are effectively included for wealth tax, without the benefit of the €300,000 (£263,616, $335,754) main home allowance.
Beneficiaries are not entitled to the main home reduction for succession tax.
Shares in foreign companies need to be included on Modelo 720.
Tags: Spain
