The death of the company purchase
In recent years it has become increasingly less popular in Spain to buy a property in the name of a company.
There are certain situations when this is a recommended option, but generally lawyers and financial advisers are reluctant to advise it.
As regards using a Spanish limited company, there are certain advantages that include not paying personal income tax, or wealth tax.
There is also the advantage upon selling the property that there will be no 3% withholding tax and you may be able to sell shares of the limited company as a means of selling the property.
However there are also many disadvantages.
This includes the rate of Capital Gains Tax with Corporation tax set at 25% for net profits of less than €300,000 per annum, and 30% thereafter.
You will also need to hire an accountant and seek legal advice both of which can cost around €1,500 per year, plus VAT.
Meanwhile, if you choose to buy using a UK Ltd company, you will not pay tax on personal income or wealth tax.
Plus, in the case of sale of the property, the company pays tax on the profits at the rate of 21% (as with individuals) and not the 25/30% as is the case with an SL.
However here too there are disadvantages.
In particular non-resident companies must pay a tax of 3% of the value of the property every year.
And as with a Spanish limited company there can be significant set up costs as the company must hire an attorney.
The main think to remember however when buying a property is that every case is different and should be looked at in its own right.
Posted on June 5th, 2012 filed under Property and Other News.