Buying resale property in a company vehicleGiles Danon
29th June 2021 at 12:16 pm
Is there any tax advantages to buying resale property in a company. Either a U.K. Ltd or a SL owned by a U.K. Ltd.
The purpose of acquisition is primarily for personal occupation but from time to time it will be rented out perhaps 4 – 6 weeks per year.
Campbell D Ferguson
29th June 2021 at 5:55 pm
I’m not an accountant, but I have heard that the Spanish tax authorities are taxing companies based on assumed rental income, whether the property is rented or not. Their theory is that the directors of the company have an obligation to maximise the company income by use of the company’s assets. Even if the property is occupied by the director/owner of the company, they are assumed either to being paying a rent, and so the company is taxed; or assumed to be having a rent-free benefit and so are personally taxed.
I’ve heard of this being extended to cars stored in the garage, where they are company owned and assumed to be available to be rented and gain income for the company.
It seems to me that, if you are caught in that, the other tax benefits are going to have to be good to counter it.
However, do check with your accountant.
1st July 2021 at 6:43 pm
In my view, the only tax advange in buying a Spanish SL holding a property via a UK ltd company is the possibility to avoid the wealth tax. This is very little advantage compared to the huge tax disadavantages you may face:
1) No possibility to deduct any VAT if you decide to make reforms.
2) Having the property at the disposal of the owner/director of the SL is considered like a rental activity. The Tax Inspection will want the SL to pay 25% corporate tax on the presumed rent (equal to rental market value) minus related expenses. Additionally, the Tax Office will understand the possibility to enjoy the house without paying any rent is a dividend in kind and will want to tax it at10% tax rate as per the Double Taxation Treaty England Spain. Furthermore, the Tax Office will claim the Company a withholding tax on those dividends.
4) Liquidation of the company will cost the shareholder 1% Stamp Duty of the net assets distributed plus registration costs.
5) Annual running costs for the company (book keeping, accountancy, etc) of circa 4000 euros.
Whereas if you buy as individual, you avoid double taxation on benefits and capital gain as well as annual running costs related to the company and a headache if the Tax Inspection knocks on your door.
My colleague Inmaculada may give you further advice on this subject as she is the real expert.
Inmaculada Domecq / TM Expert
5th July 2021 at 9:55 am
if the purpose of the investment is private use I will recomend to invest personally. however there are some issues to address such us Wealth Tax. we recomend clients to make a comparison of several alternatives to they can chose the one that fits better with their interest. there are many variables that affect the investment structure.