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Purchasing a new build using a spanish SL or company Joe Williams


I am looking to purchase a new build villa using a Spanish Sl which I intend to run as a rental business and if use it myself I will pay market rent. My lawyer says I should be able to claim back the VAT because I am using a Spanish SL whose statutes show i trade in real estate. I realise I may have to sell it after 5 years or pay the tax.

I think as a company I will also pay a 1.2% reduced stamp duty until the end of year?

Joe Williams

Also just out of interest. My lawyer advised me if I buy a resale property using a Spanish Sl i CAN buy paying only 2% as long as I sell within 5 years (or pay the remaining tax) and rent it out short term as a business.

I would like to know if this is the correct advice and if so if the same applies to buying a new build property using Spanish SL where I reclaim the VAT on the purchase.

Joe Williams
Adolfo Martos Gross / TM Expert

Joe, although I am no expert in tax law (and subject to a better opinion from my colleague Inmaculada), this is my view.

As a general rule, input VAT is only deductible if the property purchased is destined for an activity that is not exempt from VAT. Leasing is exempt of VAT, therefore VAT is not deductible.

In addition, in this case the issue is aggravated because when selling the house in the future, as it would be a second transfer, the sale would be exempt from VAT so deduction would not be possible.

VAT would only apply in case of a lease that includes services specific to hotel activity, but be very careful because the Tax Agency is very suspicious about this type of operation.

Inmaculada Domecq / TM Expert

Hi Joe,

this is not a straight forward issue. Even though you buy a property under an SL company if the business of the SL is VAT exempt, as for example, renting residential properties, the VAT borne is non deductible. In addition, acquiring a property with VAT is mandatory if we are under a first hand property. If it is a second hand property then you should assess whether VAT exemption can be waived and whether it is worth it to do it.

Indirect taxes related to real estate can be tricky so I encourage you to contact an expert for advise on the different alternatives.

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