What is better in tax when buying a house in Spain, buying with company or as individual?

Buying Property in Spain: Should You Buy as an Individual or Through a Company?

When purchasing property in Spain, a key consideration is whether to buy as a private individual or through a company. This decision can significantly impact your tax liability and long-term financial planning. This guide provides a comprehensive comparison of the Spanish tax implications for individuals (residents and non-residents) and companies (Spanish and foreign).

Buying as an Individual

1. Spanish Tax Residents

1.1 Property Acquisition Taxes

Spanish residents pay the same property acquisition taxes as non-residents, except for a 90% reduction in Stamp Duty (“Actos Jurídicos Documentados”) when acquiring a new-build home intended as a permanent residence.

  • New Properties, Plots, and Company-Owned Homes: VAT is payable but not deductible. Expenses such as notary, legal, land registry fees, and structural reforms are deductible when calculating capital gains.

  • Resale Properties: Subject to Transfer Tax. The same expenses are deductible for future capital gains.

1.2 Income Tax (IRPF)

Property owners must submit annual income tax returns even if no rental income is received.

  • Primary Residences: Declared but not taxed if used as the habitual residence for at least 3 years.

  • Non-Habitual Residences:

    • Rented Properties: Income is taxed progressively (from 19% to 47%). A 60% reduction applies to net rental income if the tenant uses the home as a primary residence.

    • Vacant Properties: Subject to imputed income tax (1.1% or 2% of cadastral value) for the period not rented.

    • Tourist Rentals: Taxed as general rental income. No 60% deduction applies. Imputed income applies to vacant periods.

1.3 Capital Gains Tax

Formula: Sale Price – Acquisition Price

  • Acquisition Price: Includes purchase price, structural improvements, acquisition-related expenses, taxes, and some mortgage costs (excluding interest).

  • Sale Price: Includes net sale price and any sale-related expenses paid by the seller.

Exemptions for Residents:

  • If reinvested in another main residence within 2 years (under age 65), the gain is exempt.

  • If over 65 and the property was the habitual residence, the gain is fully exempt.

  • No 3% withholding applies.

2. Spanish Non-Residents

2.1 Property Acquisition Taxes

Non-residents pay the same acquisition taxes as residents but are not eligible for the 90% Stamp Duty reduction.

2.2 Non-Resident Income Tax (IRNR)

  • Rented Properties:

    • EU/EEA residents: May deduct rental-related expenses.

    • Non-EU residents: No deductions allowed.

    • No 60% reduction on rental income for anyone.

  • Vacant Properties: Subject to imputed income (1.1% or 2% of cadastral value).

Tax Rates:

  • EU/EEA Residents: 19%

  • Non-EU Residents: 24%

2.3 Capital Gains Tax

Formula: Sale Price – Acquisition Price (as above).

  • Tax Rate: 19% on the gain.

  • 3% Withholding: The buyer withholds 3% of the sale price and pays it to the Tax Office. The seller can claim a refund if the actual tax is lower.

  • Filing: Capital gains declaration must be submitted within 6 months of sale completion.

Buying Through a Foreign Company

Foreign companies are generally taxed under IRNR, not Spanish corporate tax, unless operating through a permanent establishment.

1. Without Permanent Establishment

1.1 Property Acquisition Taxes

Same as for individuals. VAT is not deductible. Other acquisition-related expenses are deductible for capital gains.

1.2 Income Tax

  • Rented Properties:

    • EU Companies: Deductible expenses allowed.

    • Non-EU Companies: No deductions allowed.

    • No 60% deduction applies.

  • Vacant Properties: No imputed income tax applies to foreign companies.

Tax Rates:

  • EU/EEA Companies: 19%

  • Non-EU Companies: 24%

1.3 Capital Gains Tax

Same rules as for non-resident individuals: 19% on gains. 3% withholding applies. No exemptions.

Note: If the property is used personally by a shareholder or their family, a market-rate rental contract must be signed, and rent must be declared and taxed.

2. With Permanent Establishment

A company is considered to have a permanent establishment if it has a fixed business location or authorized agent operating in Spain regularly.

2.1 Corporate Tax

  • Tax Base: Based on accounting profits. Non-deductible payments include fees, commissions, or interest to the parent company unless they meet specific requirements.

  • Tax Rate: 30% (or 35% for hydrocarbon exploration).

  • Repatriation Tax: Additional 19% applies unless exempted under a double tax treaty.

2.2 Formal Obligations

  • File Corporate Tax return using Model 200 or 201.

  • Keep separate accounts for the permanent establishment.

  • Make quarterly payments on account.

Buying Through a Spanish Company

1. Acquisition Taxes

  • New Builds: VAT is deductible only for companies with economic activity (not equity-holding companies).

  • Resales: Transfer Tax applies. All reform and management-related costs are deductible.

2. Corporate Tax on Income

  • Standard Rate: 25%

  • Reduced Rate: 15% for newly created companies for the first two profitable years (subject to conditions).

  • Special Cooperative Rate: 20% for protected cooperatives.

3. Economic Activity vs. Equity-Holding Companies

A company with at least one full-time employee and a physical office may qualify as having economic activity. Mere ownership of property without active management is considered equity-holding (patrimonial).

Tax Advantages of Equity-Holding Companies:

  • Subject to corporate tax (often more favorable than personal tax rates).

  • Exempt from wealth tax.

  • Deduct maintenance and rental-related expenses.

  • Useful for asset protection and succession planning.

Disadvantages:

  • Not eligible for start-up incentives.

  • Dividends taxed at 19%, and may not be covered by double tax treaties.

  • Setup and maintenance costs.

  • If the property is used personally, a rental contract must be signed and taxed accordingly.

4. Special Tax Regimes

Real Estate Leasing Companies: Companies leasing 8+ properties for 3+ years may benefit from an 85% tax discount on rental income.

Tax Haven Companies: Companies from jurisdictions considered tax havens are subject to a 3% annual tax on the cadastral value of properties held in Spain.

 

Conclusion

Whether you buy a property in Spain as an individual or through a company will depend on your tax residency status, the intended use of the property, and your long-term goals. Non-residents and high-net-worth individuals may benefit from structuring ownership through a company, particularly for investment purposes. However, each case must be assessed individually to determine the most tax-efficient structure.

For tailored legal and tax advice on property investment in Spain, contact our expert team.