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News and Events on Spanish Laws and Taxes

Dutch-company Director’s loan formalization when buying Spanish properties

In the Netherlands, it is very common for the partners and directors of Dutch companies to withdraw the money that belongs to the company to use it for private purposes. In the case at hand, as experts in real estate law, we find that investor clients of Dutch nationality use the funds of their company or society to acquire their homes in Spain in a private way.

This, in principle, is allowed by Dutch law, according to which, using and withdrawing small amounts of money from the company on account of directors’ private investments is allowed, and is not taxed. It is tax exempt.

Although, from the year 2023, a new regulation was established in the Netherlands that establishes a limit of provisions, and also, increase of control system on the origin of the funds in Spain. For this reason, from €700,000, it is established that these provisions that are made by the directors, can really mean an indirect remuneration. With which, special care must be taken when the Dutch investor uses funds from his company to acquire a property in Spain, and these provisions exceed €700,000.

However, when formalizing the purchase and sale of properties in Spain, although in the Netherlands it is not necessary to formalize a document for the withdrawal of dispositions for an amount lower than that established, it is necessary to present some type of document that justifies the origin of these funds. For example, a document drawn up and formalized by the director as manager of the company, or a loan agreement between the company and the director. In the absence of this Dutch document, in Spain a loan contract can be prepared which must go through the Spanish tax administration. It is exempt from taxes, but a declaration must be submitted to the regional tax office, in which this loan is declared by means of a contract made according to Spanish laws.

This will prevent in the future that Spanish legislation can consider that the money received by the director is a donation from the hidden company.

Therefore, for this, it is necessary to prepare a contract in which the company lends the money to the director, and the latter obliges him to return it, with interest at market value. In other words, average interest rates must be established according to the market, so that it cannot be considered a fictitious operation.

Once this contract has been prepared, it must be submitted to the regional tax administration, using model 600, which, as we say, is exempt.

However, out of prudence, once the loan contract has been prepared in Spain, before formalizing it, it would be necessary for the investor to have the agreement of his accountant or Dutch tax advisor to confirm that the operation to be carried out is correct.

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