HOW TO BUY A PROPERTY IN SPAIN USING A USA COMPANY
We have already seen in other articles on this website that it is established that there are different formulas for acquiring a company in Spain, including using an existing foreign company to operate in Spain (either with a permanent establishment – PE, or without permanent establishment – SIN EP), or create a Spanish company expressly for the acquisition of real estate in Spain.
Also, as we have previously mentioned, we are talking about the fact that, in order to acquire a property in Spain in the name of an USA company to develop a real estate investment activity, it is not necessary to set up a Spanish company for the acquisition of real estate, since this can be carried out through an existing foreign company, and that through a registration process in Spain, can operate perfectly as an investment instrument in Spain, without the need to set up a Spanish company.
In this article we are going to deal precisely with the case of an existing USA company , which wishes to operate in Spain and intervene in real estate purchase and sale operations, or the development of real estate activities, such as rental, sale, reform, construction, etc. No need to set up a Spanish company.
For these purposes, we are going to talk about the following:
1.- PRELIMINARY CONCEPTS
USA COMPANY : The USA company that wishes to operate in Spain, must contemplate in its statutes that the activity that it is going to carry out in Spain (purchase/sale, construction, brokerage, rental management, etc. ) is covered by the statutes of this society. With which, and prior to making the decision to buy in Spain through this company, it is necessary to review the statutes of this company to confirm whether they contemplate said activity, and, if not, carry out the appropriate formalities in the country of origin , before the commercial registry of the country of origin , to include this type of activity in its statutes.
PERMANENT ESTABLISHMENT : Secondly, we must be clear about what type of business structure we are going to need in Spain for the development of the activity.
That is, if we are going to count on material resources (offices, cars, etc. ) or human resources (employees, etc. ) in Spain for the development of this activity.
For example, let’s take the case of a USA company of nationality that decides to invest in Spain for the acquisition of a property and that wishes to obtain returns through the rental activity.
In this case, if the rental activity does not require any allocation of material resources (offices, reception, cars, etc. ), or human resources (a Spanish resident employee for cleaning, maintenance, reception of keys, etc.), but it is simply the acquisition of the property to put it up for rent through some platform, and, as we say, without the allocation of any type of resources located in Spain.
In this case, we would be talking about the case of a US Company registered in Spain WITHOUT Permanent Establishment (Company WITHOUT EP).
Or, if, on the contrary, the US company needs for this type of investment project to have personnel resident in Spain, with its own local means of transport, or with customer service offices, etc.
In this case, we would be talking about the case of a US Company registered in Spain WITH a Permanent Establishment (PE Company).
This point is very important since the tax and management treatment is different in both cases.
- In the event that no material or human resources are needed in Spain for the development of the activity, we would be talking about a US Company registered in Spain operating WITHOUT a Permanent Establishment (WITHOUT PE). In this case, the activity to be carried out in Spain would be subject to the income tax of non-resident individuals, taxed at 19% if it is a resident company in a country of the European Union, or at 24% in the rest of the cases (as in this case), with management and maintenance tax obligations different from the WITH EP companies.
- On the other hand, if it were an activity or an investment project for which human or material resources are needed in Spain, in this case we would be talking about a US company with a permanent establishment, and which would be subject to Spanish corporate tax. , with a tax rate of 25%, and with a management treatment different from non-permanent foreign entities.
For more information regarding the tax and management conditions of the different treatment of companies registered in Spain with permanent establishment and without permanent establishment, click here to consult our specialized article
Given the difference in consideration for tax and management purposes involved in being considered a company with a permanent establishment in Spain, or without a permanent establishment, it is important to have this clear from the outset, and it is not always clearly defined. For this reason, it is often necessary to resort to the double taxation agreement established between the country of residence of the company, and Spain.
To see what are the Agreements signed between Spain and USA with which you have agreements to avoid International Double Taxation, click here.
- In USA:
Regardless of the structure that is needed in Spain to develop the activity, and whether the company has a status with a permanent establishment or without a permanent establishment, as defined above, said US company must go through a registration process. in Spain that goes through the following:
- Obtaining the ORIGINAL company documents:
- Articles of incorporation of the company
- Tax identification document of the company in US
- Society statutes
- Commercial registry report confirming that the company is registered
And in these documents it must be made very clear who are the administrators or managers authorized to represent the company, as well as the social participations of the partners or shareholders.
And in addition, this documentation, which must always be original , or, if original documents are not provided, authorized and notarized copies must be provided, that is, authenticated by a local notary in origin.
- All this documentation must be translated into Spanish by a registered official translator, either in the US.
- All this documentation must be legalized and officially recognized, with recognized executive effectiveness to be used in Spain, and this is done by obtaining the Apostille. The Apostille is a seal obtained through an authentication procedure established in the 1961 Hague Convention, and is applied to all those countries that have signed this agreement. Click here for more information about how to obtain the Apostille in the US.
- In Spain : Once all the documentation indicated above has been obtained, in Spain we must proceed as follows:
- Obtaining the NIE (foreigner identification number) the manager or administrator of the company . This document is a tax identification number through the registration of the administrator in the Spanish bureaucratic and administration system.
This document is obtained:
- Either through the Spanish offices and consulates in the country of origin ( click here to obtain information about the Spanish Consulates in the US ), which you can find attached below.
- Or, by appearing directly, or through your lawyer/representative in Spain with powers of attorney, at any of the territorial immigration offices in Spain.
- Obtaining the Spanish NIF of the foreign company . In the same way that the administrator of the company will be required to obtain a tax identification number in the Spanish administration, the US company, in order to operate in Spain and be able to carry out real estate transactions, will need to be registered with the administration. Spanish tax number, to obtain a tax number, which will be the one you use to carry out any type of transaction in Spanish territory.
This document is obtained by presenting the documentation of the company legalized and apostilled in the manner established in the previous paragraph before the Spanish tax office , which, after reviewing all the documentation , will assign a tax identification number for the company, which will be its better identification for any type of transaction in Spanish territory.
- Tax representative . One of the differences between foreign companies registered in Spain with a permanent establishment (PE), and without a permanent establishment (WITHOUT PE), stems precisely from the obligation to appoint a tax representative in Spain.
With regard to companies without a permanent establishment (WITHOUT EP), they are subject to the Income Tax of Non-Resident Individuals (IRPFNR), and it is necessary to appoint a fiscal representative in Spain to carry out the projected real estate activities, and to have a notification address in Spain, which can be used by the Spanish administration to notify and communicate any type of tax matter related to the activity to be carried out.
This fiscal domicile is usually that of the manager, or lawyer who manages and maintains the operation of the company in Spain.
However, and here comes the big difference with the WITH EP Companies, the tax representatives of these companies are NOT jointly and severally liable for the tax obligations contracted by the Company. In other words, the tax representative, normally the manager or lawyer who manages the tax activity of the company in Spain, is not responsible in the event of non-compliance with the tax obligations of the companies in Spain.
On the other hand, in the case of US Companies WITH Permanent Establishment (CON EP), which, as we say, are subject to Spanish Corporation Tax, and for whose operation and development in Spain they need a structure that requires greater complexity, and the assumption of greater fiscal and legal obligations in Spain than companies without a permanent establishment, implies that the tax representative in Spain of said companies assumes the “joint” liability of the company vis-à-vis the Spanish administration.
The figure of the fiscal representative is a very important figure, since it will be responsible «solidarity», that is, at the same level and with the same responsibility as the company, of all the fiscal obligations contracted in Spain. In other words, the tax representative will be the one required by the Spanish administration to comply with said obligations, in the event that the foreign company does not comply with them. With which, as we can see, it is a position of great responsibility, since said fiscal representative is going to assume all these types of obligations jointly and severally. Therefore, it is a business position of high responsibility and functions.
In this regard, it must be said that for many years Spanish regulations have required that the tax representative of foreign companies or companies with a permanent establishment be a tax resident in Spain . In other words, for a foreign company to be recognized in Spain with a permanent establishment, it was required to appoint a fiscal representative who had an address in Spain. This has normally been an obstacle to the establishment of foreign companies in Spain, since in many cases, the lawyers or managers in charge of managing the activity of these foreign companies were not always willing to assume such a degree of responsibility, which, this became a real obstacle for the development of activities and implementation of international companies in Spain.
However, recently, progress has been made in this regard, and the Spanish administration interprets that, for companies or companies registered in any of the countries of the European Union, they can designate the administrators or managers of said companies as tax representatives.
Thus, for example, a US company, which wants to establish itself with a permanent establishment in Spain, can designate the US manager, or US administrator, as tax representative, who will be responsible for the obligations of the Company, without the need to designate a representative with domicile or residence in Spain.
However, this obstacle has not been solved for resident foreign companies originating from other countries outside the European Union, which, in these cases, as we say, makes it difficult to establish them in Spanish territory, as they have limited availability by local managers to assume such a high degree of responsibility for these companies.
- Bank account . In order for non-resident foreign companies registered in Spain, either with a permanent establishment or without a permanent establishment, to be able to operate in Spain, they must have a bank account opened in the name of said companies. With which, once the legalizations of all the documents of the company have been obtained, as well as the NIF of the manager, or administrator, the NIF of the company, and the designation of the fiscal representative, these documents must be provided to the bank so that it can proceed. to the opening of a bank account in the name of the foreign company .
For this, the bank will require, in addition to the documentation indicated above, all kinds of information and documentation that proves the financial aspects of the company, as well as the origin of the funds that will be used to carry out the planned transactions in Spain . . To do this, you will require accounting reports, corporate tax returns, etc. from the country of origin . This type of information will depend on or will be different depending on the financial entity in question, and will help pass the filter of the money laundering prevention law in Spain, an essential requirement to act in Spain through a corporate structure.
- Act of real ownership . In addition to all of the above, to carry out the real estate operation in question, the acting notary will require, in addition to all the documentation of the company as stipulated above, the manifestation of the real owners of the company.
A “beneficial owner” is one who owns more than 25% of the company’s stock or shares. With which, it will be necessary to verify the origin of the funds used for the acquisition of the property, as well as to comply with the law on measures to prevent money laundering in Spain, to inform who are the partners of the Company that hold a participation greater than 25% of the same.
- Need for powers of attorney . Given the complexity, and the fiscal and legal implications derived from the registration of a foreign company in Spain, it is highly recommended to grant powers of attorney to your lawyer, or manager, so that they can carry out all these procedures on your behalf and the need for you to have what to do in person.
From TLA we invite you to contact us for any matter or service related to your installation/investment projects in Spain.