Are you taking over the shares of a Spanish company that owns real estate, instead of buying the property directly? In principle, this share transaction is exempt from registration duties (ITP) and VAT (IVA). However, if the company qualifies as a 'patrimony company' with no economic activity, the Spanish tax authorities will look through the structure and you will still pay transfer tax on the value of the property.
Purchasing Spanish property through a corporate structure (a Share Deal) rather than a direct purchase (a Asset Deal) is a widely used wealth planning strategy. Nevertheless, vigilance is needed: the Rule 314 in Spanish law prevents tax avoidance through companies.
Share transaction: main rule is tax exemption
The transfer of shares in a Spanish company is exempt from transfer tax (ITP) and VAT. This makes taking over a company on paper more fiscally attractive than buying bricks-and-mortar, where the cost of buyer quickly adds up to 10-14%.
However, the exemption expires immediately when the Spanish tax authorities (Agencia Tributaria) finds that the main purpose of the transaction is to avoid tax on real estate. This is specifically the case of companies whose assets consist mainly of real estate.
Expert Insight: "Many buyers wrongly think that a company is automatically a 'tax firewall'. In Spain, however, the principle of 'substance over form' applies. Without real economic activity, your company will be treated as fiscally transparent in a sale."
Exception 1: The Patrimony Company
You pay but registration fees or VAT on the share transaction if there is a patrimonial company. The law sets three cumulative conditions that must be met to be taxed:
- You acquire directly or indirectly more than 50% of the shares in the Spanish company.
- Real estate in Spain represents more than 50% of assets (the assets) of this company.
- This property will be unexploited for an economic activity.
In this scenario, the transaction is equated to a property purchase for tax purposes. The taxable base here is not the value of the shares, but the Market value or the Minimum Fiscal Value (Valor de Referencia) of the property, whichever is higher.
What is an 'Economic Activity' in Spain?
This is the crucial tipping point. Mere renting is explicitly not considered an economic activity in Spain, unless there is a professional organisational structure.
To qualify as an economic activity, you generally need to prove that:
- There is at least one person employed full-time is for management.
- There is a physical office or premises to manage operations.
Case studies: To Tax or Not To Tax?
| Situation | Activity | Fiscal consequence |
| Example 1: The Holiday Villa | The manager uses the villa privately and rents it out sporadically via Airbnb. No staff. | Do pay ITP. There is no economic activity. The taxman sees this as private use. |
| Example 2: Property management | The company owns several properties and rents through various channels. Staff are employed or actively managed by brokers. | Not paying ITP. There is an economic activity. The share transaction remains exempt. |
| Example 3: Operation | The company owns a building which it uses as an industrial laundry. | Not paying ITP. There is an economic activity. The share transaction remains exempt. |
In example 2, if there is no in-house staff, the regularity and professionalism of the rental must be conclusively proven to prove economic activity.
Exception 2: The 'Anti-Misuse' Contribution Rule
The second exception concerns the short-term holding of real estate in a company. If real estate within the 3 years prior to the share sale was contributed to a company with no economic activity, the tax authorities assume tax avoidance.
Note: In this case, the percentage of shares does not matter. Even if you acquire a minority stake (less than 50%), you will owe transfer tax. The burden of proof here is entirely on the taxpayer.
Risks: The importance of Due Diligence
Taking over a company ("share deal") involves significantly more risk than buying a property ("asset deal"). After all, you are not only buying the assets, but also the past and debts of the company.
A thorough Due Diligence (book examination) is necessary to eliminate the following risks:
- Latent capital gains: If the book value of the property is low and the actual value is high, there is a deferred tax claim in the company. When the company later sells the property, it pays corporate tax on the capital gain.
- Hidden debts: Think unpaid taxes, social security contributions or ongoing legal disputes.
- Contractual obligations: Current leases or supplier contracts that you are obliged to take over.
At Confianz, we conduct both the tax due diligence of the company as the legal audits of the property out so there are no surprises.
Is buying Spanish property with a partnership interesting?
Frequently asked questions (FAQ)
Do I pay tax if I buy shares in a Spanish real estate company?
Yes, if the company qualifies as a patrimony company (no economic activity and >50% property ownership), you pay transfer tax (ITP) as if you were buying the property yourself. If there is an active company, the purchase is usually exempt.
When is renting considered an economic activity in Spain?
Merely letting property is insufficient. Under Spanish law, an economic activity usually only exists if at least one person is employed full-time to manage the rental activity, or if a clear corporate structure is present.
Is it better to buy property or the company in Spain?
This depends on the risk profile and tax situation. Taking over a company can save transaction costs (no ITP), but carries risks such as hidden debts and latent capital gains. An 'Asset Deal' (buying property separately) is legally safer ("clean slate"), but has higher direct acquisition costs.
About the author: Glenn Janssens is a lawyer specialising in Spanish real estate transactions and tax regulations. Since 2017, he has been helping Belgian and Dutch individuals and entrepreneurs safely purchase and structure real estate in Spain. He guides files from A to Z: from due diligence, ownership and tax control to estate planning and optimisation for residents and non-residents. Thanks to his years of experience, hundreds of handled files and focus on transparent communication, Glenn makes complex Spanish legislation understandable and practically applicable for every property buyer.
