We are regularly asked whether it is interesting to purchase property in Spain with your Belgian company. The answer to this question depends on your personal situation. Besides the purchase by the company, a loan from the company may be a valid alternative. Specifically, you borrow from your Belgian company for a private purchase in Spain. In this article you will find more information on the possibilities of borrowing from your company for a second residence in Spain.
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Option 1. You borrow via current account
You finance the purchase with your current account. The advantage is flexibility. You do not then have to account for the credit. Also, no concrete repayment agreements are needed. The disadvantage is the cost. You have to pay interest to your company. For instance, the annual reference interest rate is 6.48% for income year 2021.
Option 2. You choose a fixed-term loan
You enter into a loan agreement with your company for a certain fixed period. In consultation with your accountant or bookkeeper, you can consider whether to align the repayment plan with the distribution of dividends or liquidation reserves.
The formula to be applied to calculate the interest rate is: (P x 24 x N) / (N + 1). "P" stands for the monthly charge rate, which for loans closed in income year 2021 was 0.11% (for financings other than for a vehicle). The "N" stands for the number of months the loan runs.
For example, if you borrow for a period of 5 years (60 months), we arrive at an annual interest rate of at least 2.59%.
Option 3. You take out a mortgage loan
In this case, your Belgian company establishes a mortgage on the property in Spain. The advantage is that you can borrow at lower interest rates. The reference interest rates for income year 2021 that you must use as a minimum are a fixed interest rate of 1.34% in case you also take out a mixed life insurance policy, a fixed interest rate of 1.29% for other mortgage loans or a market-based variable interest rate.
The downside is the notary and registration fees in Spain. There is also a stamp duty (AJD) payable on the secured principal of the loan, plus appurtenances (e.g. secured interest). The rate of the AJD depends on the autonomous region and ranges from 1.2% in Andalusia to 2% in Murcia. Please note that according to Spanish legislation, these costs are for the lender, namely your company. You yourself only pay the interest.
For example, if you establish a mortgage of €250,000 + €25,000 appurtenances for a property located in Valencia. The AJD is 1.5%. You should take into account a stamp duty of 4,125 euros and +/- 2,000 euros notary fees. These costs are for the company.
In addition, the other credit terms are less flexible and similar to a mortgage loan as you would take out from a bank or financial institution.
Finally, your company needs to be registered in Spain. Here you can find more explanations on the registration procedure of a Belgian company in Spain.
If you have private property in Belgium, your company can in principle also establish a mortgage on property located in Belgium for the purchase of a second residence in Spain. The notary fees will then be for you privately.
Option 4. Your IPT
For completeness, if your company has taken out an IPT - this is pension savings through the company - you can use the accrued contributions as collateral for a property located in Spain. Technically, however, you are not borrowing from your company, but from a financial institution. You then do not have to take into account the tax reference interest rates.
Decision: borrowing from your company for a second stay in Spain
If it does not prove opportune to buy in Spain with your Belgian company, financing by your company may still be interesting. In that case, it is advisable to sit down with your accountant or bookkeeper to see how you can borrow the most advantageously, taking into account the accumulated reserves within the company.
