Buying Spanish property through a company: in the past, this was often advised. However, due to changed Spanish legislation, this is not always opportune.
First, this article discusses buying property through a company for residents in Spain. This is relevant for people who eventually wish to move permanently to Spain. Then we explain the tax aspects of buying a second residence through a company.
You live or plan to move to Spain
When you emigrate to Spain, you will usually become a Spanish resident. In principle, Spain is then allowed to tax your worldwide income. Thus, as a Spanish homeowner, you will be able to enjoy a number of benefits in both the wealth tax if the capital gains tax and inheritance tax.
However, these benefits will not apply if you own property through a company. On the contrary, if you wish to occupy the property, you will have to pay market rent to your company (similar to benefits in kind). On the one hand, the company will owe corporate tax on the actual rental income. On the other hand, you will pay taxes on the income you obtain from the company.
You buy a second residence in Spain through a company
Here, we need to distinguish between buying with a Spanish company on the one hand and a Belgian company on the other.
A Spanish company - for example, a SL - setting up for an acquisition is usually interesting if the investment is part of a commercial activity. In case there is a professional operation of real estate, there is a full cost deduction and VAT deduction.
If you plan to also use the property (partially) privately, the deductibility will be limited. As a result, the size of the investment will be determinant in assessing whether a SL is a suitable tool for investing in Spain. Merely a SL setting up for tax purposes is inadvisable.
Buy with your Belgian company is not necessarily more advantageous than buying privately from a Spanish tax perspective. After all, there is no big difference between a foreign company holding Spanish property and a non-resident with property in Spain.
As a result, your company will be taxed on all property income in Spain under Spanish law. Non-resident companies can in principle only benefit from a limited cost deduction in Spain, even in the event of a subsequent sale. Moreover, the company is deemed to obtain a market rent if the company managers use the Spanish property. As a result, all in all, there is no specific advantage in Spain for investing with your Belgian company.
Nevertheless, buying with a Belgian company can be interesting. After all, through your company you can make a finance purchase, without having to distribute profits or reserves (taxed). For many clients, this is therefore the main reason why they buy through a Belgian company.
Buying property through a company: Belgian taxation
According to the double taxation treaty between Belgium and Spain, real estate is taxed in the country where it is located. Only Spain may therefore tax Spanish real estate. As a result, income from Spanish real estate in Belgium is exempt from Belgian corporate tax.
If your Spanish branch makes a loss (read: you do not rent out your Spanish premises), you can in principle deduct this loss from Belgian profits to the extent that the losses have not already been set off in Spain.
Due to the corporate tax reform, from income year 2020, you can only deduct foreign losses when those losses are final. Your losses are final when you close the foreign branch. In practice, this means selling the property in Spain.
If you also going to use personally, you enjoy a benefit of all kinds. You are required to declare this in your Belgian personal income tax return. The benefit in kind is calculated on the basis of the actual rental value.
Important: you may have to pay Spanish capital gains tax if you sell your shares in a Belgian company. If the company assets consist mainly of Spanish real estate, you will be liable to pay Spanish capital gains tax.
Buying property through a company does not provide any particular benefits from a purely Spanish perspective. However, a purchase can be interesting from a Belgian perspective, with the Belgian company financing the purchase in Spain.
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Update: March 2020