We are seeing an increase in friendly couples or family members buying one property together in Spain. The owners then agree who will use the property when and who will pay what costs. Arrangements can also be made about rentals. Therefore, in this article we discuss the possibilities of buying Spanish property with friends or family members.
Option 1: You buy together in undivided ownership
In this scenario, you buy full ownership together directly. Each owner then has a share or percentage in the full ownership. Agreements on, for example, the division of costs or who can use the property when, are recorded by the owners via a private agreement or via a notarial deed. Similarly, it is possible to prohibit the owners from leaving undivided ownership or selling to a third party for up to 10 years.
Option 2: You buy through an unincorporated company
An unincorporated company (entidade sin personalidad jurídica) and in particular a "comunidad de bienes" is a partnership in which shareholders jointly contribute assets or labour to jointly hold assets. It is similar to a partnership in Belgium and the Netherlands or (to a lesser extent) the SCI in France.
Through this structure, it is possible to draw up different agreements on the management and conservation of the property and/or the distribution of rental income. For example, one owner can obtain significantly more powers in proportion to his share in the property.
A comunidad de bienes has no legal personality, so there is unlimited liability of the shareholders. Also, shareholders are taxed in personal income tax and not in corporate income tax (provided no economic activity is carried out).
This option is less common in practice. Friendly couples who opt for such structure usually also have rental plans, extensive agreements on the use of the property or consider taking out a mortgage together in the name of the company.
A comunidad de bienes can be established either privately or by notarial deed.
Option 3: You buy with a Spanish incorporated company
Classically, we then talk about setting up an SL. You then set up a Spanish company together with your partners/partners. This structure is mainly interesting for larger investment projects, where personal use of the property is of limited importance.
The shareholders have limited liability with the SL up to their contributions. The company is taxed by Spanish corporate income tax.
Option 4: You buy with a foreign company
Finally, you can buy Spanish property with, for example, your (existing) Belgian or Dutch company. Such a property purchase is often part of a joint investment with partners.
If the activity is limited to renting out some premises, the company is a non-resident without a permanent establishment. This means the non-resident tax remains applicable and rental income is taxable at the rate of 19%.
Decision: Buying Spanish property with friends or relatives
For most people buying Spanish property with friends or family members, the first option, buying in undivided ownership, will be the preferred route. After all, you then record your agreements via a private agreement or a notarial deed. The other options are more suitable for more complex situations or investors.