Opportunities are emerging in other markets; it is time to make new decisions, and we are here to remind you that you may buy and sell real estate through both a fresh new Spanish firm and a foreign company (incorporated and with registered offices out of Spain).
This topic has piqued the interest of investorswho wish to invest in Marbella in recent years and is now gaining prominence as a result of our country’s real estate resurgence. Companies (legal entities), both Spanish and with registered offices outside of Spain, can buy property in Spain. And why not invest in the magnificent Costa del Sol paradise of Marbella through a company?
Why purchase a property with a Company (S.L) in Marbella?
The market here in Marbella has been attracting investors from many different countries, maybe due to the fact that the markets in their home countries are not interesting for them, or it’s just an interesting venture to do some business in this area. And I think the first thing that I usually tell clients that come with an investment plan, is that this can be a market of opportunities
“This is the most typical question we receive when explaining the real estate buying process on the Costa del Sol to our customers, regardless of whether they want to buy a new development home or a resale property.”
First and first, before initiating any legal action, we must assess and research the issue in each individual instance.
The idea behind investing in the real estate sector through a business is to pay fewer taxes than would be paid as an individual (natural person), in order to assume others, with the goal of lowering the investor’s ultimate total cost of purchase.
For example, functioning as a business implies avoiding having to pay Transfer Tax or Stamp Duty Tax, Capital Gain Tax, or even face a lesser tax when passing on real estate as an inheritance. On the contrary, we might combine all of these taxes into the so-called Corporate Tax, which must be paid by every corporation.
It is crucial to remember that one formula is not always more profitable than another, and we are here to help you through the process based on the scenario in each unique case.
Steps involved in the process of incorporation of a Spanish S.L.
To be more exact, Limited Liability Enterprises (S.L.) account for a significant portion of the overall number of companies in Spain, behind only the self-employed, with about 1.200.000 active limited companies in Spain today.
- To participate in routine legal-economic trade in Spain, an NIF or CIF must be obtained.
- A NIF or CIF is required for each individual (natural person) or legal company.
- Foreign people must get an N.I.E. (Number de identidad de extranjero – EN. Foreigner’s Identification Number), whilst businesses must obtain a CIF (Código de identificación fiscal – EN. Tax Identification Code).
- Entering the process: Application for the name of the company in the RMC
- Open the bank account of the company
- Drafting the Articles of incorporation of the company
- Public Deed of incorporation of the company
- Obtaining the CIF (Código de identificación fiscal – EN. Tax identification code)
- Registration in the Commercial Activities Tax (Impuesto de Actividades Económicas – IAE)
- VAT or census declaration
- Registration in the provincial Commercial Registry
- Issuance of the definitive CIF
The incorporation of the limited liability company is completed.
Advantages of buying a property in Marbella through a company
Once you have decided on a property to invest in there’s no general rule to apply for each property and every project because each company, or let’s say each an individual is different. They have different financial and tax considerations to think about.
But if it’s a pure investment and you don’t have any purpose to live in the property yourself. Lets say, you just want to invest, or have a commercial idea, then usually most of the investors are doing it through a Home Country Company or in most cases actually the Spanish SL company.
The purpose of the investment in Marbella
Taxes are an important part of this business. If you are investing in a property, you must look at the purchase price, the price you will be spending on the construction, decoration, and the profit you wish to achieve. These days all these percentages are coming very tight and all these taxes are very important to take into account.
If the objective is to purchasing a property for rental purposes, it should be remembered that EU citizens are able to deduct the majority of the rental-related expenditures and pay a 19% income tax rate on the net earnings. Non-EU residents, on the other hand, cannot deduct any expenditures and must pay a 24% income tax on gross income. According to the 2021 legislation, UK residents fall into the latter category.
There are certain tax rules that are beneficial for investors here in Andalucia when investing in a resale. There is the used property with certain deductions on the transfer tax that can be applied under certain conditions. Basically If the property use is a resale property, commercial use or a commercial plan for rent, to rent or to renovate it, to rebuild it, then instead of the7 % transfer tax, a 2% transfer tax can be applied under the condition that the property needs to be sold within 5 years. (see law)
Renting a Property with a Spanish SL in Marbella
If you buy a house and in the meantime, want to you rent the house? Can the with 2% VAT be aplied? If it is a commercial use and it’s determined by the tax office as commercial use, you’re investing in the property, you’re renting the property, you make money off that property basically, because that is the purpose of a company, to make money. So if the company is making money or making an investment in that property to make money, then the reduction can be applied.
The investment’s return
Why? Some residents (for example, Sweden, Holland, or Russia) may find it advantageous to use a corporate structure to own the property in order to take advantage of ancient tax treaties that do not subject Spain to tax on the value of a company’s shares, even if the only asset is Spanish real estate.
If the money to be invested are already in a corporate structure, transferring them to a natural person may come at a hefty cost.
If the investment is for commercial objectives within a corporate framework, it makes logical to use a corporation.
Privacy may be important to some wealthy investors.
How do you get started Investing in Marbella?
“We understand that every single project will have to be studied specifically. If you have a proper plan and if you’re working with professionals that know the market and also have experience with actual Investments, being a totally different way to to buy a property than for vocational use we recomend you to use a professional broker that knows that kind of product to start with, and to have also some kind of at least knowledge about which kind of taxes that will be applied for different kind of projects and when the broker has that those options then available to the client, interesting investment projects, then what we usually do is that we sit down together with that client, go through all the, let’s say legal and tax concerns that the client had to make an actual budget, including their taxes before the the client makes that pretty important decision. And I think that’s in the end a wise way to approach an investment in Marbella. well, If any one of our clients are looking to make an investment in Marbella.” Peter Franke (Partner of Franke de La Fuente Lawyers)
Please feel free to contact us for any further information. We are experts in Investment transactions and can hel you , along your purchase destinated to a property investment. Dinf many more articles regarding Legal advice: suspention of wealth tax in spain, Golden Visa or general property taxes in Spain
Julie Cavro is the Marketing Director at Pure Living Properties. She is responsible for all multi-channel marketing actions in constant coordination with the other departments of the company with the sole objective of obtaining the best results for our clients.