Create a company to buy and rent real estate
As a general rule, in Spain, creating a company to invest in real estate through a Limited Company SL, can generate a series of organizational, legal and tax advantages (deductible VAT for the purchase of a house by society) as well as facilitate the future sale of the property.
In summary, the benefits and advantages of buying a home in the name of a company and not buying and selling a property as a natural person are the following:
- The patrimonial heirs can avoid the inheritance tax, the capital gain tax and sometimes reduce the payment of the ITP Tax on Patrimonial Transmissions. (But be careful, if the autonomous entity that manages the ITP detects the joint transfer of the shares of a patrimonial company, it may end up imputing the ITP when considering a covert transfer).
- Creating a company to invest in real estate offers agility in the management of rental, sale and hiring of employees and future sale of the shares of the patrimonial company.
- Create a company to pay less taxes by deducting expenses derived from the main activity of the Company.
- When buying an apartment in the name of a company (Limited Partnership), they minimize the responsibilities as a natural person, referring them to the SL
Taxation of income from real estate capital
In Spain, when an SL is constituted, the income from the performance of the company is taxed at 15% during the first period in which profits are obtained and the following year, that is, during the first two years of having incorporated a new activity, is taxed at 15% for the income obtained, instead of 25% as would be usual and as it is taxed from the third year. In addition, negative results, called Negative Tax Bases BIN, can be offset with future profits indefinitely.
If you compare this with respect to Personal Income Tax Income Tax, the taxation in this case is more advantageous as a Company, because the tax rate in Personal Income Tax is 19%, and in the case of IRNR Income Tax of No Residents in Spain is 24%.
Another matter to take into account, and for which the acquisition of Properties as SL in Spain is beneficial, is the deduction of expenses derived from the main activity of the Company. In this case, if the corporate purpose of the SL is for example “promotion, construction and sale of real estate” or “management and advice on real estate operations”, you can deduct from the payment of IS Corporation Tax expenses such as the counter, cleaning , gardening, administration or common expenses among others. In the case of the non-resident natural person, they are not entitled to this type of deduction. Also like SL, you save the Wealth Tax.
From the point of view of managing the sale of the property, there may also be benefits in Spain if you have an SL, since what is transmitted in the sale are shares instead of a property. This can lead to benefits especially in the case of Inheritance or Gift Tax.
In the case of VAT, Value Added Tax, if the company leases to individuals, VAT should not be applied, so quarterly VAT is not declared, you just have to make the annual declaration by the ITP and correctly account for all the movements generated in the course of the activity. (This above only applies for leases between individuals, not for commercial premises and other properties). For all this, we recommend having a trustworthy accountant, called in Spain Gestores.
Finally, it should also be noted that, with respect to the performance of the property acquired by the Company, it is taxed only in the event of having obtained profits in the year. Different is the case in which you acquire the property as a natural person and it is not for use as a habitual residence, since you must pay income tax in the case of tax residents in Spain, in the tax for non-residents, the IRNR would be taxed by the property and Wealth Tax whether or not you have leased the property, by the so-called in Spain, Imputación de Rentas
