Wondering if you can invest in Spanish real estate using your foreign company? The answer is yes, and it comes with significant advantages! From tax benefits to streamlined management, investing through a foreign company can make the process easier. In this updated guide, we’ll take you through the essential steps to ensure a seamless and successful investment.
1) Understand the Legal Framework
You can acquire property in Spain using an existing foreign company. This can be done with or without a Permanent Establishment (PE) in Spain.
- Permanent Establishment (PE): This implies that your company has material or human resources in Spain, such as offices, employees, or equipment. A PE status means your company is subject to Spanish corporate tax at a rate of 25%.
- Without Permanent Establishment (Non-PE): If your company does not have significant resources in Spain, it will be classified as Non-PE. In this case, the company will be subject to Non-Resident Income Tax (IRNR), taxed at 19% for EU companies and 24% for others
2) Preliminary Steps for Buying Property in Spain
Review Company Bylaws and ensure your company may execute the activities you plan to conduct in Spain, such as property purchase, rental, or development. If not, amend the bylaws accordingly.
Then obtain necessary identifications, including NIE (Número de Identificación de Extranjero) for the legal representative of the company, and CIF (Certificado de Identificación Fiscal), the company's tax identification number in Spain.
Then obtain necessary identifications, including NIE (Número de Identificación de Extranjero) for the legal representative of the company, and CIF (Certificado de Identificación Fiscal), the company's tax identification number in Spain.
3) Register the Company in Spain
Documentation Required:
Present the above documents to the Spanish Tax Agency to obtain the CIF. This allows your company to operate legally in Spain and engage in real estate transactions.
- Articles of incorporation.
- Tax identification documents.
- Company Bylaws.
- Commercial registry report from the home country.
- Notarized and apostilled documents, translated into Spanish by a certified translator.
Present the above documents to the Spanish Tax Agency to obtain the CIF. This allows your company to operate legally in Spain and engage in real estate transactions.
4) Open a Spanish Bank Account:
Opening a Spanish bank account is necessary for managing financial transactions, including property payments, taxes, and operational expenses. The bank will require:
- Legalized company documents.
- NIE and CIF numbers.
- Information on the financial status and origin of funds to comply with anti-money laundering regulations.
5) Tax Representation and Compliance
Appoint a Fiscal Representative:
- Non-PE Companies: Must appoint a tax representative in Spain to handle tax obligations. This representative is not liable for the company’s taxes.
- PE Companies: The tax representative is jointly liable for the company’s tax obligations. This person must be a resident in Spain or an EU citizen.
6) Property Acquisition Process in Spain
Steps involved:
Registration:
Register the property at the Land Registry to ensure legal recognition of ownership.
- Reservation Contract: Initial deposit to reserve the property.
- Earnest Money Contract (Contrato de Arras): Typically, 10% of the property price, setting the terms for the final purchase.
- Public Deed of Sale (Escritura Pública): Final signing before a notary, transferring ownership.
Registration:
Register the property at the Land Registry to ensure legal recognition of ownership.
7) Tax Obligations for Foreign Companies
- Transfer Tax (ITP): For resale properties.
- VAT (IVA): For new properties, typically 10%.
- Stamp Duty: Ranges from 0.4% to 1.5%.
- Annual Property Taxes: Ongoing tax obligations based on property ownership.
Navigating the process of buying property in Spain through a foreign company requires careful planning and adherence to both Spanish and international regulations. Consulting with legal and tax professionals in both your home country and Spain is crucial to ensure compliance and optimize the benefits of your investment.
For more detailed information, contact us at info@utrust.es.
For more detailed information, contact us at info@utrust.es.