I am a foreigner and I have several real estate properties in Spain. My idea is to buy several more for rental purposes, although I may possibly sell them.
Please advise me of the most cost efficient way to invest, as an individual, or should I set up a Spanish company?
Thank you for your enquiry.
First of all, I must say that it is not possible to give advice in general as to which is the most appropriate way to invest in Spain as it depends upon a number of factors, some of which we review below.
INVESTOR’S FISCAL RESIDENCE.
A fundamental issue when establishing an investment strategy in Spain is to know where the investor’s place of residence is. Thus, the taxes payable, for example, Income Tax (for rentals) or capital gain (on a sale), will depend on the tax residence of the taxpayer. But we understand that different residence rates may be contrary to European Law, regarding freedom of movement of capital.
For example, in principle a resident in the European Union, Iceland or Norway will pay less in income tax for the yield obtained by a lease (rent 19 per cent), than an individual who does not reside within the European Union ( 24 per cent).
DETERMINE THE MAIN OBJECTIVE OF THE INVESTMENT.
Another essential issue is to know what the investor intention may be as the advice will not be the same if the investment objective is to purchase and sell real estate over a short period of time or if it is one that seeks long-term lease or if it needs finance in Spain.
For example, if the investor is not resident in the European Union, in principle he is not allowed to deduct the expenses of the property (which we understand is contrary to the freedom of movement of capital enshrined in European Union law). Therefore, if the idea is to rent many properties, with high expenses (loan interest, maintenance, taxes, community owner’s fees, etc.), it is possible that setting up a company in Spain, (an SL), is a good option.
OTHER TAXES AND TAX MATTERS TO BE TAKEN INTO ACCOUNT.
In addition to the income tax for rental income, one must take into account, when investing the cost of other taxes such as Wealth Tax, Inheritance Tax, etc. as well as the maintenance costs of an SL.
Therefore, if you want to invest in Spain, either in one or many real estate properties, and want to know the fiscal and legally appropriate way to do it, contact us and we will help you.
The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.
Carlos Baos (Lawyer)
White & Baos
Tel:+34 966 426 185
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