When investing in Spanish real estate, one of the key decisions you’ll face is whether to purchase property as an individual or through a company. While both structures are legally viable for foreign investors, using a corporate entity can offer significant tax advantages in certain scenarios.
In this guide, we’ll break down how company ownership works, what tax benefits it provides, and in what situations it makes sense to invest through a company in Spain.
1. Personal Ownership vs. Corporate Ownership: What’s the Difference?
H2: Personal Ownership
When you buy property in Spain as an individual (either resident or non-resident), all income and capital gains from the property are taxed under personal tax rules. This includes:
- Personal income tax on rental income
- Capital gains tax on resale profits
- Exposure to wealth tax and inheritance tax based on personal assets
H2: Corporate Ownership
In contrast, buying property through a Spanish company (Sociedad Limitada or S.L.) shifts the taxation framework to corporate tax rules. The property becomes an asset of the company, and any income or gains are declared through the corporate structure.
2. Corporate Tax Rates vs. Personal Tax Rates
H2: Corporate Tax Rates
- Standard corporate tax rate: 25%
- Reduced rate for new companies: 15% during the first two profitable years
- No progressive brackets — a flat rate is applied to net profits
H2: Personal Tax Rates
- Rental income: up to 47% (for high earners)
- Capital gains: progressive from 19% to 26%
- Limited deductions for non-residents
Conclusion: If rental income or resale gains are significant, corporate tax rates may be lower and more predictable than high personal tax brackets.
3. Deductible Expenses for Companies
One of the biggest advantages of owning property through a company is the broader range of deductible expenses, including:
- Mortgage interest and banking costs
- Property maintenance and repairs
- Management and legal fees
- Depreciation of the building
- Salaries or service fees (if employing a director or property manager)
Companies can offset these expenses against their rental income, reducing the overall taxable base. Personal owners, especially non-residents, often cannot claim all of these deductions.
4. Retaining and Reinvesting Profits
Companies allow more flexibility in retaining earnings and reinvesting profits. Instead of distributing income (and paying dividend tax), a company can:
- Accumulate profits to purchase additional properties
- Finance renovations or improvements
- Build equity without triggering personal income tax
This makes corporate ownership ideal for investors who plan to scale a buy-to-let portfolio over time.
5. Inheritance & Succession Planning
Passing property through a company can offer more control and tax efficiency:
- Company shares can be transferred instead of the property itself
- Allows more flexibility in structuring ownership between heirs or shareholders
- May reduce exposure to Spanish inheritance and gift taxes, depending on region and structure
This is especially beneficial for international investors looking to plan for long-term family wealth transfer.
6. Wealth Tax Advantages
For high-net-worth individuals, wealth tax can be a concern:
- Individuals are taxed on assets in Spain (and worldwide if residents)
- Owning property through a company may reduce exposure to personal wealth tax, depending on structure
- The company is taxed as a separate legal entity
This can help optimize your asset declaration and reduce personal tax liabilities, particularly if you own multiple properties.
7. When Does Corporate Ownership Make Sense?
Using a company to invest in property in Spain is especially useful when:
- You plan to build a portfolio of multiple rental properties
- You want to reinvest profits into additional real estate
- You want better control over succession planning
- You have high income and want to avoid top-tier personal tax brackets
- You want to access wider deductions and operational control
It may not be cost-effective for one-off or low-value properties due to annual compliance costs.
8. Costs and Administrative Considerations
While the tax advantages are clear, setting up and maintaining a Spanish company involves:
- Formation costs (typically €1,000–€1,500)
- Annual accounting and tax filing (~€1,000+ per year)
- Legal obligations: bookkeeping, shareholder meetings, annual returns
- Corporate bank accounts and director responsibilities
These overheads must be weighed against the potential tax savings and investment goals.
9. Alternatives: Using a Foreign Company
Some investors choose to use an existing company abroad (e.g. in the UK or Luxembourg) to hold Spanish real estate. This requires careful tax planning:
- May trigger permanent establishment status in Spain
- Still liable for Spanish corporate tax on income from Spanish assets
- May offer asset protection or international tax benefits under treaties
You must assess the risks of double taxation and seek specialized advice.
Corporate Ownership Is a Strategic Tool—But Not for Everyone
Setting up a company to invest in property in Spain can offer substantial tax benefits, flexibility, and long-term planning advantages. However, it also comes with costs, responsibilities, and complexity.
Before choosing this route, it’s essential to consult with a tax advisor who understands both Spanish and international tax law. A personalized Investment Strategy Session can help you decide the most efficient ownership structure for your real estate goals.