When buying property in Spain as a foreign investor, one of the most important decisions you’ll face is how to structure the ownership of your investment:
- Should you buy the property in your personal name?
- Or is it better to purchase through a Spanish company (Sociedad Limitada or SL)?
While this might seem like a technical or secondary issue, the reality is that your ownership structure will affect almost every aspect of your investment, including:
- How much tax you pay on rental income
- What happens when you sell the property
- Your liability exposure
- Your ability to deduct costs
- How easily you can transfer or inherit the asset
This guide will explore the differences, advantages, disadvantages, and tax implications of both ownership models, so you can make an informed, strategic decision that aligns with your investment goals.
1. Why Ownership Structure Matters for Foreign Buyers
Most property guides focus on location, price, or rental yields—but ownership structure is one of the most important (and overlooked) parts of a real estate investment in Spain.
Your decision will affect:
- Taxation of rental income (which varies significantly between individuals and companies)
- Capital gains tax when selling
- Wealth and inheritance tax exposure
- Legal and financial risk
- Access to deductions and business treatment
- How the investment can be scaled or sold in the future
Without a strategic structure, even a well-located property can become a tax burden or legal headache.
2. Buying Property in Your Personal Name
2.1 What It Involves
When you buy property in your personal name, the title deed is registered to you as an individual (or shared ownership with a partner or spouse). This is the most common approach, especially for lifestyle buyers or first-time investors.
2.2 Key Advantages of Personal Ownership
Simplicity
- No need to create or maintain a legal entity.
- Fewer administrative obligations—no annual accounts, tax filings, or business registrations.
Lower Setup Costs
- Only standard property acquisition costs apply: notary, registration, transfer tax (ITP or VAT), and legal fees.
- No incorporation or ongoing accounting expenses.
Mortgage Accessibility
- Banks are often more willing to offer financing to individuals, especially if the property is for residential use.
- You may be able to secure lower interest rates and higher loan-to-value ratios.
Suitable for Lifestyle and Occasional Use
- If you’re buying a second home and only renting it part-time, personal ownership often makes more sense than forming a business entity.
2.3 Tax Considerations for Individual Ownership
Rental Income Tax
- If you’re an EU/EEA resident, rental income is taxed at 19%, and you can deduct allowable expenses (management, maintenance, interest, etc.).
- If you’re a non-EU/EEA resident, you’re taxed at 24%, and no deductions are permitted—this can significantly reduce your net yield.
Imputed Income Tax (If Property Is Not Rented)
- Even if the property is not rented, Spain applies a notional income tax on second homes owned by non-residents.
- Calculated as 1.1% to 2% of the cadastral value, taxed at 19% or 24% depending on residency.
Capital Gains Tax on Sale
- 19% on the first €6,000 of gain
- 21% on gains between €6,001 and €50,000
- 23% on gains above €50,000
- Non-residents also face a 3% withholding tax on sale proceeds, which acts as an advance payment of the capital gains tax.
Wealth Tax
- Applies to non-residents with Spanish assets above €700,000.
- Rates range from 0.2% to 2.5%, depending on asset value and region.
Inheritance Tax
- Varies by autonomous region and relation to heirs.
- Spouses, children, and direct heirs can face significant inheritance tax, unless advanced planning is in place.
- No automatic exemption for foreign heirs unless specific structures are used.
2.4 Disadvantages of Personal Ownership
- Higher effective tax rates, especially for non-EU residents.
- Limited expense deductions, reducing after-tax rental yield.
- Greater exposure to inheritance and wealth taxes.
- Limited scalability—not practical for owning multiple properties or operating a rental business.
- No legal separation between personal and investment liability.
3. Buying Property Through a Spanish Company (Sociedad Limitada – SL)
3.1 What It Involves
You establish a Spanish limited company (SL), which becomes the legal owner of the property. You are typically the sole shareholder and administrator.
This model is used by:
- Investors building multi-property portfolios
- Buyers seeking maximum tax efficiency
- High-net-worth individuals who want asset protection and inheritance planning options
3.2 Key Advantages of Corporate Ownership
Tax Efficiency for Non-EU Investors
- Corporate rental income is taxed at 15% for the first two years (if newly formed and profitable), and 25% thereafter.
- All operating and management expenses are deductible, including:
- Property management and repairs
- Accounting and legal fees
- Depreciation
- Business travel
- Utilities and even some furnishings (if used in rental activity)
This can significantly lower your effective tax burden, especially compared to the 24% flat rate for non-EU individuals with no deductions.
Asset Protection
- The company is a separate legal entity, so your personal assets are protected from liabilities, legal disputes, or tenant issues.
Better for Scaling a Portfolio
- You can own multiple properties under one structure.
- You can bring in partners, investors, or co-shareholders.
- Suitable for building a rental business, not just a one-off investment.
Estate and Exit Flexibility
- You can sell company shares instead of selling the property directly, potentially reducing transfer tax and capital gains.
- Easier to plan inheritance transfers through shareholding structure, often with lower tax consequences.
3.3 Tax Considerations for Corporate Ownership
Rental Income Tax
- Taxed as corporate profit:
- 15% in year 1 and 2 (if new company with profits)
- 25% standard corporate rate thereafter
- All eligible expenses are deductible before calculating taxable profit.
Capital Gains on Sale
- Gains from sale are treated as company profits, taxed at the corporate rate.
- Additional taxes may apply when profits are distributed to shareholders.
Dividend Tax
- When company profits are paid out to you as a shareholder, you may be subject to dividend withholding tax, typically 19%.
- This can lead to double taxation unless structured carefully (e.g. using a holding company or reinvesting profits).
Wealth Tax
- SL companies are generally excluded from personal wealth tax unless shares are personally held and exceed exemption thresholds.
Annual Reporting Requirements
- You must maintain proper accounting records, submit annual corporate tax returns, and file financial statements.
- Expect to budget around €1,500–€2,500 per year in professional services (accountant, filings, compliance).
3.4 Disadvantages of Corporate Ownership
- Higher setup and ongoing costs, especially if managing a single property.
- More complex legal structure with strict reporting obligations.
- Potential double taxation if you withdraw profits rather than reinvest.
- No access to residential mortgages—only commercial financing, often at less favorable terms.
4. Comparison Table: Personal vs. Corporate Ownership
| Criteria | Personal Ownership | Corporate Ownership (SL) |
|---|---|---|
| Setup Cost | Low | Medium (€1,000–€2,000) |
| Annual Costs | Minimal | €1,500–€2,500+ (accounting, tax) |
| Rental Income Tax (EU) | 19% (with deductions) | 15–25% (broad deductions) |
| Rental Income Tax (non-EU) | 24% (no deductions) | 15–25% (full deductions) |
| Capital Gains Tax | 19–23% | 15–25% (as corporate profit) |
| Inheritance Planning | Complex | Easier via shares |
| Asset Protection | None | Yes (limited liability) |
| Scalability | Limited | Excellent |
| Mortgage Access | Easier | Harder (requires commercial lending) |
5. Which Option Is Right for You?
Choose Personal Ownership If You:
- Are buying a single property for lifestyle use or part-time rental
- Want to avoid ongoing corporate administration and fees
- Are a resident or tax resident of an EU/EEA country
- Don’t plan to grow a property portfolio or run a rental business
Choose Corporate Ownership If You:
- Are a non-EU resident seeking to reduce your tax burden
- Want to deduct more expenses and optimize profits
- Plan to buy multiple properties or operate full-time rentals
- Need asset protection or estate planning tools
- Want a structure suitable for scaling, reinvestment, or partner involvement
6. Get Professional Help to Make the Right Choice
Choosing between personal and corporate ownership in Spain is not a one-size-fits-all decision. It depends on your investment goals, tax status, nationality, number of properties, and long-term plans.
We strongly recommend speaking with an expert before deciding.
Our Investment Strategy Session gives you:
- A full breakdown of the tax, legal, and financial pros and cons
- An analysis of which structure fits your specific situation
- An action plan to set up the right ownership path from day one
- Introductions to trusted lawyers, tax advisors, and accountants
Price: €500 — a smart investment for long-term savings and security.
👉 Book Your Investment Strategy Session Here
Conclusion
Buying property in Spain is about more than location and price. If you don’t choose the right ownership structure, you could pay far more in taxes, lose flexibility, and put your personal assets at risk.
Whether you opt for personal simplicity or corporate efficiency, make sure your structure supports your goals, not just the purchase itself. Plan ahead—your returns, risk exposure, and future freedom depend on it.