Inheritance tax for non-residents has traditionally been much higher in Spain than for residents. This has been drawn to the attention of the European courts and Spain has been told to change its practices. No doubt, in due course they will. In the meantime inheritance tax legislation in Spain remains the same and people continue to look at the option of buying property here in the name of a legal entity (company).
What are the benefits?
If you own a property in the name of a non-resident company then you do not have to pay national taxes. If you buy as an individual, you must pay national taxes, including non-resident income tax based upon the value of the property.
A Spanish property registered in a non-resident company’s name does not have to pay Spanish inheritance tax. As previously mentioned, non-resident inheritance tax can be quite steep, and this has often been seen as an incentive for buying in this way. However, buying a Spanish property as a company has a number of other implications and it is important to consider the pros and cons first.
For example, you might avoid the need to pay inheritance tax and national taxes but you will still have the same expenses and taxes when you come to sell your Spanish property. And the process costs more too.
You should be aware that there are additional costs and procedures if you do decide to buy in the name of a company. Your company will need to have a Spanish CIF number which is a company tax identification number.
You will also need a certificate of the mercantile registry. Any foreign documentation will need to be validated in the country of origin through the use of the Stamp of Apostille and translated into Spanish by an official translator.
These additional requirements mean that it will cost you approximately 1,500€ more than the usual cost of the buying process. It will also take approximately six weeks in preparation time.
If you have not formalised a private purchase contract then you can choose to either buy a property in your own name or in the name of a company. But once it has been formalised then you will need the agreement of the seller.
For some people these additional milestones are worth it. As with everything, the possible benefits must be weighed up against the disadvantages and a decision made in good time about what’s best for you.