Business Expenses and Obligations in Spain as a Property Investor

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You may be interested in investing in Spain’s once again growing real estate market but are unfamiliar with Spanish law and financial regulations.

The only thing needed to be able to legally buy a home in Spain is a tax id number. For foreigners this is referred to as a NIE and can be acquired in any police station in Spain.

Serious investors will however be looking to open a business entity to manage their property  investment assets. The standard business entity in Spain for small business is the Sociedad Limitada, which is similar to a limited liability company in the US.

Expect to pay 1000€ to 1500€ euros to have an SL setup for you and it includes all the costs of setting up your business entity. A new business must have 3000€ euros in the account to start. Once you have begun activity you can use this money as you see fit, there is no minimum balance requirement. Monthly accounting fees will range from 80€ to 120€ euros per month.

Here are the legal expenses involved with owning property in Spain:

  • Business entities without a permanent establishment that are EU tax (including Iceland and Norway) residents pay 19% on net rental income as a foreign investor. Expenses related to renting can be deducted.
  • Non EU resident business entities pay 24% over gross rental income. No deductions are allowed.
  • Spanish Business entities pay 25% tax on rental income. All deductions are allowed including depreciation.
  • VAT is not charged when renting to individuals and the standard 21% VAT is charged in renting to a business entity. Learn more about rental contracts in Spain here.
  • Dividend distribution to a foreign entity is taxed at 19%. This rate may be reduced based on ta treaties. The rate may also be eliminated all-together if the company and investment qualify to a series of conditions.
  • Upon the sale of the property the standard corporate income tax rate of 25% is applied for Spanish companies.
  • Non-residents pay 19% upon selling the property and this amount may be adjusted depending on tax treaties. The purchaser of the property must withhold 3% of the purchase price to pay a portion of the tax for the seller.

If you are serious about investing in Spain you should speak to a Spanish tax specialist to get up to date advice on how to minimize taxes and expenses while operating in Spain.

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