Owning property in Marbella is a goal for many, but beyond choosing the perfect villa or apartment, one crucial decision has to be made: should you buy as an individual or through a company? The right structure can have significant financial and legal implications, so let’s break it down in a way that makes sense—no legal jargon, just practical information.
Individual Ownership: A Simple and Direct Approach
Purchasing property in your name is the most straightforward way to go. It’s fast, simple, and doesn’t require much in the way of extra admin. But there are a few things to keep in mind:
- Taxes: If you’re a non-resident, you’ll be subject to a Non-Resident Income Tax (NRIT) on potential rental income, even if the property isn’t rented out. When selling, you’ll face capital gains tax, but Spain offers some exemptions based on reinvestment.
- Selling Scenario: When selling a property as an individual, the capital gains tax is generally 19%–23% for residents and non-residents, depending on the length of ownership. Spain has some exemptions that can help mitigate this, particularly if you reinvest the proceeds into another property or if the property has been your primary residence for more than three years. Transfer tax (ITP) of around 7% is paid when buying, but the rate will depend on the property’s value.
- Beckham Law: For high-net-worth individuals considering a move to Spain, the Beckham Law offers an attractive tax benefit. This special tax regime allows qualifying individuals to pay a flat 24% tax on Spanish income, with no taxation on global earnings. It’s particularly beneficial for those relocating for work or investment purposes and can provide substantial savings over time.
- Inheritance Planning: Spanish inheritance laws can be complex, with forced heirship rules that may impact how your property is passed down. However, recent legal changes allow EU citizens to apply the inheritance laws of their home country.
- Ongoing Costs: Property tax (IBI) and potential rental income tax are all part of the package. Keeping everything in your name keeps things simple, but it may not always be the most tax-efficient option.
Company Ownership: A Strategic Alternative
Purchasing through a company—either a Spanish SL (Sociedad Limitada) or an international entity—can be a smart move, particularly for investors and high-net-worth individuals. Here’s why:
- Tax Efficiency: Corporate structures may reduce tax liabilities, particularly for rental income, as companies can deduct expenses more efficiently than individuals. Capital gains tax may also be lower (around 25% for corporations), depending on the setup, and companies can benefit from favorable tax treatment in property transactions. Transfer tax (ITP) can be a lot lower as well (2%), if the property is bought with the intention of resale and the company is specialised in real estate.
- Flipping Properties: If you’re buying properties to flip (buy, renovate and resell), company ownership may have additional advantages, including lower transfer tax rates when selling, as properties held within a business are subject to VAT (IVA) rather than ITP. Additionally, as a company, you’re allowed to deduct expenses related to the property (e.g., renovations), which is beneficial when flipping a property for profit.
- Privacy & Asset Protection: A company structure can provide an additional layer of privacy, shielding your name from public records. It also helps separate personal and business liabilities.
- Inheritance Planning Advantages: Shares in a company can often be transferred more flexibly than direct property ownership, potentially avoiding Spanish inheritance tax complications.
- Admin & Compliance: There’s no sugar-coating it—running a company means added responsibilities, including annual filings, corporation tax payments, and legal compliance. But for the right investor, these extra steps are normally worth it.
Is Company Ownership Worth It?
Some years ago, buying property through a company—especially offshore—was the go-to move for most investors looking for tax advantages and an extra layer of privacy. However, times have changed and things are not the same anymore. Stricter regulations, checks and greater financial transparency have reshaped the landscape, meaning many of the old perks no longer apply in the same way. That said, company ownership can still make sense for the right buyer. It all comes down to your individual goals, tax planning, and long-term investment strategy. The key? Consulting a professional to make sure the benefits still work in your favour before going for it.
Which One’s Right for You?
The best ownership structure depends on your long-term plans, financial strategy, and how you intend to use the property. If you’re buying a second home for personal use, individual ownership is normally the simplest solution. But if you’re investing in multiple properties, renting them out, or planning for the future and want to pass on assets to your family, a corporate structure could be the smarter choice.
Navigating the world of property ownership in Spain can sometimes seem complex, but with the right advice and strategy, it’s a smooth and rewarding process. If you’re looking for personal advice, our team is here to help. Let’s talk.