Using Company Structures to avoid paying taxes in Spain

[Goldberg Global]

Would any one like to talk about using SL company structures to legally avoid paying taxes in Spain?

Thank you in advance all contributors.

[GranCanaria]

I can talk a little about a transaction that is used quite frequently to try to avoid paying the property transfer tax (Impuesto de Transmisiones Patrimoniales), that consists in buying the shares of the company who owns the property instead of the property itself. I can say that this has several risks that even solicitors sometimes don’t warn about:

1) The Spanish tax law establishes that if more than 50% of the companies’ assets are real estate assets, in some cases the property transfer tax will have to be paid anyway, which was the actual aim of buying the company instead of the property.

2) Before you buy someone else’s company, you should order an exhaustive audit of this company, check how it has been managed in the past, whether it has fulfilled it’s tax and legal obligations, which commitments it has incurred into, because you will be responsible for those after buying the company. This audit involves considerable expenses.

3) To have a company means having to fulfil yearly tax and legal obligations, carry an official bookkeeping, presenting several tax statements etc. so you will have to pay an accountant/ tax adviser to handle this, i. e. further expenses.

My conclusion is that the transaction of buying a company with the only aim of not paying the transfer tax needs to be supervised by a very good lawyer and tax adviser (not only a general lawyer), because otherwise it can end up being more expensive than buying the property: you might have to pay the property transfer tax and also further non-recurring and also recurring expenses.

[Goldberg Global]

The problems that non residents have is the tax on rental income.

If they get some.

They by law have to pay the state 24% of income (gross) before deductions.
So if you rent at 1000 per month, in your pocket you should by law take 760 per month, and 240 goes to the state.

The company format, if you have multiple properties is the way to offset costs otherwise you are screwed for tax at the outset.

The tax on transfer is an important thing, but like you said, you have to be careful what you do.