WHAT ABOUT WEALTH TAX IF BUYING WITH A COMPANY?
There is a wealth tax in Spain.
To avoid this tax, there is often the question of whether the company can acquire the property in Spain.
This article will further explain to you how capital gains tax is viewed with a company.
In principle, wealth tax applies to individuals including non-residents with property in Spain.
For those non-residents, we have the exemption of 700,000 euros.
If this threshold is exceeded then rates apply from 0.25% to 2.50%.
You have a Spanish company.
As mentioned earlier, wealth tax only applies to individuals. However, participations or shares in a company do count as part of your personal assets.
In some cases, participations or shares in companies with an economic activity (not a patrimony company) can be exempted. For example, we have the condition that you, as manager or director, derive your main source of income from the company.
If there is a rental activity, among other things, there must be at least one full-time employee.
So simply using or setting up a Spanish company to hold a second residence will not qualify for the exemption.
You have a company in your country.
Here it is a question of fact whether wealth tax applies to a non-resident shareholder of a Belgian company whose business assets consist mainly (usually above 50%) of real estate in Spain.
On the one hand, the wealth tax may not apply if the Belgian company is not subject to Spanish company law.
On the other hand, the Spanish tax authorities may argue that there would be a fiction because there would be no economic motive to acquire the Spanish property through this company.
File by file this has to be looked at.
Valuation of the property.
There must be clarity about the size of the assets before a wealth tax can be levied. Annually, you should therefore value the assets and liabilities in your estate.
Real estate in full ownership owned by natural persons is valued according to the highest value of the following valuations : the value in the deed, the cadastral value or the minimum tax acceptable value.
The company's valuation here is done on the basis of the accounts (which have been properly kept) according to IRPF rules. This is irrespective of whether the holdings or shares qualify for exemption.
Real estate owned by companies is valued as for natural persons unless the professional activity is to "deal in" or "develop" real estate.
In most situations, the value of the deed of sale applies.
What if there are debts?
In principle, debts are deductible provided (1) they are duly justified and, in the case of non-residents, there is a link with Spain (2).
Here we consider, for example, a mortgage loan. Interest, debt and guarantees attached to exempt assets are not deductible.
The valuation of the debt here is then based on its nominal value at the time of the taxable moment.
The net assets and the taxable base.
As last the net assets.
Net assets consist of all non-exempt assets that were reduced by deductible debts. On top of that, we have the exemptions of the autonomous regions.
So, as a non-resident, there is the exemption of 700,000 euros.
Your company's property in Spain has a value of 3,500,000 euros.
You have a mortgage with a nominal value of 2,000,000 euros.
The net assets are then 1,500,000 euros.
As a non-resident, there is an exemption on the first 700,000 euros.
The taxable base is then 800,000 euros.
The rates are applied to this.
A non-resident can also opt for the regime of the autonomous region in which his assets are located. It is more interesting to opt for the autonomous region's regime in certain cases.
Decision: wealth tax with a company.
If you decide to buy property with your company, you may personally come into contact with wealth tax in Spain.
Although wealth tax is only there for individuals, the Spanish tax authorities have a number of tools to tax your personal assets in Spain through your company.
"Source Confianz: your legal specialist for Spain"