On a few occasions we have come across some articles in social media and the press, advising to purchase a Spanish house through a Limited Company, informing that this way the purchaser will have a substantial saving in taxes, and will pay 1,5% tax on the house price, instead than the standard 10% tax.
Obviously, a Limited company with real business activity is entitled to purchase a house, but its taxation may vary dependant on the type and structure of the company.
Under article 314 of the law RDL 4/2015, enacted on the 23rd of October 2015, if the value of the house would be more than half of the company assets, the purchase tax on that house is 10%, which is the standard tax.
That means that it is not correct to set up a company to save taxes in the purchase, if the company does not have any other capital than the house, and it has no real business activity.
It is not correct either to purchase or sell the shares of that “shell company”, to avoid paying the correct 10% tax.
Please note that business activity needs to be proven with purchases and sales of services and products, which need to be reflected in the company bank account, in other words; it is not enough to declare that a business exists, it has to be possible to prove it with bank statements.
Accordingly, as lawyers, we would never advise a client to purchase a Spanish house with a “shell company”, and if have you been recommended to do it, we strongly suggest that you seek independent advice, always from a fully qualified lawyer, as estate agents and gestors do not have legal qualification and are not allowed to provide legal advice.