Buying Property in Spain: Through a Company or as an Individual?

Buying Property in Spain: In the Name of a Company or as an Individual?

You own a business, you want to buy a home in Spain, and a question that seems logical comes to mind: Why buy it as an individual when I can do so through my company?

In theory, it sounds simple. The company purchases the property, covers the expenses, and the property becomes part of its assets. For a business owner, this may even seem more natural than buying a villa or an apartment privately.

In practice, the answer is far less obvious.

Buying property in Spain through a company may make sense for certain investments, especially when there is actual real estate activity, multiple investors, or a long-term strategy. But setting up a company solely to register a home in its name—a home that you and your family will use—does not automatically make the transaction more efficient.

Before deciding who will be listed as the owner on the deed, you need to answer another question: Why are you actually buying that property?

The first step isn't to choose between a business and an individual

Imagine two buyers.

The first one wants a villa in Marbella where he can spend three months a year with his family. He doesn't plan to rent it out, nor does he intend to buy any more properties.

The second person wants to purchase several apartments, rent them out, reinvest the income, and build a real estate portfolio over the next ten years.

Both can buy real estate in Spain. But trying to use exactly the same structure for both would make little sense.

The legal structure of the purchase should be a consequence of the project, not the starting point.

That’s why, before discussing corporations, taxes, or financing, it’s important to determine whether we’re buying a second home, a primary residence, a rental property, a property to renovate and sell, or the first property in a larger portfolio.

Only then does it make sense to compare a purchase made as an individual with a purchase made through a corporation.

Purchasing as an individual is usually the simplest way to acquire a vehicle for personal use

When the primary goal is to use the property for personal purposes, purchasing it as an individual typically offers a simpler structure.

The home is registered directly in your name. There is no intermediary company between you and the property; therefore, there is no need to explain why the owner of a company uses an asset that legally belongs to that company.

This does not mean that a private purchase is tax-free.

For example, a nonresident individual who owns urban real estate in Spain for personal use or that remains vacant may be subject to the Nonresident Income Tax on so-called imputed income. If the property is rented out, the income earned is also subject to specific tax treatment, and when it is sold, a capital gain may be realized that is subject to taxation in Spain.

But the structure is easy to understand: you buy a property for yourself, and you are the owner.

When a company is incorporated, a second legal reality emerges. The house is no longer yours. It belongs to the company.

And that difference matters.

The company buys the villa, but you want to use it

This is one of the issues that raises the most questions among business owners.

Let’s suppose a company buys a villa in Marbella. A shareholder in that company decides to use it during his vacation without paying any rent to the company because, after all, he considers that “the company is his.”

From a tax perspective, it's not that simple.

The Spanish Corporate Income Tax Law establishes rules for transactions between a corporation and certain shareholders or directors. When such a relationship exists, the transactions must be valued at market value—that is, based on the terms that independent parties would have agreed upon.

That is why a property purchased by a company for the owner's private use warrants a specific tax review.

It's not enough to say, "I'm paying for it through the company, so it counts as an expense."

The right question is: What is the relationship between society, property, and the person who actually enjoys it?

A villa used by a partner's family does not become a business asset simply because the purchase invoice is in the company's name.

Owning a company that owns real estate does not automatically mean that the company is engaged in real estate activities

Here's another widely held belief.

“I start a company, buy two apartments, and just like that, I have a real estate company.”

Not necessarily.

Spanish law distinguishes between a company’s mere assets and the conduct of an economic activity. For corporate income tax purposes, an entity may be considered an asset-holding entity when more than half of its assets consist of securities or items not related to an economic activity.

In addition, the Corporate Income Tax Law itself establishes a specific condition for classifying real estate leasing as an economic activity: at least one full-time employee with an employment contract must be used to manage it.

That really changes the conversation.

Buying an apartment in the name of a corporation and renting it out does not, in and of itself, mean that we have a real estate business structure with all the implications that one might imagine.

That's why it's best to be wary of blanket recommendations such as "if you're going to rent, always go through a company."

You have to look at the entire structure.

When might it make more sense to buy a property through a corporation?

A company becomes more interesting when ownership is part of a broader business or investment venture.

For example, when there are multiple investors and it is necessary to clearly define ownership stakes and responsibilities; when the goal is to build a portfolio consisting of multiple properties; when there is an organized real estate investment operation; or when the capital comes from an existing business structure and a reinvestment strategy is being developed.

There may also be estate planning, financing, or succession-related reasons that make it advisable to consider a corporate structure.

But “it might make sense” is very different from “it’s cheaper.”

A corporate structure must be analyzed as a whole: acquisition, use of the property, revenue, expenses, financing, distribution of profits, potential sale, and the tax status of the partners.

Focusing solely on the moment of purchase and ignoring what will happen over the next ten years can end up creating a highly inefficient structure.

Does a company pay less in taxes when it buys a property?

We shouldn't assume that.

In Spain, the tax applicable to a purchase depends, among other factors, on the type of property and the characteristics of the transaction. Generally speaking, the initial transfer of a new home by a developer is subject to VAT. In contrast, existing homes are typically subject to the Property Transfer Tax.

For a new home, the standard VAT rate applicable to the home is currently 10%.

In Andalusia, home to Marbella and much of the Costa del Sol, the standard rate for the Transfer Tax on Real Estate is currently 7%, while the standard rate for Stamp Duty is 1.2%. Reduced rates apply in certain cases, so each transaction must be reviewed on a case-by-case basis.

The fact that the buyer is a company does not automatically eliminate these taxes.

There are indeed specific business situations that are treated differently. For example, Andalusia provides a reduced tax rate for real estate professionals who purchase certain homes for resale, provided they meet the established requirements. But this is precisely a good example of why it is unwise to generalize: simply incorporating a company and calling it a real estate firm is not enough to automatically qualify for a specific tax treatment.

Can a company deduct property expenses?

This question seems simple, but it can be dangerous if answered with a simple “yes.”

A company may have tax-deductible expenses related to its business activities, but the key issue is precisely that connection to its business activities.

It is not the same for a company to commercially exploit a property as it is for it to buy a beach house for its shareholder to use free of charge.

In addition, when transactions occur between a company and its shareholders, Spanish rules on related-party transactions require the use of market values in the cases provided for by law.

That’s why, before buying a property with the intention of “passing all the expenses on to the company,” it’s a good idea to analyze what the property will actually be used for.

An expense does not become a business expense simply because it is paid from a business bank account.

What if the company is foreign?

It is also possible for a company incorporated outside of Spain to own real estate located in Spain.

In that case, Spanish tax laws for non-residents come into play. The Tax Agency expressly distinguishes between the taxation of non-resident legal entities and non-resident entities that own real estate. Rental income and capital gains from the sale of such property may be subject to the Non-Resident Income Tax in Spain.

There is also a special 3% tax on certain properties owned by entities resident in jurisdictions considered non-cooperative, although the regulations provide for various exceptions.

This does not mean that a foreign corporation is a bad structure. It means that using a company registered in another country does not mean that ownership ceases to have tax implications in Spain.

When the property is located in Marbella, a significant portion of the structure will still need to be analyzed in accordance with Spanish law.

Buying to Rent Changes the Conversation

If the goal is to invest, the comparison between an individual and a corporation becomes much more interesting.

You need to calculate expected income, actual expenses, the financing method, the projected number of properties, and what will happen to the profits.

The time horizon is also important.

Someone who buys a single apartment to earn supplemental income is in a very different situation than an investor who plans to purchase five villas, hire staff, manage the properties, and systematically reinvest the profits.

That is why the number of properties should not be the only criterion either.

The question is whether there really is a business operation organized around those assets.

Sometimes the answer will be yes. Other times, we’ll simply be dealing with an individual or a company that owns real estate.

What happens when it's time to sell?

This issue should be considered before making a purchase, not five years later.

A property purchased for personal use may generate a capital gain when it is sold. For nonresident owners, the Tax Agency expressly includes gains derived from the sale of real estate located in Spain within the taxation applicable to real estate.

If the property is owned by a corporation, the sale takes place within a different tax structure.

And there may be yet another possibility: that instead of selling the property directly, shares in the owning company are sold. This raises different legal and tax considerations that will depend on the structure, the partners’ residency, international agreements, and the characteristics of the entity.

That's why a structure that seems attractive on the day of purchase may be much less appealing when the time comes to exit the investment.

Good planning should take both ends of the operation into account.

What if several of us buy it together?

Here, a society can solve problems that go far beyond taxes.

Two friends can buy a villa, splitting the cost 50-50. Three investors can jointly purchase several apartments. A family may want to structure an investment with the next generation in mind.

In these cases, it is necessary to determine who provides the capital, who decides on a sale, how the proceeds are distributed, what happens if someone wants to withdraw from the investment, and how future renovations or extraordinary expenses will be financed.

A society can be one way of organizing these relationships, although it is not the only one.

The Lawyers, Loriini's exclusive legal partner, specializes in joint ventures, real estate transactions, financing, tax advice, and comprehensive legal representation in real estate transactions.

Here, the value of the system lies not merely in paying more or fewer taxes.

The goal is to prevent a situation five years from now where three owners have three completely different ideas about what to do with a property worth two million euros.

Business or individual: the question we ask at Loriini

When a client tells us they want to buy a property in Marbella, we don't start by telling them how they should go about it.

First, we want to know what you plan to do with it.

Will it be a second home?

Will your family live there?

Will it be rented out?

Is it part of an investment portfolio?

Will there be more buyers?

Are you planning to buy other properties?

Do you want to keep the property for twenty years or sell it after renovating it?

These answers allow legal and tax professionals to explore a structure that makes sense for the actual case.

Loriini operates in Marbella, offering a combination of property search, interior design, furniture selection, and renovation services, while The Lawyers serves as a legal partner specializing in real estate transactions, financing, and investment-related advice.

This allows us to analyze the property not as an isolated transaction, but as part of a comprehensive project.

So, which is better: buying as an individual or through a company?

If you're looking for a one-line answer, you're probably asking the wrong question.

For a second home intended primarily for use by the owner and his or her family, setting up a company solely for the purpose of owning the home can add a level of complexity that should be justified by a real benefit.

For a well-organized real estate project involving multiple assets, investors, rental properties, or a long-term business strategy, exploring a corporate structure may make much more sense.

But the decision must be made before signing the purchase agreement.

Transferring ownership of a property from an individual to a corporation—or vice versa—is not simply a matter of changing a name on a document. It may involve a new transfer and have tax and legal implications.

So, if you're thinking about buying a property in Marbella or on the Costa del Sol and aren't sure whether to do it on your own or through a company, it's best to review the structure before reserving the property.

At Loriini, we can help you find the right property and coordinate the process with legal and tax specialists to ensure that the purchase structure aligns with your intended use of the property.

Because there should be a strategy in place first.

Next, a structure.

And only then, a signature.

Frequently Asked Questions About Buying Property in Spain Through a Company

Can a company buy a home in Spain?

Yes. A legal entity can own real estate in Spain. In the case of a nonresident entity, rental income and any gains from a sale may be subject to Spanish taxation.

Is it cheaper to buy a home in a company's name?

Not necessarily. Using a corporation does not automatically eliminate the taxes associated with the purchase. A new home may be subject to VAT, and a used home may be subject to property transfer tax, depending on the circumstances of the transaction.

Can I live in a house that belongs to my own company?

A company’s shareholder may use real estate owned by the company, but the tax implications must be properly analyzed. Spanish law considers certain transactions between a company and its shareholders to be related-party transactions and requires that they be valued at market prices.

Does buying a home to rent out mean that my company is engaged in an economic activity?

Not automatically. For corporate income tax purposes, Spanish regulations establish specific requirements for classifying real estate leasing as an economic activity, including the use of at least one full-time employee to organize that activity.

Can a foreign company buy property in Spain?

Yes, but the property is still located in Spain and may be subject to Spanish tax obligations. Nonresident entities may be taxed on rental income and gains from the sale of the property.

Which option is best for buying a villa in Marbella?

It depends primarily on the intended use. For a villa intended primarily for family use, a private purchase may be a simpler option. For organized real estate investments, multiple owners, or a portfolio of assets, it may be advisable to consider forming a corporation. The decision should be reviewed with tax and legal specialists before finalizing the purchase.