Being tax efficient on a spanish property

Ok, thanks for all your help Eric.

I know sweet F.A. about accounting and not a lot more about Spanish property, but I'd like to butt into this interesting thread anyway.

I was told at one time that owning a Spanish property could be a nightmare, because the Hispanics were considering Wealth Taxes and similar, cunningly aimed at hitting the foreign owner of holiday homes, while leaving the locals in peace. Even if you avoid that, I was further told, over some chilled dry sherry and a large plate of Jabugo ham, that even if they didn't get you that way, the lawyers wouls keep a significant portion of the purchase price as some kind of surety, and then forget that they owed you the money, and that there were all sorts of cute little wheezes to relieve you of further funds and generally extract a proportion of the sale price, either in local taxes, lawyers fees and so forth. How that affects your situation where you are selling it to a company you control and no actual money may be changing hands, I'm not sure. I suspect that the old Latin maxim of 'Let's fk the Gringo over real good', probably still applies, and what you really need is a trustworthy Spanish lawyer. Unless you have got his daughter hostage in your cellar, I imagine that you are going have some difficulty there too.

So, assuming that you manage to carry out this transaction in Spain ( and the best of British with that) the problem is that you might have a CGT charge on the increase in value of your property since you bought it. I am very surprised to learn that any Spanish property has increased in value. I would have imagined that it was going down like the Hindenburg.

If then you put this private asset into your company you either do so in exchange for shares or as a loan from you to the company (to buy the property). You can then be repaid the loan at whatever rate you consider appropriate, with no tax implications. Is that approximately right Eric? Any income the company generates from the property must then be taxable profit, and if you use the flat, that is a taxable benefit unless you pay a fair rent, which is taxable profit again. Any costs are however presumably deductable before tax.

However, suppose your intention is not to rent out the property except to yourself, does that mean the company is an investment company, and does it still mean that everything it pays out on charges, local rates, maintenance etc is deductable from profits before tax (assuming that it is making any.) What is the status of a company which just holds an asset, and visibly does nothing with it other than let the directors use it for holidays? If the property becomes a negative asset, and the Spanish are still coming after you for taxes of various kinds, does it put you in a position where you can just fold the company and walk?

I was last in Spain around the time of the Peninsular War, so maybe my recollections are a little out of date. Cojones Senor!

Cardingan Kid has raised some very valid points - which I didn't mention. In particular, using the company for your own (or your family's use) would create a liability to a taxable Benefit in Kind - unless you as individuals paid the commercial going rate to the company for the use of the property.

I thought the Portugeezers shut down the 'offshore ownership' gig years ago

Are you not reiterating exactly my point?

Ha ha, 'tax efficient' and 'companies house' in the same sentence?

Set up a Panama foundation wrapped in a BVI trust to own the property. All the tax benefits in the world.

Oh ok, you win, you're right, I'm wrong, I give up.

It's still a valid point.