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Thread: Transfering property ownership into a UK company

  1. #1
    robert
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    Default Transfering property ownership into a UK company

    By forming a UK Company: The owner of the property forms a UK Limited Liability company, in which ownership of the property passes into the hands of the company. In this way when he or she passes away, the company will be reorganised, that means it will only be necessary to transfer some company shares, which falls outside Spanish inheritance tax. Is this true

  2. #2
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    This is indeed true and can be done but 2 things come to mind immediately:

    • If the UK company shareholders are not tax residents in the UK they may fall foul of the Spanish 3% special tax on the cadastre value (impuesto especial sobre inmuebles de entidades no residentes). This tax is paid yearly and on an average property worth for the Town Hall (according to the IBI receipt) 200,000 Euros the tax would be 6 thousand Euros per annum.
    • If the Inland Revenue decides to intervene in the transfer of shares after death this may have an impact on IHT in the UK, although expert advice on UK jurisdiction will have to be sought in this respect.

    If the above causes concerns it may be wise to consider perhaps a Spanish Limited Liability company as it is possible, in practice, to not have to transfer shares if the director of the company is a third party with the ability manage the company.
    Last edited by aflores; 02-03-2009 at 11:34 AM.
    Antonio Flores
    Abogado/Lawyer
    Lawbird Legal Services
    Read my Blog

  3. #3
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    Default Transfering property ownership into a UK company

    Hello Robert,

    I have just made a Post to this Forum in the Tax section which may be of interest to you headed "How To Safeguard Against Spanish Inheritance Tax"

    My Corporate Property Ownership Consultant who is located in the UK & Spain helped me purchase my property in Spain using a UK Limited Company, so I can pass on their details to you if you wish. I also know they give correct advice and the method for this procedure even if you already own in your own name.

    aflores comment above about the 3% Tax I think you will find out to be inaccurate as that Tax in Spain is only charged to Offshore Companies, like the Isle of Man, and not UK Limited Companies which may only be Taxed in the UK, not Spain, also the Shareholders do not pay any Taxes to the Spanish authorities either.

    The British Government allow Shares in a UK Limited Company to be passed on to the Beneficiaries Tax Free as well, and you only require a Will in the UK and not a Will in Spain.

    The solution of owning in a UK Limited Company completely removes Taxation in Spain, whereas owning in your own name, a Spanish (SL) Company or an Offshore Company does not.

    Please let me know if you would like my Consultants details or any information on this subject as I can discuss it from first hand experience.
    Last edited by W.C.D.; 02-14-2009 at 09:28 PM.
    Kind Regards,

    Westholme Corporate Developments Limited

  4. #4
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    Default Non residents

    Hello WCD,

    Your information is incorrect, unfortunately. If you read article 40 of the Texto Refundido de IRNR (Non Residentes Income Tax Act) you will clearly see that the 3% tax will not apply to Non Resident Companies provided these companies are domiciled in a country which has a double taxation agreement with Spain and the agreement has a proviso for exchange of information, AND also that the shareholders are residents in a country which has a double taxation agreement with Spain (and such agreement has a proviso for exchange of information).

    All of which means that if a British company owns property in Spain but its shareholders are British citizens residents of, for example, the Cayman Islands, Mauritania, Serbia or Mozambique (none of which have a double taxation agreement with Spain) the 3% tax will be applicable.
    Antonio Flores
    Abogado/Lawyer
    Lawbird Legal Services
    Read my Blog

  5. #5
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    Thumbs up Corporate Property Ownership

    aflores
    You are not correct on this one ,A UK Company under EU Law does not pay any tax in Spain ,You are referring to Non EU Companies . A UK Company is a EU Company and under the EU treaty as Long as the Company has a Minimum of 2 Shareholders and is registered in the UK for tax purposes then No tax, We have over 400 client companies under management and know this is the case. we file non resident company tax returns on the 31 st January every year with zero tax.
    As you will be aware of the Spanish law a UK company will not pay the 7% tax if the property is gifted to the Company and once done no 25% tax on its rental income a UK company can also claim tax relief against its future and current earnings including mortgage interest and utility bills. This is not possible privately in Spain .If you are a resident of Spain for Fiscal reasons then you will not pay tax in Spain on your UK shares when sold as a non domiciled person only pays on their Spanish located assets not that of other countries .
    WCD seems to know the right strategy
    I think most people would be confused with what you say as not many will live in the Caymen Islands or other non EU locations

  6. #6
    Unregistered
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    Default MR.G

    If one has owned a property in own name for a number of years then transfers to a uk company surely he will have to pay spanish capital gains

  7. #7
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    Mr G
    Sorry for the late reply. If you invest your Spanish property into a UK Company then the following calculation is used to arrive at an investment value free of CGT in Spain you take the value of the property as stated in the Title deed and add to this value the 7% that you paid on purchase plus the Notary and Land registry Charges then indexation is added allowing for inflation for the years that you have owned the property. This gives a new higher investment value free from CGT you would need to check that this value is above the Hacienda Valuation stated for your property on their website as the transaction may attract tax if below this figure. If you are resident in Spain for Fiscal reasons over 65 and are submitting your tax returns and this is your man residence then no CGT is payable on any investment value.
    Last edited by Malcroach; 03-04-2011 at 06:57 PM.

  8. #8
    Unregistered
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    Quote Originally Posted by Malcroach View Post
    aflores
    You are not correct on this one ,A UK Company under EU Law does not pay any tax in Spain ,You are referring to Non EU Companies . A UK Company is a EU Company and under the EU treaty as Long as the Company has a Minimum of 2 Shareholders and is registered in the UK for tax purposes then No tax, We have over 400 client companies under management and know this is the case. we file non resident company tax returns on the 31 st January every year with zero tax.
    As you will be aware of the Spanish law a UK company will not pay the 7% tax if the property is gifted to the Company and once done no 25% tax on its rental income a UK company can also claim tax relief against its future and current earnings including mortgage interest and utility bills. This is not possible privately in Spain .If you are a resident of Spain for Fiscal reasons then you will not pay tax in Spain on your UK shares when sold as a non domiciled person only pays on their Spanish located assets not that of other countries .
    WCD seems to know the right strategy
    I think most people would be confused with what you say as not many will live in the Caymen Islands or other non EU locations
    What about when the shareholder of the EU corp is a non-EU corporation?

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