A. There are two ways of approaching the matter you propose:
- The first one is to be buy a plot of land (at 7% Transfer Tax or 16% VAT + 1% Stamp Duty, depending on the seller's activity) and then contract a builder, in which case you would be paying 7% on the cost of works, plus 1% of Stamp duty to register the building.
- The second one is to buy a finished property, at a straight 7% VAT plus 1% Stamp Duty.
There are two main issues to take into account when opting for one or another:
- Tax: VAT is recoverable if you set up yourself as a trader, but the tax authorities now request that you prove that you have one person working full time and office space rented. This option is therefore not applicable unless you qualify.
- Purchase price: If we discard the above, the 16% VAT on the plot may be stiff if applicable (it may well not be the case and only a 7% transfer tax is applicable), the whole value of the operation is lower than if you buy straight from the developer. As an example, a villa which you buy for say 600k Euros from a developer could cost you to build 250k Euros plus another 150k Euros for the plot.
If as you say you wish to buy a plot and then construct your best bet is to avoid a plot with a 16%VAT + 1%Stamp Duty and find one at a straight 7% Transfer Tax.
With respect to Inheritance Tax, it is now very uncommon for buyers to acquire property via an offshore company unless a Spanish limited company is set in between both. This certainly avoids 100% IHT, subject to the dispositions of the jurisdiction of the offshore.
Another two ways to avoid IHT is to have a high mortgage in place, at all times (capping it up every two years or so), and/or split ownership into bare ownership and life interest where you retain the latter and your inheritors the former.
I would be pleased we met up on your next trip and discuss these matters thoroughly and therefore I will leave it to you as to when is it more convenient.