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Is there any way of structuring my property ownership to avoid paying wealth tax on a portfolio consisting of tree Spanish properties?

Property Law

Antonio Flores Vila

14th of September 2007

Q. I have a property portfolio in the Uk and 3 properties in Spain all owned under my name except for 2 in Spain. I am looking to move to Spain in the future and use the rental income to live on in Spain. Is there any way of structuring my property ownership to avoid paying wealth tax as this would reduce my income from the rental as i assume i have to pay income tax on top as well. I have around 2 million pounds equity. What would my taxes be and how can i become tax efficient. I have heard of trust ect and a window of opportunity of transfering property onve you leave the UK? Thank you


    A. It is customary for property owners with a portfolio of two or more properties to own them through a Spanish Limited company (SL). This in turn is now seen as a disadvantage from a Cgt perspective for Corporate tax is currently at 30% (plus a retention on dividends of 15% for non-residents), whereas Cgt for non-residents is of 18% straight.

    On the contrary non-residents do not pay wealth tax on shares whereas they do on property, and wealth tax can be hefty depending on the equity on the properties you own. If you have large mortgages on these properties and your equity is low, you’d be better off by keeping them in your own name. If on the contrary the value of the properties is high and you have no mortgage I would be inclined to look at the SL option, ALWAYS bearing in mind the profit you could be making on selling these, as by keeping them in your name you have a 18% Cgt versus a 45% Corporate tax plus dividend retention.

    On the rental front, a non-resident will pay a flat fee of 25% whereas a company will pay 30% but being able to deduct any expenses associated with the rental.

    As you can see the best option will depend on a number of factors which have to be carefully weighed one another.

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