It is common practice in Spain to buy properties through companies in tax havens as a means to evading transfer tax, inheritance and gift tax and capital gains tax.
To penalise this practice, the Gravamen Especial sobre los Bienes Inmuebles de las Entidades no Residentes (special tax on property of non-resident entities) was introduced. It is an independent tax that is not connected to the local IBI (property tax).
This tax consists of 3% of the cadastral value (or the price paid if the cadastral value does not exist), it is accrued on 31 December and is paid the following January. It applies to all entities, from companies to investment or trust funds.
If an entity owns a share of the property together with other individuals or entities, the value of the assets or rights will be taxed proportionately to their ownership share.
An exemption from this tax is provided for entities that permanently or usually carry out business operations in Spain which are distinguishable from property ownership or leasing. Leasing is not considered an economic activity for the purpose of this tax.
The amount of the Gravamen Especial sobre Bienes Inmuebles de Entidades no Residentes tax will be considered a deductible expense if income is received from leasing.
Even if the property is transferred, it will be subject to this tax, which means that the buyer will be liable for paying it.
Finally, we must mention that the law envisages the possibility that an entity in a tax haven is considered a resident in Spain when its main assets directly or indirectly consist of assets based in Spain or when it carries out its main activity in Spain. If the tax office chooses this option, instead of levying the 3% tax the entity would be directly taxed in Spain.
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Álvaro Morales Sousa, Partner, TempleCambria Lawyers
(+34) 956 440 172 email@example.com
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