Property purchase in Spain

[cart]

We are contemplating purchasing a flat in Spain in the very near future. Nothing has been signed and no funds have yet been handed over, so we would like to take advantage of any advice on the most advantageous method of purchase before making a commitment. What we have investigated is that the property has been legitimately built and there is no prospect of the sudden appearance of Spanish bulldozers.

As three owners we will to continue to work and reside in the UK and this would be a shared holiday home. We are all British born and domiciled in the UK.

Ownership within the framework of an offshore company is no longer advantageous, but there has been an ongoing thread on Taxation Web that suggests it is possible to own a Spanish property within a UK company and each owner would hold shares in the company. As three close but unconnected purchasers this would be an ideal solution.

Any advice please?

[bakeja]

The main advantage of the UK company scheme, according to its proponents, is to save inheritance tax. When one of the co-owners dies the UK shares form part of his estate not the Spanish property so that the Spanish inheritance tax is not applicable. Spanish inheritance tax, especially for non residents with property in Spain, can be onerous and so if you feel this is an issue then perhaps the company option should be explored.

Other potential benefits mooted relate to the onward sale of the property at a later date. Spanish Capital Gains Tax and Property Transfer duty (a sort of Spanish stamp duty) can be avoided if only the UK shares change hands. Presumably though there would be a UK capital gain on the share disposal. Also the company would be "storing up" the Spanish capital gain which may be a factor for the buyer. Also the benefit of the "stamp duty" saving would accrue to the buyer not you as the sellers.

Aside from running costs the big disadvantage I see is that it may make the property harder to sell. A lot of potential buyers would be put off by the structure I would have thought even though there may be tax savings.