Using a UK Limited Company for foreign investments (EU)

[fincas.indigo]

I am part of a small group of investors who have pooled some funds to invest in Spain, and who are now keen to review our structure in order to formalise how we are setup as well as how best to pay our taxes.

Through a contact in Spain, we purchase the right to sublet managed holiday apartment blocks, which we then rent out for the holiday season. The income from the rentals covers the cost of the lease with any surplus able to be taken as profits, or reinvested for future years.

What would be the best way to set this up as a company structure, ideally using a UK Limited Company as the main vehicle? Could we also reduce our final tax bill by taking off the cost of the initial purchase of the lease (i.e. the upfront investment) from the overall rental income received? Where would our tax liabilities lie?

Rest assured I am also looking into setting up a Spanish Company for this activity too however my initial research has shown this to be a much more costly affair hence my interest in exploring whether another solution would exist.

Additional information for reference:
- Funds to be invested: between 100 and 200k EUR
- The investors are residents in various EU countries
- Once setup, the contract for the lease would be done between the company and the holiday complex
- Rental income received could be paid into a bank account in either Spain or UK
- Ideally the company should allow the investors to sell their stake on and leave should they wish, and also allow us to grow the capital available through further direct investment

[AGoodman]

If you assume that it should be possible to structure things so that the costs are deductible from profits for UK corporation tax (although do not take my word for this), you need to obtain proper Spanish tax advice. To the extent Spanish tax is payable, this may well be credited against any UK corporation tax.

Spain will have the first taxing rights on the income under the UK / Spain double tax treaty and I would be very surprised if Spanish national tax laws did not impose their equivalent of income or corporation tax on the rental income. That should be your first point of call irrespective of the location of the company.

[fincas.indigo]

Many thanks - I had a productive call with a Spanish tax advisor this week so will digest the various items for consideration and hopefully finalise an approach we can then execute.