Buying Property on Costa Blanca: Private Ownership or Company Purchase

Buying a house on the Spanish Costa Blanca is an exciting step for Polish investors. One of the key choices is whether to acquire the property personally or through a Polish limited liability company (sp. z o.o.). Both forms are possible for Polish tax residents, but they come with different tax obligations, inheritance consequences, and costs. Below, we provide a detailed comparison: personal ownership vs. company ownership, in terms of: taxes, inheritance, and ongoing costs and obligations. We analyze both the investment scenario (rental) and private use to help determine which form is more advantageous.

Tax Aspects

Taxation varies significantly depending on whether you own the property as an individual or through a company. Key issues include rental income tax, capital gains tax upon sale, VAT, and the interaction of Spanish and Polish taxes in light of the double taxation agreement.

Rental Income Tax (Investment Scenario)

• In Spain: both individuals and Polish sp. z o.o. pay 19% tax on net profit (income minus expenses). Polish owners – as EU residents – have the right to deduct costs related to maintenance, renovations, or depreciation.
• In Poland: as a Polish tax resident, you must also report this income in PIT (individual) or CIT (company). Thanks to the agreement with Spain, the tax credit method applies – you pay first in Spain, and in Poland, you can deduct this tax from your own liability. In practice, often no additional tax arises.
• Personal vs. Company Ownership: an individual can benefit from a lump sum (e.g., 8.5% up to 100,000 PLN per year), while a company pays CIT. The problem with company rental is double taxation: after CIT, the income is taxed again as a dividend (19%). Personal ownership eliminates this second level.
• Private Use Tax: if the property is not rented, Spain imposes a so-called deemed income tax on personal use – applicable to both individuals and companies.

Capital Gains Tax

• Spain: a 19% tax on profit upon sale applies (the difference between the purchase and sale price, after adjustments). This applies to both individuals and companies.
• Poland: individuals benefit from an exemption after 5 years – after this period, the sale of foreign property is exempt from PIT. Companies – regardless of the holding period – pay CIT. The company cannot benefit from this exemption.
• Personal ownership wins if you plan to hold the property for 5+ years and do not want to pay tax upon sale.

VAT and Property Transfer Tax

• New Property: 10% VAT + AJD (about 1.5%). An individual cannot recover VAT. A company – if it conducts short-term rentals with VAT – can recover it.
• Secondary Market: 10% ITP (property transfer tax) – non-deductible, regardless of the form of purchase.

Other Taxes

• IBI (Property Tax): a fixed annual fee for every owner (about 0.3–0.5% of the cadastral value).
• Wealth Tax (Spain): applies to individuals with assets over ~€700,000. Since 2022, individuals holding shares in a foreign company owning Spanish property may also be subject to this tax.
• Poland does not levy a wealth tax, so this threat only concerns Spanish regulations.

Inheritance and Succession

Owning property abroad means considering inheritance issues, taxes, and the ease of passing the property to the next generation.

Personal Ownership

• Spain: inheritance tax (ISD) applies. For children, spouses, and parents in the Valencia region – 99% exemption. There is a need to deal with matters at a notary, register the inheritance, and translations.
• Poland: close relatives (group I) are completely exempt from tax – provided the acquisition is reported within 6 months.
• Note: if you plan to leave the property to a more distant relative (e.g., niece), in Spain, ISD can be as high as 30% or more.

Ownership through a Company

• No tax in Spain: the property does not change ownership – it still belongs to the company.
• Only shares in the company are subject to inheritance – the entire process takes place in Poland.
• For more distant relatives and unrelated persons, the company form avoids high inheritance taxes in Spain.
• Also more convenient for close relatives – no contact with Spanish authorities.

Ongoing Costs and Obligations

Personal Ownership

• Simple settlements, low maintenance costs.
• Annual tax declaration in Spain (form 210).
• In Poland, you report rental income in PIT (or use a lump sum).
• No obligation to maintain accounting.

Ownership through a Company

• Full accounting, financial reports, CIT, ZUS, etc.
• Accounting and advisory costs.
• In Spain – the company submits forms 210, may need a proxy.
• Using the property by the owner requires invoicing or income settlement.

Benefits:

• Asset Protection: the company bears liability – not you as an individual.
• Investment Development Opportunities: for those planning to purchase multiple properties.
• Professional Image: for entities renting properties for tourism.

Summary: What to Choose?

Personal Ownership – When?

• You are buying a holiday home or for yourself.
• You rent occasionally or not at all.
• You want minimal bureaucracy.
• You have close family as heirs.

Ownership through a Company – When?

• You plan professional rental (e.g., short-term).
• You want to recover VAT upon purchase.
• You are thinking about a portfolio investment (more than 1 property).
• You want to facilitate succession for those outside the immediate family.

‍

Wondering which purchase form will be optimal for you?

Contact us – we will advise you for free on what will be best in your situation.

‍

‍

Sources:

• Agencia Tributaria – Impuesto sobre la Renta de no Residentes (IRNR)
• Agencia Tributaria – Impuesto sobre Sucesiones y Donaciones (ISD)
• Ministerio de Hacienda y Función Pública – Régimen fiscal para no residentes
• Ministerstwo Finansów RP – PIT, CIT, inheritance and donation tax
• Double Taxation Agreement Poland-Spain
• MDDP – Selling property abroad and PIT tax
• Baker McKenzie – Changes in Spanish wealth tax
• Blevins Franks – Inheritance reform in Valencia

‍