There are substantial advantages in owning a Spanish property through a company, including:

• Mitigation of Spanish Inheritance Tax - the rates of tax applicable vary between 7.65% and 34%. A property owned by a company will not be subject to inheritance tax in Spain. **, a disposal of the property in Spain does not take place.
• Successors As a Company never dies, a Spanish property owned by a ership. Discretion, when it comes to ownership, may also be required and can be achieved by corporate and trust ownership. company continues without the need for a new registration of title in Spain.
• Spanish Rules of Succession - Unlike English law, where a person is free to leave his property to whomever he wishes, Spanish law states that at least one third of an estate must be left to the deceased's children in equal parts, another third must go to any child or grandchild, but at the discretion of the testator, with the surviving spouse retaining a life interest in that third. As with the above, a Company never dies and these rules will therefore not apply.
• Spanish Capital Gains Tax - Spanish capital gains tax is payable on the gain in value of the house when resale is effected in Spain and can be as high as 35%. Liability to this tax can be avoided as, by transferring the shares rather than the property, a disposal of the property in does not take place.
• Privacy, Confidentiality and Asset Protection - These are other advantages of Company ownership. Discretion, when it comes to ownership, may also be required and can be achieved by corporate and trust ownership.

If the beneficial owner is not a UK resident it is sometimes advisable to hold the shares in a Spanish SL through a UK holding Company. If the beneficial owner of the shares is a UK resident then an alternative holding Company (probably EU) would be more appropriate. The reason is that if you are a UK resident then transfer of the shares in the UK holding Company would give rise to a capital gain in the UK.

Historically Spanish property was often held in offshore companies. In the early 90's Spanish Hacienda applied an annual tax (presently 3%) on the value of the property on all property owning offshore companies identified in black a list of "Paraiso Fiscales" (Tax Havens) to discourage such ownership.

We do not therefore recommend an offshore company such as a Gibraltar Company or a Channel Island Company because they are on the said list of Paraiso Fiscales.

We should mention that a holding Company from an offshore jurisdiction does not in itself give rise to an annual tax of 3% that would normally be applied to offshore companies owning the property directly. It is, nevertheless, our view that in the future the Spanish Hacienda will look beyond the Spanish Company owning the property, and if the holding Company is an offshore Company, the Hacienda will treat the Spanish company as nominee for the offshore company and therefore apply the said 3% tax.

The preferred structure would therefore be as follows:

1. Beneficial Owner
2. Declaration of Trust
3. Shares held by our Trust Company
4. (EU) Holding Company
5. Spanish SL
6. Property

You will see from the illustration above that shares in the holding company would normally be held by our Trust Company's name with a declaration of Trust stating that we hold the shares on your behalf. This document is a private document that is not registered anywhere but provides you with the security that ultimately the property is yours, and that you can enforce that document by applying to court for recognition of ownership should, for whatever reason, you be uncomfortable with the trustees' behaviour.

On that subject, it is important you realise that we are barristers and professionals, licensed by our Financial Services Commission (in essence the UK FSA), and have hundreds of substantial trusts and companies under management. Nicholas Cruz, LLB, TEP (the Senior Partner of Cruz & Co) is also a British Barrister and a member of the Clerksroom Chambers, and a Trust & Estate Practitioner. Serge Garcia, the M.D. of Acquarius Trust Company is a Chartered Banker, Chartered Secretary and Trust & Estate Practitioner. See page About the Firm & the Company

Additionally, if you wish to settle the shares on trust at a later date in favour of your next of kin you can do so by establishing a more complex trust, though in the short term a simple declaration of trust, which is a document that says we hold the shares to your order, coupled with a letter of wishes which sets out your instructions in the event of your demise.

In summary, the main advantage of corporate ownership is:-

1. Confidentiality
2. Inheritance tax planning
3. Avoidance of Spanish rules of succession
4. If a willing buyer is prepared to purchase the shares of the holding company mitigation of capital gains and transfer taxes

Costs of a Spanish SL are approximately GBP 3,000 plus annual fees of approximately GBP 1,000.

With regards the holding Company, the incorporation and the first year’s fees including filing of the annual accounts are approximately £1,200. This includes the declaration of trust referred to earlier.

In terms of time, in order to progress matters, we would need to apply to the registry in Madrid for approval of a name. The name is applied for by one of the shareholders i.e. the holding company. It takes approximately ten days for the name to be approved and until that name is approved we cannot execute the deed of incorporation of the Spanish Company, and therefore cannot transact on behalf of the Company.

Once the name has been approved and the Deed of Incorporation signed then the Company can transact even though the granting of a certificate of incorporation and obtaining a fiscal number would take a little longer. At this stage a power of attorney in favour of your lawyer can be granted to enable him to sign the Escritura de Compraventa. An alternative is for your lawyer to sign as a "verbal mandatory" and the director of the Company ratify the action of your lawyer at a later date before a notary. Preparation and issuing of a power of attorney is approximately GBP 150 and a similar fee would apply to the ratification fee.

If you are obtaining a mortgage for the purchase of your property you would need to speak immediately to your bank and explain to them that you intend to purchase the property in a Company name. Most of our clients purchase in Company names and banks are usually happy to proceed on this basis, subject to the execution of the appropriate guarantee. Nevertheless it is worth checking.

It is in our opinion extremely sensible to proceed in this manner, and our experience has always been that clients who do not, revert to us years later expressing regret.

Finally on the question of receipt of funds we should point out that corporate ownership of property will not make payment of cash to a bank any easier. The normal proof of funds and documentary evidence required would be applicable.

The upside of our trust company being licensed is that clients have the comfort that we are a reputable company vetted by our fiscal authorities and accountable. The downside as some may perceive it is that we require, in addition to fees on account (£3,000), compliance with all our know your client and due diligence procedures.

That includes:

1. Certified copy of passport of beneficial owner(s)
2. Reference from bank accountant or a lawyer as per attached draft.
3. Two utility bills showing proof of residence
4. Our client questionnaire/agreement (copy attached) completed and signed (can be provided on request).

Please contact us for any further information you require.