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Wednesday, October 17, 2007
annie potter
Parcela
I'm in formby, merseyside
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I have a client who I am arranging a mortgage for, he is buying on Deia, Majorca. This property is owned as a Ltd Co, can someone explain to me what the implications are?? It seems as thought this is a tax issue, if it is really as good as his Spanish solicitor is saying, then why doesnt everyone set this up this way?
There doesnt seem to be any commercial business involved and it appears to be just a 'ghost company' which has apparently been checked out and it is all clean.
I am a bit sceptical as he is being told this will save him £100,000!!
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17 Oct 2007 11:38 AM
Rixxy
Villa
I'm in San Pedro
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Hi Annie,
In theory this is good and if he is buying via the UK banks then fine, but if he wants to raise money in Spain, the banks will not accept the company and he will have to purchase in his own name.
I assume the structure is uk ltd co ownes all shares of spanish SL (same as ltd) and the asset is the house. This isnt advised anymore as the authorites are aware of the tax avoidances. As your client buys the uk ltd company, there is no 7% purchase tax to pay, or notary fees, or lawyers fees as effectively the owner of the property is the same - the spanish SL.
One thing to check is the spanish SL doesnt have any liabilites or debts at all - a company search will show this, other than that there is no reason to do it
One word of advice - if the client is going to have to sell it on at a later stage, and the new buyer needs a mortgage, then your guy will be clobbered for taxes as the original price 'paid' will be shown on the title deeds, so the profit difference he will have to pay at a current rate of 18% of profit. If the property has been in the company for many years, then this could be huge! Bear in mind 99.9% of buyers will raise finance via a spanish bank and this will limit his selling possibilites if he insists on the company being purchased
He would be well advised to check out all the angles and then go for it if it ticks his boxes
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17 Oct 2007 6:55 PM
Smiley
** EOS Superstar **
I'm in Nueva Andalucia
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Bad advice and no advantage to it these days - Hacienda have closed the tax beneficial loopholes and all SLs are having to be crystalized to become transparent for tacx purposes. Additionally it will cause minor problems at sale if he sells, as it is illegal as you know (as a mortgage advisor) to borrow money to buy shares and if he sells to someone who needs a mortgage to buy then it will not be permitted by a Spanish lender.
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