In 2023, of the 640,000 properties sold in Spain, 15% were purchased by foreigners (6% of whom were French). Against this backdrop, buying in Spain via a French SCI (Société Civile Immobilière) is an increasingly popular strategy among savvy investors. Here's how it works.

What is an SCI and why use it to buy in Spain?

Definition and operation of an SCI

A Société Civile Immobilière (SCI) is a French legal structure that enables several partners to manage a shared property portfolio. Each associate holds shares in proportion to his or her contribution. 

The SCI is a separate legal entity, which means it can open bank accounts and take out loans. 

There is no SCI equivalent in Spain. Setting up an SCI in France to buy in Spain offers legal flexibility and real estate advantages (attractive prices, high rental yields, high rental pressure).

Are you just starting to think about it? To find out more about buying property in Spain, read our dedicated article : Why invest in Spain? or contact us. 

Advantages of setting up an SCI to buy property in Spain

There are several advantages to buying a property with other investors through an SCI.

• Collective asset management
• Financing facilities
• Sharing the costs and expenses of buying real estate
• Tax benefits, which we'll come back to in a moment
• Simplifying transfer to heirs  

The SCI is not suitable for commercial activities. The SAS or SARL are better suited to commercial projects.

Buying in Spain through a French SCI: administrative formalities

Setting up an SCI to buy in Spain takes around 3 months.

Key steps in setting up an SCI

1 Obtaining the NIE

Each SCI partner must obtain a Foreign Identification Number. This is essential for all transactions in Spain. To find out how to apply, we refer you to our complete article: the Foreign Identification Number. A word of clarification in case of doubt: you don't need to be a Spanish resident to obtain a NIE. 

A word of advice: start the process as soon as possible, as lead times vary.

2. Obtaining apostilled Kbis

This is the official extract of the SCI's Kbis issued in France by the clerk's office of the commercial court. Copies are not valid. It must be apostilled (authenticated) to guarantee its validity abroad. Visit this official link to request an apostille.

3. Translation of apostilled Kbis

Once the Kbis has been apostilled, it must be translated into Spanish by a sworn translator to be accepted by the authorities on the other side of the border. 

4. Obtain NIF - Tax Identification Number

To invest in Spain, the SCI must obtain a NIF (Numéro d'Identification Fiscal), the equivalent of the SIRET number in France. This number is essential for property registration and tax management in Spain. The NIF is issued by Spanish police stations with foreigners' offices, or by the Spanish Consulate General in Paris. 

Please note: if the SCI is held by a holding company (a parent company), the holding company must also hold a NIF to be recognized for tax purposes in Spain. 

Our teams can refer you to trusted experts to oversee the entire administrative and legal process. Contact us for more information.

Buying in Spain via an SCI: what kind of financing?

Financing options for an SCI in France

The majority of investors who buy in Spain via an SCI obtain their financing without any difficulty in France. Here's what they can expect:

• Property loans secured on French assets (shares in a Société Civile de Placement Immobilier, a debt-free principal residence, a Plan d'Épargne Retraite or a Plan d'Épargne en Actions).
• The use of a holding company's cash flow to finance the purchase via the SCI. This is a strong point for investor entrepreneurs, who often have more cash available in their company's accounts than they do in their own. We'll come back to this point in detail.
• Financing via consumer loans (up to €75,000 over 5-7 years in 2024). 

Financing options for an SCI in Spain

If you're planning tobuy a property in Spain via a French SCI, you'll mainly be financing it with Spanish banks, unless you have assets in France that can be used as collateral, as we've said. This is common practice in Spain, but bear in mind that some banks may be more cautious than others.

To optimize your chances of obtaining a loan, we recommend that you contact specialized local institutions.

• The Welcome Hub Sabadell in Barcelona is a valuable resource, ideal for international buyers. Sabadell offers competitive interest rates, generally on average terms of around 20 years.
• UCI offers loans over a longer term (30 years), but with higher interest rates, often in excess of 5%.

What documents do I need to apply for financing in Spain?

Prepare a complete file for your financing application, including :

• Your passport
• Your NIE number (Numéro d'Identité d'Étranger)
• Proof of income
• Savings statements
• A credit report from your home country

Careful preparation of these documents will increase your chances of obtaining suitable financing for your property purchase in Spain via your French SCI.

What is the process for buying in Spain via an SCI?

Once the SCI is in the process of being set up, you can launch your real estate project in Spain. On the other side of the Pyrenees, property transactions are much faster than in France (3 months vs. 6 months in France). 

The 5 key steps to investing in Spain via a French SCI

1. Prospecting: the search for and selection of a property can be launched at the same time as your administrative procedures.
2. Negotiation and purchase offer : reservation of the property(la reserva) and payment of a deposit (usually €1,000).
3. Legal and technical due diligence : in Spain, it is the buyer's responsibility to ensure that the property is in order before taking ownership. 
4. Signature of the preliminary sales agreement(contrato de arras) and payment of 10% of the value of the property.
5. Signature of the deed before a notary.

We would like to draw your attention to the following points: 

• In Spain, the sales agreement is very binding;
• The notary's role is minimal; the buyer has a great deal of responsibility. It is advisable to turn to a specialist lawyer to avoid mistakes and, ultimately, damage. 
• There is no cooling-off period as in France;
• Most of the time, suspensive conditions are refused. 

Terreta Spain's advice : allow sufficient time in the compromis to obtain the NIE and NIF before signing the deed of sale. And above all, entrust your project to local real estate experts. Our teams can help you. Make an appointment with them directly online.

Acquisition costs (notary, lawyer, taxes) in Spain

One point not to be overlooked when preparing the financial package for your SCI property purchase project in Spain: acquisition costs. These generally represent 10-15% of the price of the property, and include :

• Notary fees ;
• Lawyer's fees: the lawyer secures the transaction, oversees the legal and administrative aspects and helps avoid common pitfalls. 
• Local taxes, in particular the ITP (Impuesto sobre las Transmissions Patrimoniales, which must be paid at the time of purchase). 

Buying in Spain via a French SCI: tax optimization

Investing in real estate via an SCI in Spain offers a significant tax advantage over direct personal investment: it allows you toinvest company cash in real estate, while avoiding the tax burden associated with dividend distribution.

• Saving on flat tax: by using an SCI, the entrepreneur avoids the dividend distribution process that would be necessary for private investment. This strategy saves the 30% flat tax. 
• Optimized investment mechanism via a holding company: the operating company can lend the funds directly to the SCI. This loan can be progressively repaid by the SCI from the rents received, as part of a rental activity. Interest paid by the SCI to the lending company is tax-deductible for the SCI.
• Greater flexibility and control: by using the operating company to lend directly to the SCI, the entrepreneur retains more direct control over the real estate investment and the management of financial flows between the two entities.

Example of a financial package for investing via a SCI in Spain

An entrepreneur has €100,000 in the treasury of his SASU (Société par Actions Simplifiée Unipersonnelle).

• If he buys a property privately, he will have to pay himself the €100,000 and 30% flat tax, i.e. €30,000. He will then have only €70,000 left to invest.
• On the other hand, by investing via an SCI, he could increase his contribution by just over 40% and use the €100,000 at his disposal. All he needs to do is : 

1. Set up a holding company (if one does not already exist) ; 
2. Transferring funds from the SASU to the holding company;
3. Take advantage of the parent-daughter regime, which exempts dividends from taxation in the holding company. This minimizes the tax impact of transferring funds;
4. Contribute cash to the SCI and invest through it.

Terreta Spain's advice: if you are both the manager of your company and an investor, creating a holding company is an effective strategy for reducing taxes and facilitating the transfer of funds between your companies. Contact us for a personal consultation.

How is a French SCI taxed in Spain?

1. Taxation of rental income :
   • Subject to Impuesto sobre la Renta de No Residentes (IRNR).
   • Tax rate: 19% of property profits (24% for non-EU residents).
   • Quarterly declaration required.
2. Tax deductions :
   • Expenses with a direct economic link to the activity in Spain can be deducted.
   • Renovation expenses are deductible for an SCI, unlike an individual.
3. Corporate income tax :
   • Applicable if the SCI is considered a commercial entity.
   • Not applicable for simple ownership and rental of real estate.
4. Franco-Spanish tax treaty :
   • Avoid double taxation of income.
   • Income taxed in Spain is neutralized in France.
5. Special features :
   • No IRNR to pay for the SCI, unlike foreign individuals.
   • No taxation in Spain if the property is not rented out and used solely by the associates.
6. Bank charges :
   • Higher for SCIs than for private individuals in Spain.

What other taxes need to be taken into account?

What other taxes need to be taken into account?

• VAT, transfer duties and other taxes (IBI, the equivalent of property tax, for example), the amounts of which vary according to the Spanish community in which the property is located, as well as the type of property purchased.
• On disposal, the capital gain is taxed at 19% if the SCI is owned by non-Spanish tax residents.
• Finally, when inheriting: if the heirs are integrated into the SCI, they don't need to go before a Spanish notary or pay taxes in Spain, as the owner of the property remains the SCI.

Terreta Spain's advice: note that the Spanish tax system is complex and that it is advisable to turn to an international tax specialist to avoid any confusion. Contact us to be put in touch with trusted local professionals.  

Disadvantage of SCI: management and accounting costs

It should be pointed out that buying via an SCI involves annual costs of around €3,000 (€2,000/year in Spain and €1,000/year in France for SCI accounting and declarations). In any case, these costs are far lower than the tax payable on dividend distributions, making investment via an SCI generally more advantageous. 

Investing via an SCI in Spain: points to watch out for

Investing via a SCI in Spain is advantageous, but mistakes are common among novice investors. They include:

• Poor cost evaluation;
• Insufficient preparation of documents ;
• Lack of understanding of local regulations;
• Taking tax risks and paying penalties due to unfamiliarity with Spanish tax obligations.

Testimonials from customers who have invested in Spain via an SCI with Terreta Spain

Claude's project (first name changed)

As an example, and to make things more concrete, let's start by looking at Claude's case. He recently invested in Valencia with his partner via an SCI. The purchase was partly financed by a consumer loan in France, and the SCI was set up quickly and cost-effectively.

• Formalities: creation of SCI in France and registration in Spain, obtaining NIE and NIF. 
• Financing: €150,000 total with €100,000 down payment and €50,000 5-year consumer loan.
• Creation of the SCI: completed in a week via an online legal services platform for €1,000.
• Accounting: estimated annual costs: €1,000 to €1,500 in France and around €2,000 in Spain.
• Rental management: 50% of the rent for each new contract, no recurring costs.

Testimonial from Pierre (first name changed)

Let's look at another example, that of Pierre, an experienced investor who chose to buy a property in Valencia via an existing SCI and holding company. 

• Pierre invested a total of €350,000, without taking out a loan. The entire sum was contributed by his holding company to the SCI.
• Pierre's holding company owns 20% of the shares in the SCI and has transferred 100% of the funds in the form of an associated current account.
• All dividends returned to the holding company will be tax-free over a long period, as they will be used to repay the current account.
• 80% of the profits generated by the SCI can be distributed to Pierre as personal dividends.

Conclusion

In conclusion, buying in Spain with a French SCI is a profitable and secure strategy. It offers significant tax and asset advantages. However, it is essential to surround yourself with competent professionals to maximize your chances of success.

Do you have any questions? Would you like to set up an SCI? Contact Terreta Spain's specialized teams. 

FAQ. Buying in Spain via a French SCI

Why choose an SCI to invest in Spain rather than buying on your own?

An SCI facilitates collective asset management, optimizes investment for tax purposes, and simplifies the transfer of assets to heirs. It also avoids the distribution of dividends and the 30% flat tax, making it possible to invest company cash more efficiently.

What are the costs involved in buying property in Spain via an SCI?

Acquisition costs include notary fees, legal fees and local taxes. These represent around 10-15% of the property price. Managing an SCI in Spain also entails annual fees: around €3,000.

Investing in Spain with a French SCI: is it possible to obtain financing in France?

Yes, French banks offer real estate loans with guarantees, consumer loans, or the use of a holding company's cash flow. Conditions vary according to the bank and the SCI's profile.

Investing in Spain with a French SCI: is it possible to obtain financing in Spain?

Yes, it is possible to obtain financing in Spain for your SCI. All you need to do is compile a complete file, including: your passport, your NIE number (Numéro d'Identité d'Étranger), proof of income, savings statements and a credit report from your country of origin. Banque de Sabadell is a good partner for foreigners. 

How is an SCI taxed in Spain?

Rental income from an SCI in Spain is taxed at 19% (24% for non-EU residents) on property profits via the Impuesto sobre la Renta de No Residentes (IRNR). Corporate income tax is applicable if the SCI is considered a business, at a rate of 25%. Expenses related to the activity in Spain can be deducted. There is no double taxation, thanks to the tax treaty between France and Spain. The SCI is not liable for IRNR if the property is not rented out.

Buying in Spain via a French SCI: what are the risks?

The risks associated with buying through an SCI in Spain are: poor cost evaluation, inadequate preparation, lack of understanding of local regulations. 

Sources: Masteos, Idealista, Sabadell