Introduction

If you read our blog regularly, you know that buying in Spain is a good idea. But more and more investors are asking themselves and us these (mega-wise) questions: is it more strategic to buy in your own name, via an SL or a SOCIMI (the equivalent of Reits)? And, is one regime preferable to another, depending on whether or not you are a Spanish tax resident? 

This choice determines the taxation and management of your assets, and even the conditions for passing them on. 

Terreta Spain's experts bring out the scanner. 

Resident or not, that's the question

Who is a Spanish tax resident?

You are considered a tax resident in Spain if you live there for more than 183 days a year , or if the core of your economic activity or family life is based there. Spanish tax residents are subject to IRPF ( Personal Income Tax). 

• IRPF is progressive and can be as high as 47%. 

Who is a foreign tax resident?

Conversely, foreign residents spending less than 183 days in the country are subject to IRNR, theNon-Resident Income Tax.  

• IRNR is 19% for EU members and 24% for non-EU citizens.

Buying in your own name: advantages and disadvantages

The advantage of buying in your own name is simplicity. The problem lies in the tax implications, especially if you plan to invest in several properties.

For non-residents 

• Income from property rentals is subject to IRNR, i.e. 19% or 24% depending on the country of residence. 
• Expense deductions are very limited for EU nationals.
• No deduction is possible for non-EU residents.
• Transmission is complex and often costly. 

For residents

If you're a resident, buying in your own name makes sense if you have few assets (and little income). 

• Income from property rentals is subject to IRPF and its progressive scale.
• Expense deductions are more extensive than for non-residents. They extend to a 50% allowance on net rental income (for new contracts in 2025).
• Transmission is simpler than in the case of non-residents, but can be complex depending on the family situation.

Need help with your project? Talk to one of our experts.

Remember: Own name = first-time investor or purchase of second home.

Discover and download our complete guide right here.

Create a Sociedad de responsabilidad Limitada

Definition: what is SL?

In simple terms, the SL is a company that enables you to own, manage and transfer assets in Spain within a secure, tax-optimized framework.

It offers great management flexibility, does not require large share capital, and protects members whose liability is limited to the capital they contribute. In short, your personal assets are protected. 

The Spanish SL is the equivalent of the SARL in France, the SRL in Italy, the Gmbh in Germany, the LLC in the USA or the LTD in the UK.

Prerequisite: when is leasing considered an economic activity? 

Are you planning to invest in several properties and develop a medium- to large-scale rental business? Then setting up a rental property company is a good idea. 

Beware, no smokescreen possible, you'll need to carry out a real economic activity. According to Article 5.1 of Law 27/2014 on corporate income tax, the rental of real estate is considered an economic activity once a person is employed full-time with an employment contract.

What are the key benefits of SL?

Tax benefits

• For SLs, the corporate income tax rate is fixed at 25% , with a reduced rate of 15% for the first two profitable years. This also applies to capital gains. 
• A wide range of expenses can be deducted: interest on loans, works, various fees, depreciation, management fees, maintenance, furniture, etc. This is a big plus when you own several properties. 
• Optimization of wealth tax : the assets are held by the company, and this can therefore reduce your IP (Impuesto sobre el Patrimonio) base. 

Legend: to declare your corporation tax, you will need to fill in form 200. Here is an example.

Source: Agencia Tributaria

Collective management and easier transfer

A Sociedad de responsabilidad Limitada is ideal if you want to invest with several people. What's more, the transfer of shares makes it easier. 

Bank credibility

Not to be overlooked, investing in SL is a sign of confidence for a bank if you need a loan.

Special rental regime

You can benefit froman even more advantageous special plan if : 

• You own 8 or more properties
• You rent the property for a minimum of 3 years
• You keep separate accounts for each unit.

In this case, jackpot: 

• 40% bonus on the portion of tax corresponding to rental income.
• Reduced corporate income tax rate of 15%, compared with 25% as a general rule.
• Super-reduced VAT of 4% for the purchase of new homes for long-term rental by these companies.

The disadvantages of investing via an SL

There are disadvantages to opening and running an SL, and it's best to be forewarned. 

• Set-up and management costs.
• Administrative obligations.
• Possible double taxation depending on country of residence (a majority of countries, over 90, have signed non-double taxation agreements with Spain, but this is not the case for Denmark in the EU, Singapore or Hong Kong, for example). 
• An SL arrangement is unsuitable for the purchase of your principal residence.
• Please note that to benefit from the tax advantages of the SL, you must be able to provide precise proof of your activity. 

Terreta tip: remember to keep a clear record of your activity: rental lease, management mandate, invoices, etc.

Good to know: 

• In the Community of Madrid, real estate companies can benefit from a reduced rate of 2% instead of the standard 6% on Estate Transfer Tax (ITP) when they purchase a property intended for resale within 3 years.
• In the Valencian Community, there is a 50% or 70% ITP bonus for SLs if the property is being renovated or rented out. 
• Please note that Catalonia has just put an end (March 2025) to the 70% ITP bonus for real estate companies for resale purposes.
• In Andalusia, when a property is acquired with a view to resale (within 5 years), an ITP rate of 2% may be applied.

At what threshold is it worth buying in SL?

For residents subject to IRPF: it is estimated that below €40,000 in annual net profits, the SL is not worth the effort. In this case, you should opt for the simplicity and tax advantages of buying in your own name. 

For non-residents subject to IRNR: if your rental income is low and you have few expenses, we recommend that you buy in your own name. This will save you a lot of red tape. 

BUT if you have a lot of expenses to deduct (work, depreciation, interest, etc.), the SL can become interesting. It allows you to deduct them before tax, which is not possible with IRNR in your own name. 

Comparative table of own-name and SL purchases 

Tax status	Proper name	SL	Deductions possible in your own name	Deductions available via SL
IRPF resident	Progressive IRPF up to 47%.	25% IS	Yes, but limited	Numerous
Non-resident IRNR	IRNR 19% or 24% on gross income	IS 25% on net profit	Very limited and none outside the EU	Numerous

Case studies

• An investor earns €60,000 gross profit for the year 
• He can deduct €10,000 in expenses if he buys in his own name (IRPF, IRNR).
• He can deduct €20,000 in expenses if he buys through a company (SL)

Diet	Tax base	Rates	Annual tax
IRNR EU	50 000	19%	9 500
IRNR OUTSIDE EU	60 000	24%	14 400
IRPF	50 000	30% (average)	15 000
SL	40 000	25% (or 15%)	10,000 (or 6,000)

At the beginning of 2025, as part of new regulations designed to curb the housing crisis, Pedro Sánchez symbolically evoked a radical measure: to introduce a dissuasive tax of up to 100% of the purchase price for non-EU non-resident foreigners. This extreme proposal was aimed at limiting international investors' access to the Spanish real estate market.

Buying through an SL would (for the time being) make it possible to circumvent this legislative change, if confirmed. 

Having trouble defining your project? Talk to a Terreta Spain expert.

How to set up a Sociedad Limitada in Spain  

There are 8 essential steps to creating your SL : 

1. Reserve your company name.
2. Open a pro bank account with a share capital of €3,000 (this is our reco even though the law has allowed you to open an account with a capital of €1 since 2022). 
3. Drafting by-laws.
4. Sign the incorporation deed before a notary.
5. Register with the tax authorities(Agencia Tributaria) and fill in form 036 to obtain your NIF, the Tax Identification Number.
6. The manager and active partners must register with Social Security by filling in this PDF.
7. Apply to the FNMT(Fábrica Nacional Moneda y Timbre) for a digital certificate. 

Allow between 15 days and 2 months for the formalities involved in setting up a Sociedad Limitada. 💸Less than €1,000 if you are accompanied by an expert (less than €500 if you do it yourself). 

Delaguia-Luzon is a leading law firm based in Valence, specializing in commercial law. They can help you set up your company. Contact them here. 

We have detailed each of these steps in our fact sheet on Creating an SL in Spain (to be inserted once published). 

Remember: SL = investor owning several properties or high expenses.

What is a SOCIMI?

SOCIMI, an alternative to explore

If neither buying on your own nor setting up an SL seems right for you, there's a third way: 

➤ You can set up a SOCIMI (Société Cotée d'Investissement Immobilier), the Spanish equivalent of REITs. These are large collective investment vehicles , set up by funds or very large portfolios, whose share capital must exceed 5 million euros. 

➤ You can buy shares in a publicly listed SOCIMI. This allows you to invest in Spanish real estate without buying property directly.

A more passive solution, but highly regulated

SOCIMIs are regulated by Law 11/2009, and enable anyone wishing toinvest in Spanish real estate to do so without buying property directly, but by acquiring shares in these real estate companies , which own and operate real estate assets (residential, office, retail, etc.). 

Good to know: 

• Listed on the stock exchange, shares are liquid and therefore easier to sell than an apartment.
• This type of investment gives access to assets normally inaccessible to private individuals, such as entire buildings or premium retail properties.

Terreta's advice: SOCIMIs are very profit-oriented. They're ideal if you want to diversify your business without having to manage it. 

Investment conditions 

When it invests, SOCIMI must comply with the following criteria: 

• 80% of income must come from rentals or dividends; 
• At least 80% of its assets must be residential or urban rental properties; 
• She must keep her goods for at least 3 years before selling them;  
• It must pay 80% of rents received and 50% of capital gains realized to its shareholders in the form of dividends (unless it uses this capital gain to buy back a property within 3 years). 
• If it holds shares in another SOCIMI, it must repay all dividends received. 

SOCIMI taxation: 0% corporation tax 

If it meets the above criteria, SOCIMI benefits from a VERY advantageous tax regime. 

• 0% corporation tax on distributed profits.
• ITP reduced by 95% on purchase of property.

If it does not comply with the defined framework, it loses de facto its tax benefits. There is also a 15% withholding tax on retained earnings. 

Buying via a SOCIMI: shareholder taxation 

If you buy shares in SOCIMI, you will be subject to tax. Here's what you need to know. 

If you receive dividends 

• As an individual tax resident in Spain

➤ Dividends are subject to theIRPF scale, in the capital income category.

• As a non-resident 

➤ IRNR at 19% (if you are in the EU or EEA)
➤ IRNR at 24% (outside the EU/EEA), unless there is a double taxation agreement.

If you sell your shares and make a capital gain 

• You will pay capital gains tax in the same way as for a conventional share, via the IRPF if you are resident in Spain for tax purposes. 
• In your country of residence, if you are a non-resident.

As a non-resident, dividends and capital gains may also be taxed in your country of residence, unless a double taxation treaty prevents double taxation.

Remember: SOCIMI = passive investor or stock market diversification.

Need personalized advice? Our advisors will analyze your profile and project free of charge, and recommend the most suitable structure. Make an appointment with an expert.

Conclusion 

Whether you invest in your own name, set up an SL or buy shares in a SOCIMI depends on your situation, your project and your medium- to long-term vision. 

The choice is yours, but don't go it alone. If in doubt, consult a real estate expert in Spain.

FAQ - Investing in real estate in Spain: should you buy in your own name, through an SL or a SOCIMI?

What are the advantages of buying in your own name?

• Simple management.
• Tax system suited to small investors (few properties).
• For residents: 50% allowance on net rents (since 2025).
• Easier transmission for residents.

What are the disadvantages of buying in your own name?

• Heavy taxation for large estates.
• Little or no deductions for non-residents.
• Complex transmission for non-residents.

What is a Sociedad Limitada (SL)?

The SL is a limited liability company that enables you to manage, hold and transfer real estate assets in a secure, tax-optimized environment. The recommended minimum share capital is €3,000, and partners' personal assets are protected. 

What are the advantages of investing through an SL?

• Fixed corporate income tax rate of 25% (15% for the first two profitable years).
• Large deduction of expenses (work, interest, depreciation, etc.).
• Wealth tax optimization.
• Easy transfer of shares.
• Increased credibility with banks.

What are the conditions for benefiting from the special rental scheme in SL?

• Own at least 8 properties.
• Rent them for at least 3 years.
• Keep separate accounts for each unit.
• In this case: 40% tax rebate, reduced corporation tax at 15%, 4% VAT on new purchases.

What are the disadvantages of SL?

• Set-up and management costs.
• Increased administrative obligations.
• Risk of double taxation depending on country of residence.
• Unsuitable for a primary residence1.

At what point does SL become attractive?

• For residents: from €35,000 - €40,000 in annual profits.
• For non-residents: if you have a lot of expenses to deduct, the SL can be advantageous.

What is a SOCIMI?

SOCIMI is the Spanish equivalent of REITs, reserved for large portfolios (minimum capital of 5 million euros). It enables collective investment in real estate, with a highly advantageous tax structure (0% corporation tax if conditions are met).

What are the requirements for setting up a SOCIMI?

• 80% of income from rentals or dividends.
• 80% of assets in apartments or urban buildings for rent.
• Goods must be kept for at least 3 years.
• Distribution of 80% of rental income and 50% of capital gains as dividends

How am I taxed if I invest in a SOCIMI as a shareholder?

As a shareholder in a SOCIMI, you are taxed on dividends received and on capital gains if you sell your shares:

• If you are resident in Spain for tax purposes, dividends and capital gains are subject to IRPF, in the capital income category (between 19% and 28%).
  
• If you are a non-resident, you are subject to IRNR: 19% if you live in the EU or EEA, or 24% if you live outside the EU/EEA. Dividends and capital gains may also be taxed in your country of residence, unless a double taxation treaty prevents this.

How long does it take to set up an SL?

• Lead time: 15 days to 2 months.
• Cost: less than €1,000 with support, less than €500 stand-alone

What regional advantages are there on purchase taxes?

• Madrid: ITP at 2% (instead of 6%) for resale within 3 years.
• Valencian Community: 50% or 70% ITP bonus, depending on usage.
• Andalusia: ITP at 2% for resale within 5 years.
• Catalonia: end of 70% bonus in March 2025.