Monday, 1st June 2020

This Month's Magazine
Tax changes affecting offshore companies with property in Spain.

Tax changes affecting offshore companies with property in Spain.

For some time now I have been advising on the dangers of owning assets in Spain through an offshore company.

Over the last twenty years many thousands of foreign investors have channelled their property investments in Spain directly or indirectly through offshore companies. This has enabled many individuals to avoid the payment of many Spanish taxes such as capital gains tax and inheritance and gift tax.    

As from the 1st.January 2007 these tax avoidance measures came to an end and owning assets in Spain through an offshore structure could have no commercial or fiscal benefit.  Continuing to hold assets in an offshore structure could now increase exposure to taxation.

In line with the rest of Europe, the Spanish authorities have been trying to introduce legislation that will lessen the amount of tax evasion and money laundering that is perceived to be enjoyed by entities located in offshore tax centres. The tax office does not want to leave any stone unturned in its quest to eradicate all investments channelled through tax haven countries.

The main thrust of the legislation is aimed at forcing such companies to demonstrate beyond reasonable doubt that their underlying activities are truly carried out in their respective offshore centre, and that these are indeed normal business activities.


The tax office will be able to initiate tax investigations of these companies based on the simple presumption that they consider the true or main activities to be carried out in Spain. It will be up to the companies concerned to demonstrate otherwise. Failure to do so will result in the companies in question, having to present accounts in Spain, reflecting all their transactions, wherever they are.

These proposals will also affect offshore holding companies set up to hold shares in a Spanish company which owns the property.

Most lawyers are now advising property purchasers not to buy the shares in the offshore company but to buy the property in their own names. This will leave the seller with very large capital gains tax liabilities.

It is generally agreed that now is the time to unwind any offshore structure that is in place especially where property in Spain is concerned.  However, other measures can be taken to minimize exposure to Spanish taxation and protect the benefits of offshore ownership.

If you already hold your Spanish property through such a structure and wish to continue to do so, yet still enjoy the tax benefits, contact Allan Graydon

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