Foreign Company Ownership of Spanish Property: Tax, Liability and the Non-Resident Corporate Route (2026)

Holding a Costa del Sol villa through a UK Ltd, a Luxembourg SARL or a Delaware LLC changes the tax treatment in ways that catch buyers off guard. A foreign company owning Spanish real estate without a permanent establishment is taxed under the Non-Resident Income Tax (IRNR) on its Spain-sourced income, not under the corporate income tax (IS) that a Spanish SL pays. The rules, set out in the Ley del Impuesto sobre la Renta de no Residentes and the Ley del Impuesto sobre Sociedades, differ from the individual-owner route in three places: the 3% special levy on tax-haven entities, the absence of imputed income for corporate owners, and the permanent-establishment risk.

How is a foreign company owning Spanish property taxed?

A non-resident entity that owns Spanish property and has no permanent establishment in Spain falls under IRNR for its Spanish-sourced income. The tax base depends on the income type. Rental income is taxed on the gross amount received, capital gains on the gain realised, and there is no annual imputed-income charge for empty properties (that rule applies to natural persons only, under Article 13.1.h of the IRNR Law). The tax is filed on Modelo 210, per property and per income type, with quarterly deadlines for recurring rental income.

The rate depends on where the company is resident. Entities based in the EU, Iceland, Norway or Liechtenstein pay 19%. Entities resident anywhere else, including the US and most non-EU jurisdictions, pay 24% on gross rental income with no deductible expenses. EU-based entities may deduct expenses directly related to earning the rental income, following the compatibility clause with the EU non-discrimination rules. This rate split is set out in the Agencia Tributaria’s guidance on property taxation for non-residents.

What is the 3% Gravamen Especial on non-resident entities?

The Gravamen Especial sobre Bienes Inmuebles de Entidades no Residentes, regulated in Chapter VI of the IRNR Law, is a 3% annual levy on the cadastral value of Spanish real estate owned by entities resident in a jurisdiction Spain classifies as non-cooperative, the term that replaced “tax haven” after July 2021. It is filed on Modelo 213 each January, covering the previous calendar year.

The levy applies to the cadastral value, the same figure used for IBI. The 3% charge is deductible as an expense when calculating the entity’s IRNR base. Three categories of entity are exempt even if they are based in a listed jurisdiction: foreign states and public institutions, entities running a genuine economic activity in Spain distinct from mere property holding, and companies listed on an official regulated securities market.

A company based in the UK, Germany, the United States, Luxembourg or any cooperative jurisdiction does not pay this levy. It applies to structures routed through jurisdictions on Spain’s Annex IV list of non-cooperative jurisdictions, which the Agencia Tributaria publishes and updates. This is the single most misunderstood rule in foreign-company ownership: most buyers assume all foreign companies pay 3% a year, when the levy is targeted at tax-haven vehicles.

Does a foreign company pay imputed income tax on an empty property?

No. The imputed-income regime, which charges non-resident individuals 1.1% or 2% of the cadastral value on properties not rented out, applies only to natural persons. Article 13.1.h of the IRNR Law, as the Agencia Tributaria’s own guidance states, applies to “non-resident taxpayers who are natural persons, owners of urban properties”. A foreign corporate owner of an unrented property files nothing for imputed income.

This is a structural difference from individual ownership. A non-resident person with an empty Marbella apartment pays roughly 1.1% of the cadastral value each year as IRNR imputed income, filed on Modelo 210. A UK Ltd with the same apartment pays nothing until it lets the property or sells it. The trade-off is that corporate rental income is taxed at 24% on gross (for non-EU companies) with no expense deduction, while an individual non-EU resident also pays 24% but an EU resident individual pays 19% and may deduct costs.

When does a foreign company create a permanent establishment in Spain?

A permanent establishment (PE), defined in Article 16 of the IRNR Law, exists when a non-resident entity has a fixed place of business in Spain through which it carries out all or part of its activity. The Agencia Tributaria lists the premises that count: executive headquarters, branch offices, offices, factories, workshops, warehouses, shops, mines, wells, quarries, agricultural or livestock holdings, and any place used for surveying or extracting natural resources. Construction, installation or assembly work lasting more than six months also constitutes a PE.

Owning a single rental property does not create a PE. Letting out a portfolio from a staffed Spanish office does. A foreign company with a PE in Spain is taxed under corporate income tax (IS), not the simplified IRNR. It files Modelo 200, deducts business expenses, and pays the 25% general IS rate (or 15% in its first two profitable years if it qualifies as a newly created entity). The PE route is heavier on compliance but allows full expense deduction and loss carry-forward.

A foreign company that owns property through a Spanish subsidiary, rather than directly, has the subsidiary taxed as a Spanish resident entity under IS. That subsidiary pays 25% on its profits, files Modelo 200 annually, and withholds 19% on dividend distributions to its foreign parent unless a double taxation agreement reduces the rate. Our guide to corporate income tax for a Spanish SL holding property covers the IS side in detail.

How does foreign-company ownership compare with a Spanish SL and individual ownership?

The three routes differ on tax rate, liability, succession and reporting. A side-by-side comparison helps buyers see where the foreign-company route sits.

Dimension	Foreign company (no PE)	Spanish SL	Individual non-resident
Tax on rental income	IRNR 19% (EU/EEA) or 24% (rest), gross base	IS 25% general, 15% first two years, net base	IRNR 19% (EU/EEA) or 24% (rest), gross base
Imputed income on empty property	Not applicable	Not applicable (IS on profits instead)	1.1% or 2% of cadastral value, Modelo 210
Gravamen Especial (tax-haven entity)	3% of cadastral value, Modelo 213	Not applicable	Not applicable
Capital gains on sale	IRNR 19% (EU/EEA) or 24% (rest), no 3% buyer retention	IS 25% on company profit, then dividend withholding	19% flat, 3% buyer retention via Modelo 211
Expense deduction	EU entities: yes. Non-EU: no	Full business deduction	EU entities: yes. Non-EU: no
Liability shield	Yes, company limited by shares	Yes, SL limited by capital	No, personal liability
Succession	Share transfer, no Spanish ITP on property	Share transfer, no Spanish ITP on property	Property transfer, ITP 7% Andalusia, plus ISD
Annual filing	Modelo 210 per income type	Modelo 200 IS, plus Modelo 111/115 withholdings	Modelo 210 per income type
Transfer on sale	Share sale may avoid ITP, subject to DTA	Share sale avoids ITP	Property sale, ITP on buyer, CGT on seller

The foreign-company route suits a buyer who already has a trading company offshore, wants the liability shield without incorporating in Spain, and accepts the gross-income tax base. The Spanish SL route suits a buyer who plans to let multiple properties, wants full expense deduction, and is prepared for Spanish corporate compliance. Individual ownership is the simplest and the default for a single-property buyer.

What are the permanent-establishment and anti-avoidance risks?

The main risks for a foreign-company structure are PE creation and anti-avoidance challenge. A PE triggers full IS compliance, which is costlier than IRNR but allows expense deduction. The boundary is activity-based: passive property holding does not create a PE, active management from a fixed Spanish office does.

Spain applies two anti-avoidance layers. The general anti-abuse rule in Article 15 of the Ley General Tributaria (Law 58/2003) lets the Agencia Tributaria recharacterise transactions where the main purpose is tax avoidance and the arrangement lacks economic substance. The ATAD general anti-abuse rule, transposed through the same provision, extends this to cross-border structures. A foreign company set up purely to dodge Spanish tax, with no commercial rationale, can be challenged and taxed as if the individual owned the property directly.

DAC6, transposed in Spain by Ley 10/2020 of 30 December 2020 and its developing regulations, requires intermediaries (lawyers, tax advisors, banks) and relevant taxpayers to report cross-border arrangements meeting certain hallmarks. A straightforward property purchase does not trigger reporting, but a structure involving deductible losses, cross-border payments with tax mismatch, or automatic conversion of income into capital gains likely does. The hallmarks are set out in Categories A to E of the directive.

The OECD Pillar Two 15% global minimum tax, implemented in Spain through Law 7/2024 of 29 October, applies only to multinational groups with consolidated revenue above EUR 750 million. A single-property holding company or a small investor vehicle is far below the threshold and unaffected. Pillar Two is relevant only to large corporate groups, not to the typical foreign buyer holding a Costa del Sol property through a company.

How does a double taxation agreement affect the foreign-company route?

Spain’s network of double taxation agreements (DTAs) determines which country taxes the rental income and the capital gain. Most DTAs follow the OECD Model Convention, which lets the source country (Spain) tax real-estate income and gains, with the residence country granting a credit. This means a UK company letting a Spanish property pays IRNR in Spain and then credits that against its UK corporation tax.

The DTA does not reduce the Spanish IRNR rate below 19% or 24% for property income, because real-estate income is typically taxable in the source state. It does prevent double taxation through the foreign tax credit. Some DTAs reduce the dividend withholding rate on profit repatriation from the Spanish subsidiary to its foreign parent, often from 19% to 5% or 10% subject to participation thresholds. Our guide to double taxation agreements and Spanish property covers the treaty mechanics.

What does a foreign company pay on sale?

On selling the property, the foreign company pays IRNR on the capital gain at 19% (EU/EEA) or 24% (rest). Unlike an individual seller, there is no 3% buyer retention via Modelo 211: that mechanism applies to non-resident individuals, not to entities. The company files Modelo 210 and pays the full tax. The buyer, when purchasing from a foreign company, is not obliged to withhold the 3%.

Selling the shares of the foreign company rather than the property itself can avoid Spanish transfer tax and IRNR on the gain, because the share transfer is taxed in the company’s residence country under most DTAs. This is the classic advantage of corporate wrappers. The risk is anti-avoidance: if the Agencia Tributaria treats the share sale as a property sale in substance, it can challenge the structure under Article 15 LGT. A genuine holding company with commercial substance withstands challenge; a shell created days before the sale does not.

What should a buyer weigh before choosing the foreign-company route?

The foreign-company route makes sense for a buyer who already has an offshore company, wants to keep Spanish compliance light (no Modelo 200, no IS, no Spanish bookkeeping), and accepts the gross-income tax base on rental income. It does not make sense for a buyer planning to run an active lettings business, where a Spanish SL with full expense deduction and IS loss carry-forward is more efficient.

Three checks before committing. First, confirm the company’s residence jurisdiction is not on Spain’s non-cooperative list, otherwise the 3% Gravamen Especial applies each year. Second, confirm the DTA between Spain and the company’s residence country treats real-estate income as expected, so the foreign tax credit works. Third, confirm the structure has commercial substance, so it withstands the Article 15 LGT anti-avoidance test and any DAC6 hallmark review.

The individual-ownership route, covered in our non-resident income tax guide, is simpler and cheaper for a single property. The Spanish SL route, covered in our buying through a company guide, is more efficient for an active portfolio. The foreign-company route sits between them: lighter on compliance than a Spanish SL, heavier on tax than individual ownership, and viable only with substance and the right residence jurisdiction.

This guide is general information, not legal or tax advice. Rules change and individual circumstances differ. Verify current requirements with an independent lawyer (abogado) or tax advisor (gestor/asesor fiscal) before acting.