Holding your Mallorca home through an LLC or a foreign company: what it costs in Spain

The special tax on property owned by foreign companies

A company resident outside Spain that owns Spanish property pays a special annual tax of 3% of the cadastral value, known as the gravamen especial and filed on Tax Form 213 in January for the previous year. It is designed to stop individuals hiding behind a foreign company, and it applies unless an exemption fits.

The main exemptions cover companies entitled to a double tax treaty with an exchange of information clause whose ultimate individual owners are identified and live in Spain or in a treaty country, companies that carry on a genuine business other than holding property, and listed companies. Claiming an exemption usually means filing the Tax Form 213 anyway and naming the individuals behind the company.

A single-member US LLC that is disregarded for US federal tax purposes is not always treated as entitled to the treaty in its own right. The exemption cannot be assumed; it has to be checked against the facts of each structure.

What else the company changes

• No imputed income, but no relief either. A company pays no Tax Form 210 on imputed income, which applies only to individuals. If the property is let, the company declares the rental income. The saving on imputed income is usually far smaller than the 3% special tax.
• Wealth tax still applies. Shares in a company whose assets consist mainly of Spanish real estate are treated as Spanish assets for non-resident wealth tax. Putting the house into a company does not take it out of the charge.
• Selling the shares is taxed in Spain. The gain on shares in a company whose value comes mainly from Spanish property is Spanish-source income, and most treaties, including those with Germany and the United States, allow Spain to tax it.
• Transfer tax can follow the shares. Buying control of a company whose assets are mainly Spanish property can be taxed as if the property itself had been bought, where the tax office sees the share purchase as a way of avoiding transfer tax.
• More paperwork, every year. The company needs a Spanish tax identification number, its accounts must support the valuation of the shares, and the notary will ask for its ultimate beneficial owners at completion.

The inheritance argument

The usual reason given for a company is inheritance. Holding through a foreign company can change which country taxes the estate and how. But with the Balearic 100% relief for spouses, children and parents, the Spanish inheritance tax that a company might avoid is often nil in any case, and heirs resident in Germany are usually taxed there whatever the structure. The company rarely buys much that direct ownership, a will and a clear choice of law would not.

When a company does make sense

• A letting business with its own organisation, staff or management, rather than a single holiday home.
• Several properties held with other investors, where a company makes ownership and exit easier to manage.
• A specific estate or family reason in your home country, analysed on both sides before the purchase.

For a home you use yourself, direct ownership, often jointly with your spouse, is usually simpler and cheaper. If you already hold a Mallorca property through a company, the question is whether to keep, restructure or unwind it, and each route has its own tax cost that should be measured before anything is signed.

If you live in Spain and use an LLC for investments

This note is about property owned by non-residents. Spanish residents who hold investments through a US LLC face a different set of questions: the residence of the company itself, the controlled foreign company rules and the Tax Form 720. The partners have analysed that case in detail in US LLC and Spanish tax residence, on the Lexon site.

Sources: Articles 13, 40 to 45 of the consolidated Non-Resident Income Tax Act (Real Decreto Legislativo 5/2004); article 5 of Ley 19/1991 on wealth tax; article 338 of Ley 6/2023 on securities markets; double tax treaties between Spain and Germany (2011) and the United States (1990, as amended by the 2013 protocol).

This page is general information and reflects the rules in force on the date shown. It is not advice and does not replace an assessment of your own case.