Spanish Mortgages for Company Purchases: Advantages and Limitations
Buying property through a company is usually only worthwhile for running it as a business, using retained profits from an existing company, or working around currency restrictions. IMS advises on structuring and financing company purchases, with applications placed by a Bank of Spain-registered advisor.
Over the past few years, the benefit of buying property in Spain through a company has diminished. Most buyers now look to purchase in a personal name. Nevertheless, for some purchasers — particularly those buying for genuine business reasons — buying through a company remains the right route.
Spanish mortgages for company purchases come with some limitations and specific requirements. One key reason to consider borrowing through a Spanish SL is if you earn income in a currency not covered by lenders in Spain.
Company loans often come with higher bank arrangement fees. Interest rates are also generally higher than for a personal-name purchase.
If you’re buying for business purposes, company ownership can offer real advantages:
- The property can be used to generate income from regular rentals
- Running costs can be offset against income
- It may be possible to obtain rebates on some Spanish taxes, like IVA
These benefits apply specifically where the purchase is genuinely business-driven — they don’t apply to purchasing through a company for personal use. A company structure still requires a personal guarantee from directors, so it doesn’t remove personal liability.
Why Are Spanish Banks Less Likely to Grant a Company Loan?
Files for loans granted in a company’s name are more likely to be pulled and scrutinised in the event of a Bank of Spain audit — first for money laundering or tax evasion checks, and second because the file must show a higher level of due diligence, making this type of lending more complicated overall.
- Legislation requires the bank to confirm each year that the company remains financially viable, with no infractions or bankruptcy proceedings under way
- The repossession process can also be more complicated, particularly where the property is owned by a trading company that is also non-resident
- For risk purposes, a higher level of funds must be held against a company loan on the bank’s balance sheet, compared to a personal-name mortgage
Company loans can overcome access issues for clients who earn in currencies not covered by non-resident lending in Spain.
Expert advice should be taken on the cost of setting up and running a Spanish SL.
Can I Obtain a Mortgage Through a Spanish SL?
An SL (Sociedad Limitada) is a Spanish limited company — a resident structure, distinct from a non-resident company. Spanish banks can offer mortgages to an SL, and tend to look more favourably on this structure than on non-resident company ownership: a wider range of banks will consider a loan where a resident SL is involved.
It’s normal for the SL to be dormant, created solely as a holding structure for the asset.
- The loan is granted to the company, and all shareholders must act as guarantors
- A Spanish SL must have a minimum of two shareholders
- Affordability is based on the personal situation of the shareholders, and normal criteria apply
- The SL must be set up before a mortgage application can be made
- Monthly and yearly tax returns and accounts are necessary, even if the SL only holds an asset
Maximum loan-to-value may be limited to 60%, with a 15-year term
Can a Non-Resident Company Get a Spanish Mortgage?
Purchasing Spanish property through a non-resident company is possible. The company can be an existing one, a trading company, or a new company set up solely to hold the asset. It can hold the property directly, or via a Spanish SL that in turn holds the asset.
- To buy the property and arrange a mortgage, the company needs a non-resident fiscal number in Spain — a CIF, the company equivalent of the individual NIE
- To obtain the CIF, you’ll need the company’s articles, deeds, and shareholder certificates, along with certificates from government departments confirming the company is set up according to the law
- All documents must be translated into Spanish and carry the Hague Apostille stamp
- At least one shareholder will need Power of Attorney, to act on the company’s behalf in all matters relating to the purchase
Each shareholder will also need their own individual NIE certificate, since they must personally act as guarantors
How Do Banks Assess Risk on a Company Loan?
The loan deed is recorded in the company’s name, as the company is the legal owner. However, the financial data used to assess the loan rests on personal guarantees from all shareholders — loans based on the company’s own fiscal position are not possible.
- Most companies owning property in Spain are just holding structures
- Mortgages are assessed against the personal incomes of the owners, not the performance of the company itself — documents required for the application reflect this
- All shareholders must present their personal documents, including ID, tax returns, credit files, and bank statements, and are personally liable for loan payments
- A mortgage can’t be used to buy shares in an existing company — it can only be raised to directly buy the property
Need to understand more about buying and borrowing in a company name? Ask your question and our expert advisers will help.
What Due Diligence Is Needed for a Company Mortgage?
Applying for a company mortgage in Spain requires extra paperwork. The loan sits in the company’s name, but banks assess risk based on the guarantors. This means documentation and due diligence requirements are always high. The paperwork must cover three things: the legal ownership structure, the company’s fiscal position, and the owners’ personal finances.
- You’ll need corporate documentation — deeds, incorporation certificates, and the CIF — as covered earlier for non-resident companies and Spanish SLs
- If the company trades, you’ll need two years of accounts and a balance sheet to show fiscal viability
- Where the company exists or trades, you’ll need corporate tax returns
- Where applicable, you’ll need six months of company bank statements showing fiscal activity
For expert advice on Company Mortgages contact us today