Taking a Spanish mortgage in name of a Company

Current background

Whilst over the last few years the benefit of buying property in Spain in a company name has diminished, and most buyers look to buy in a personal name never the less for some purchasers buying in a Company name remains the right route forward them.

If the property in Spain is to be used to generate an income from regular rentals then holding it in a company structure can help to offset some running costs against income and to get a rebate on some Spanish taxes like IVA where applicable

Since the economic banking crisis in Spain many Banks have withdrawn from offering a loan where the purchase of the property in Spain is to be made in a Company name. There are a number of reasons for this. Where loans are offered applicants may have to pay higher Bank arrangement fees and may find interest rates are higher than would be if the property was held in a personal name.

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Company loans for Spanish property

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Issues for Banks of loans in Company names

Files for loans granted in the name of a Company are always more likely to pulled and scrutinized by the Bank of Spain when they do their regular audits. This is for the checking of money laundering and tax evasion which is deemed to be more likely in this type of transaction. The regulator requires a higher level of due diligence can be evidenced on the file.

Under current legislation the Bank can be required to confirm each year that the Company remains financially viable and has no infractions or bankruptcy proceedings taking place.

The repossession process can be more complicated particularly where the company owning the property is a trading Company and is a non resident company.

The amount of funds that must be passed to the balance sheet to cover risk at inception of the loan is higher for the Banks than if the property loan is in a personal name.

Company valuation issues

Buying and a loan for a resident Spanish SL

It is possible to purchase and gain a loan for a property bought in a Spanish Limited Company. It is normal for the SL to be a dormant and new entity created solely as a holding structure for the asset you are buying.  In general the Banks in Spain look more favorably on a structure that includes an SL and more Banks will consider a loan on this basis, than Banks that will look at lending where no SL is involved.

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Buying and a loan for a non resident company

Purchase of Spanish property and a loan can be arranged via a non resident company. The company can be an existing company; can be a trading company, and or a new company set up solely to hold the asset. The nonresident Company can either hold the property directly or own a Spanish SL company that in turn holds the asset.

In order to both buy and arrange a mortgage with a non resident company the company will require a non resident fiscal number in Spain. For individuals this is the NIE, for companies this is a CIF. To obtain a CIF the company must provide the articles, deeds, shareholders certificate, and the certificate from the relevant countries government department confirming the company is set up according to the law. All of the documents will have to be translated into Spanish and hold the stamp of the Hague Apostille.

A minimum of one of the shareholders of the Company will need to have Power of Attorney allowing them to act on behalf of the company in all matters relating to the purchase and all shareholders, as part of the process of being a guarantor, will need to obtain an NIE number.

If a company is set up in a fiscal paradise the buying process becomes more difficult and with most banks in Spain a loan will not be possible.

Risk process for assessing a loan in a Company name

Whilst on the deeds in Spain any loan granted will be recorded in the name of the company that owns the property the financial data by which the Bank will assess the loan will rest on the personal guarantees of the shareholders of the Company. No loan is granted based solely on the Company’s fiscal position.

Many Companies that are looking at owning property in Spain are in any case just holding structures, but even for active companies the loan will be assessed against personal incomes of owners not performance of the Company itself and documents for the mortgage will reflect this.

The guarantors will be personally liable for the loan payments and could be pursued in event of a default.

A Mortgage in Spain cannot be granted to buy the shares of an existing Company. If the purchaser intends to take over the existing structure and the property is already in the name of a Company to achieve borrowing it will have to be removed from the existing Company first.

Mortgages for property in Spain

Due diligence

Because the loan is on the name of the company but the risk assessment is in the name of the guarantors the level of documentation and due diligence is always high within the application process The paperwork will need to cover off all the legal aspects of the ownership of the ownership structure, the fiscal viability of the Company and all the personal debt and income information of the individual owners.

Risk assessment

Risk assessment requirements

For the Company

  • All deeds and certificates showing incorporation of the Company and the owners stamped by the Apostille for nonresident companies.
  • CIF certificate for Company in Spain
  • Financial data for trading companies, 2 years accounts and balance sheet.
  • Corporate tax returns where company is a trading company.
  • Bank accounts where applicable for last 6 months showing fiscal activity

for the Guarantor

  • Latest personal tax returns
  • Copy of credit files from relevant country of residency
  • Last 6 months personal bank statements
  • Nie certificate
  • Copy of passport

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