Over the last few years the benefit of buying property in Spain in a company name has diminished. Most buyers look to buy in a personal name. Never the less for some purchasers buying in a Company name remains the right route. Mortgages for companies however have limitations.
Company ownership structures can have benefits. For instance If the property in Spain is to be used to generate an income from regular rentals. To offset running costs against income. Also to get rebates on some Spanish taxes like IVA.
Since the economic banking crisis in Spain many Banks have withdrawn Mortgages for companies. For offered loans, applicants may have to pay higher Bank arrangement fees. Also may find interest rates are higher than for a personal name.
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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. In the event of a Bank of Spain audit. Firstly money laundering or tax evasion checks are more likely. Secondly files must show higher levels of due diligence. Making therefore Company loans more complicated.
Legislation dictates the Bank is required to confirm each year the Company remains financially viable. In addition that it 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. Furthermore is a non resident company.
For risk purpose. Funds required to pass to Banks balance sheet are higher. In the circumstance of loans to Companies. Compared to loans in personal names.
Buying and a loan for a resident Spanish SL
Spanish Limited Companies can obtain loans. It is normal for the SL to be a dormant. Created solely as a holding structure for the asset. Banks in Spain look more favourably on structures that include an SL. Further Banks will consider a loan on this basis. Rather than where no SL is involved.
Buying and a loan for a non resident company
Purchase of Spanish property in a non resident company. The company can be an existing company. Or it can be a trading company. Also 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 for 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. Articles, deeds, shareholder certificates are required for the CIF. In addition, certificates from government departments. Confirmation 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. NIE certificates are also required for all shareholders. Because they must act as guarantors.
Companies based in fiscal paradises will not get lending.
Risk process for assessing a loan in a Company name
The Spanish loan deed is recorded in the name of the company. This being the owner. However the financial data by which the Bank will assess the loan will rest on the personal guarantees. Including all of the shareholders of the Company. Loans granted based on the Company’s fiscal position are not possible.
Many Companies that are looking at owning property in Spain are just holding structures. Mortgages for companies will be assessed against personal incomes of owners. Therefore not performance of the Company itself. Any documents for the mortgage will reflect this.
Guarantors are personally liable for loan payments.
It is not possible for a Mortgage in Spain to buy the shares of an existing Company. Only directly buy a property.
Due diligence on Mortgages for companies
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 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