Legal requirements for the acquisition of real estate by a legal entity

Acquiring real estate directly with a company's share capital or available liquidity requires compliance with a series of regulatory demands and formal procedures prior to signing before a notary:

• Articles of association and corporate purpose: It is essential to check that the company's articles of association cover the purchase, sale or management of real estate, or at least that the property investment does not conflict with the main activity declared by the company.
• General meeting resolution: Depending on the value of the property relative to the company's total assets, particularly if it exceeds the legally established threshold for essential assets, prior approval by the general meeting of shareholders via a formal resolution is required.
• Proof of origin of funds: In accordance with anti-money laundering regulations, the notary will require reliable proof of the origin of the funds used to pay the property price.
• Identification of the ultimate beneficial owner: Any commercial entity acquiring property must formally disclose its shareholding structure and identify the natural persons who exercise effective control over the company.

Advantages of buying a residential property outright through a company

Acquiring a residential property without taking out a mortgage loan offers several benefits in terms of accounting management and operational agility.

Absence of financial and mortgage costs

By not taking out a mortgage, the entity avoids paying bank interest, arrangement or redemption fees, mandatory valuation costs imposed by the lender, and notary and registry fees arising from setting up a mortgage charge.

Speed in completing the transaction

Self-financed property purchases funded by equity are not subject to bank risk assessment deadlines or mortgage credit legislation requirements. This allows the transaction to be closed much faster for the seller.

Diversification and investment of corporate assets

Converting surplus liquidity or accumulated reserves into property assets allows the company to protect its capital against inflation and diversify its balance sheet structure through tangible assets.

Tax implications of buying a house through a company

Tax treatment is the determining factor when assessing the suitability of buying a property through a company, as the corporate tax regime differs significantly from that applied to individuals.

Taxes applicable at the time of acquisition

If the property is resale, the transaction will be subject to Property Transfer Tax (ITP), the applicable rate of which depends on the autonomous community where the property is located. In the case of new-build properties acquired directly from the developer, the purchase incurs Value Added Tax (IVA) alongside Stamp Duty (AJD). The right to deduct the IVA amount will depend on the subsequent use of the property and the distinct sector of business activity.

Ongoing taxation under Corporation Tax

The property is accounted for under the company's non-current assets. The entity will be able to deduct tax-deductible expenses linked to the maintenance of the property, such as Property Tax (IBI), community fees, insurance and repairs, in addition to applying the corresponding depreciation to the building, provided that the asset is tied to generating income or economic activity.

Personal use of the property by shareholders or directors

When the property acquired by the company is used for the private enjoyment of a shareholder or director, the tax authority considers this relationship as a related-party transaction. To comply with regulations, the transaction must be structured through one of the following avenues:

• Rent at market rate: The company must formalise a lease agreement with the shareholder charging rent equivalent to market value, including this amount in the taxable base for Corporation Tax.
• Benefit in kind: Giving free use of the property must be accounted for as a benefit in kind within the shareholder or director's IRPF, making the corresponding payments on account.

Risks and disadvantages to consider

Despite the availability of corporate liquidity, using a company to purchase residential property is not always the most advantageous option:

• Loss of personal tax benefits: The company cannot claim the tax exemption for reinvestment in a main residence nor personal IRPF tax deductions.
• Integrated asset risk: By being incorporated into the commercial balance sheet, the property becomes exposed to commercial risks, debts and potential creditor claims stemming from the entity's business activity.
• Greater scrutiny from the Tax Agency: Company-owned residential properties are often subject to specific audits to prevent undeclared personal use.

Special regime for Social Housing (VPO) in the Comunidad de Madrid

If you wish to acquire a Subsidised Housing (VPO) or publicly protected property within the Comunidad de Madrid, regional legislation lays down very strict requirements. As a general rule, access to these homes is reserved for natural persons who meet specific income limits to use them as their primary residence. Acquisition by a commercial company in the Comunidad de Madrid is exceptional and requires prior administrative authorization from the competent housing department.

Financial evaluation and expert advice

Before executing the direct purchase of a property with corporate funds, it is essential to carry out a detailed study that considers both the entity's future liquidity and the long-term investment yield. On occasion, structuring the transaction by combining equity and external financing makes it possible to optimise the tax burden and maintain operational capacity.

To determine the right option for your corporate profile, we invite you to contact our mortgage credit intermediaries, who will offer you a tailored analysis of the viability and financing alternatives for your project.