Incorporate a new property developer and pay less taxes in Spain
Property development and reduced rate
If you are going to carry out a property development, set up a new company to carry it out. See how to act in these cases in order to minimise your taxation on the profits you obtain from this activity.
Start-up company
Property development
If you and other individual partners are going to carry out a property development (you will acquire land to build on and then sell the properties you build), try to carry out this activity through a newly created company (incorporated since 2015) that has never made a profit.
Important
Thus, once they finish the construction work and start selling the properties, the company will be taxed at the reduced rate of 15% in the first two years with a positive Corporate Income Tax (IS) base.
Sale in two financial years
In these cases, try to concentrate your sales and profits in two consecutive years, so that all the company’s profits are taxed at the 15% rate. If you leave sales for a third year, the profits in that year will be taxed at 23% or 25%.
Important
For example, to achieve this objective, if you carry out a housing development and finish it in October 2024, do not formalise your first sale until January 2025. In this way you will have the full years 2025 and 2026 to sell the properties and in both years you will be able to enjoy the reduced rate of 15%.
Example of how a newly incorporated real estate development company would be taxed
Your newly established company is developing a building of eight flats, which is due to be completed in October 2024. The selling price per dwelling is 300,000 euros, while the construction costs per dwelling are 220,000 euros:
Option 1.Sell one dwelling at the end of 2024, three more in 2025 and the remaining in 2026.
Option 2. Sell four homes in 2025 and the remaining four in 2026.
| Concept | Option 1 (1) | Option 2 (2) |
| Profit 2024 | 80.000 (3) | 0 |
| Quote IS | 12.000 (15%) | – |
| Profit 2025 | 240.000 | 320.000 |
| Quote IS | 36.000 (15%) | 48.000 (15%) |
| Profit 2026 | 320.000 | 320.000 |
| Quote IS | 73.600 (23%) | 48.000 (15%) |
| Total quote | 121.600 | 96.000 |
| Saving option 2 | 25.600 | |
The company starts to make profits in 2024, so the reduced rate of 15% is applicable in 2024 and 2025. In 2026 the applicable rate is 23% (as the turnover in the previous year is less than €1 million).
The company starts to make a profit in 2025, so in 2025 and 2026 the applicable rate is 15%.
The profit for each house sold is 80,000 euros. For simplicity, it is assumed that there are no overhead costs and all costs are counted as construction costs.
Eligibility for the 15% incentive
New activity
In order to benefit from this incentive, the property development activity must not have been previously carried out by related persons or entities that have transferred their business to the company. For example:
If you set up a company (holding at least 25% of the capital) and it acquires a development under construction from your brother, you will not be able to enjoy the reduced rate.
Nor will you be able to do so if you, by means of a non-monetary contribution, transfer to your company a development that is already under construction.
More than one year
In addition, the property development activity must not have been carried out during the year prior to the incorporation of the company by any partner (whether you or another partner) with a shareholding of more than 50% of the capital.
Finally, to qualify for the 15% rate, your company must not be part of any group of companies.
Concentrate the sales of all properties and premises developed within two consecutive financial years. In this way, all your company’s profits will be taxed at the reduced rate of 15% and your company will reduce its tax bill.
