Holding structures and taxes for hotel owners: SPV, OpCo and PropCo, VAT and transfer taxes

Two investors can buy the same hotel at the same price and end up with very different results, because of how they hold it. The structure decides which taxes you pay at purchase, how the profit leaves the country, what a lender will accept and how easily the hotel can be sold later. It is also the part of the project that is hardest to change afterwards, so it belongs in the plan before you sign a preliminary contract. This guide covers the choices at a headline level. It is not a tax calculation, and the rules differ by country and change often; your own tax adviser and a local lawyer must confirm the details. It follows our hotel real estate guide for private investors and the piece on hotel acquisition financing.

Asset deal or share deal

There are two ways to buy a hotel that is owned by a company. In an asset deal you buy the building and the business assets and the seller's company stays with the seller. In a share deal you buy the company that owns the hotel, and with it everything the company has done in the past.

• An asset deal gives you a clean start: you choose what you take, and old liabilities stay behind in the seller's company. The price is usually a higher tax on the transfer of the property and more paperwork (licences, employment contracts and permits have to be moved or reissued).
• A share deal is usually faster and often cheaper in transfer tax, but you inherit the company: its tax history, disputes, employment liabilities and unknown problems. The buyer then relies on warranties, a price adjustment and a careful due diligence.

In Spain, for example, transfers of shares are generally outside transfer tax and stamp duty, with an anti-avoidance rule that can apply when 50% or more of the company's assets are Spanish real estate and control changes hands. That is why advisers often compare both routes before the offer is made.

The OpCo and PropCo split

In a hotel, two businesses sit in one building: owning the property and running the hotel. Investors often separate them.

• PropCo owns the land and the building. It earns rent from OpCo, carries the bank loan and is the company a buyer or lender looks at when judging the real estate.
• OpCo runs the hotel: it employs the staff, holds the licence and the operating contract and pays rent to PropCo. It is the riskier company, because it has the day-to-day liabilities.

The benefits are practical: a problem in the operating company does not automatically reach the building, you can change the operator without selling the property, and a later sale-and-leaseback is easier to arrange (see exiting a hotel investment). The costs are two sets of accounts, two companies to run, and a rule that the rent between related companies must be at a level that independent parties would agree; tax authorities look at it closely. For a small hotel, the split can be too heavy, and a single company is common. Decide it with your adviser and your bank, as lenders may prefer one or the other. We describe how hotels are operated in management agreements, leases and franchise.

Taxes on the purchase: VAT, transfer tax and going-concern rules

The cost of buying a hotel depends on whether the deal is treated as a sale of real estate, a sale of a business as a going concern, or a sale of shares. The headline picture, with figures from public summaries, looks like this.

• Spain: the sale of a hotel as an independent economic unit, in other words a going concern, is outside VAT but falls under transfer tax (ITP) on the real estate part. ITP is set by each region and is commonly 6% to 11%. What counts as an independent economic unit is a point of legal uncertainty between the central tax authority and some regions, and the answer changes the bill significantly.
• Greece: buying an operating hotel with its land triggers a 3.09% real estate transfer tax paid by the buyer. VAT at 24% applies only in limited cases of new buildings before they are used. A business transferred as a going concern can attract a 2.4% stamp duty on its net asset value.
• Portugal: a commercial property is subject to IMT of 6.5% and stamp duty of 0.8%; VAT at 23% can apply when the seller has waived the exemption.
• Croatia: a 3% real estate transfer tax, but 25% VAT instead for buildings that have been in use for less than two years. Accommodation services are taxed at 13% VAT.
• Italy: the picture depends on the seller. A sale by a construction company can bear VAT; otherwise registration tax applies, together with fixed mortgage and cadastral taxes (50 or 200 euro each, depending on the regime). We could not confirm the registration tax rate for a hotel and do not quote one: the 9% commonly cited is for a secondary home.

How VAT works for the transfer of a going concern in the other countries was not checked here, and it is exactly the point that differs. Do not assume the Spanish logic applies elsewhere. Ask the local adviser for a written answer before the offer.

Taking profit out: dividends, interest and loans

A hotel company pays tax on its profit, and then there is a second layer when the profit is paid to the owner. Statutory withholding tax rates on dividends paid to non-residents, according to one ranking, are 19% in Spain, 26% in Italy, 5% in Greece, 28% in Portugal and 10% in Croatia. Tax treaties and the EU parent-subsidiary regime can lower them, but only if the structure and the owner meet the conditions. These are the statutory rates, not what you will actually pay.

Owners also lend money to their own company, and the interest is another way to take profit out. In general terms the EU limits how much net interest a company can deduct (a cap at 30% of EBITDA, general knowledge that we did not search for). The interest must also be at a market rate, and the loan should be documented. Check this before you plan to finance the purchase with a loan from yourself.

Hotels also generate local levies. A tourist tax is normally charged to the guest and collected by the hotel on behalf of the municipality; it is not income, but the hotel must register and report it. Annual property taxes are paid by the owner and differ by country and municipality.

A Polish tax resident who owns a hotel through a foreign company

Poland taxes the worldwide income of its tax residents. In headline terms, a private individual who receives dividends from a foreign company pays Polish tax on them (19% is the usual rate; general knowledge that we did not search for), with a credit for foreign tax up to the limit set by the treaty. If you hold the hotel directly rather than through a company, the rental income follows the rules in tax on foreign rental income for Polish residents.

A second Polish rule matters for foreign companies. The controlled foreign company (CFC) rules apply when a Polish taxpayer holds at least 25% of the shares or voting rights for at least 30 days, the company earns at least half of its revenue from passive sources, and the tax rate in its country is below 14.25%. When they apply, the income is taxed in Poland at 19% and the foreign tax is credited. A company with revenue up to 250,000 euro a year is outside the rules. An operating hotel business is generally active income, while a company that only collects rent can look more passive, but the answer depends on the facts and on the reporting rules. Ask a Polish adviser before the purchase, not after the first tax return.

Practical points that decide a structure

• Banks usually want a special purpose company that owns only the hotel, with guarantees from the owners. See hotel acquisition financing.
• A company in the country of the hotel is easier to manage than a distant holding, but a holding can make a later sale of shares simpler.
• Keep substance: a real address, real directors, accounting and filings. A shell with no activity attracts questions from banks and tax authorities.
• Beneficial owner registers record who stands behind the company. Plan for your name to appear.
• Think about the exit from the first day. A buyer of a company inherits its past; a buyer of the building pays transfer tax. The structure should allow the cheaper route if the buyer prefers it.

Who this is for, and who should not

The topic matters to a buyer of an operating hotel or a building that will be run as one, and to anyone who plans to borrow or to sell in a few years. A buyer of a single unit in a hotel or in a condo hotel does not choose a structure in the same way; the rental pool or management contract then matters far more (see hotel unit rental pools and guaranteed yields). If a promoter promises that a structure removes tax or guarantees income, treat it as a warning sign.

A short checklist before you sign

• Asset deal or share deal, with the tax difference calculated in writing by a local adviser.
• Whether the sale counts as a going concern in that country, and what that means for VAT and transfer tax.
• OpCo and PropCo or one company, and what your lender expects.
• The route for taking profit out and the tax on each step, including Poland.
• Whether Polish CFC rules could apply.
• A plan for the exit, including which structure a buyer will prefer.

FAQ

Do I need a company to buy a hotel? Often yes, if you borrow or want to separate risk, but a private person can buy directly in many countries. It depends on the country, the financing and your tax position.

Is a share deal always cheaper? Not always. It can save transfer tax but moves the history of the company to you. The price should reflect that.

Can a structure remove tax? A structure can shift when and where tax is paid and avoid double taxation, but it does not make profit tax-free, and aggressive plans are checked by the authorities.

How we help

We help you check, compare and negotiate: we put the main structure options side by side, collect written answers from local tax advisers and lawyers, and bring your Polish adviser into the discussion before you commit. You can see the hotels in our catalogue; we do not promise any tax result or return.

This article is informational only and is not legal, tax or investment advice. Rates and rules are indicative, come from public and professional sources and change over time; confirm them with a tax adviser and a local lawyer before you buy.