SPV and holding structures for overseas property

A special purpose vehicle, or SPV, is a company created to hold one asset or one project, here a property or a small group of properties. A holding company sits above one or more such companies and owns their shares. Investors use these structures for liability, for joint ownership and for a clean sale. They are also the structures that tax authorities look at most closely. This article explains the mechanics and what to verify, without recommending any jurisdiction. It is informational, not legal, tax or investment advice. If you are still deciding between a company and personal ownership, start with buying through a company or personally.

What an SPV does and does not do

A typical SPV owns the property, borrows against it, receives the rent and pays the costs. The investor owns its shares directly or through a holding company. The advantages are practical: a claim connected to one building does not automatically reach the others, partners can hold different percentages, and a buyer can acquire the whole project by taking over the shares.

What it does not do is remove tax or make the owner invisible. Profit is taxed in the company, payments to the owner may be taxed again, and the owner's country of residence has its own rules. A structure with no commercial purpose is exactly what the anti-avoidance rules below are written for.

Jurisdictions that come up in practice

The following places are mentioned in conversations about property structures. This is a list of names, not a recommendation, and every point must be verified with a local adviser for the current year.

• Cyprus. A common holding and operating location for EU investors, with a tax treaty network. Verify the corporate tax rate, the treatment of dividends and gains, and whether the company needs real local management.
• Spain. Property companies exist, but Spain applies a special 3% annual levy on the cadastral value of property owned by entities resident in tax havens or non-cooperative jurisdictions, with exemptions, and files on form 213; see the Spanish Tax Agency page. Check the owner's residence before choosing the structure.
• Portugal. Companies are used for rental and development; verify the local tax on property held by companies and the treatment of share sales when the company mainly holds property.
• UAE free zones. Companies in free zones are used to hold or buy property in some cases, but the rules differ between emirates and between zones, and the Land Department decides what can be registered to whom. Verify with the Land Department and the zone authority, not only with a company-formation agent.
• Bulgaria. Local companies have long been used to hold land and buildings. Before Bulgaria joined the EU in 2007, a company was the usual route for foreigners who could not own land directly; today the rules differ, and limits for agricultural land may still apply. Verify the current rules for the specific type of land.

For each, ask the same questions. What is the current corporate tax and how are dividends taxed? Is there a withholding tax on payments abroad? Is there a treaty with your country of residence and what does it say about rental income and gains? Are there special taxes on the company-owned property? See special taxes on company-owned property. What does the company have to file, and how often?

Costs of running an SPV

We are not giving figures, because we could not verify current prices and they differ by country and provider. The cost categories are:

• Formation: lawyer, registration, notary or official fees, translations, and sometimes a minimum share capital.
• Annual accounting and tax returns by a local accountant.
• A statutory audit, where the company exceeds a size threshold or the law requires it.
• A registered office and, where required, a resident director or company secretary.
• Bank account costs, and the time banks take for due diligence on a new company.
• Annual registry fees and filing of beneficial-owner information.
• Costs of closing the company if it is not sold.

These are fixed costs. For one modest property they can consume a large part of the net rent. Compare them with the savings you expect, using the total cost of ownership approach.

Substance

Many tax rules ask whether a company has real substance in its country: decision-makers who actually act there, a real office or premises, appropriate staff or service providers, and a business reason. A company run only on paper from another country may lose treaty benefits, be treated as resident elsewhere or be disregarded for tax. If an SPV is used, find out who the directors are, where board meetings take place, who signs, and whether the structure is described honestly in the accounts.

EU anti-avoidance rules, at a high level

The EU Anti-Tax Avoidance Directive (ATAD) sets minimum standards that member states have put into national law. Its main areas, as summarised by law firms and advisers, are a limit on the deduction of interest (generally linked to 30% of EBITDA, with exceptions), a general anti-abuse rule for arrangements whose main purpose is to obtain a tax advantage, controlled foreign company rules, rules on hybrid mismatches and exit taxation. Details differ by country, and we could not check each national law. In practice the general anti-abuse rule means that an arrangement without a genuine commercial reason can be disregarded for tax.

DAC6 is a separate directive on mandatory disclosure. As we understand it, it requires EU-based intermediaries, such as advisers, to report certain cross-border arrangements that match listed hallmarks to their tax authority, generally within 30 days. It is aimed at the advisers who design schemes, and a plain property purchase through a normal company will not normally be what it targets; still, ask your adviser whether any hallmark applies. Treat this paragraph as orientation, not as a statement of the law in your country. The European Commission's taxation site is a starting point: taxation-customs.ec.europa.eu.

Exit by share sale

Investors like SPVs because a sale of shares can pass the property with its contracts and tenants in one step. Check four things. First, whether the country taxes the sale of shares in a property-rich company like a property sale, or charges a transfer tax on it. Second, the tax on the seller's gain, in the company's country and in the seller's country of residence. Third, buyers' due diligence: they will inspect the company's whole history and often pay less for shares because of hidden liabilities, so keep accounts clean. Fourth, how the sale will be recorded in the beneficial-owner register. Our guide to selling property abroad covers the ordinary route for comparison.

FAQ

Is an SPV legal? Yes, in the sense that it is an ordinary company form. What matters is whether it has a real purpose, is run properly and is reported correctly in all countries concerned.

Which jurisdiction is best? There is no best one. The answer depends on where the property is, where you are tax resident and what you plan to do with it. A local adviser should compare the actual numbers.

Does a holding company in another country reduce my taxes? It may change how profit is taxed in each place, but anti-abuse rules and your home country's rules apply. Do not set one up for a tax result alone.

Do I need local directors? Sometimes. Some jurisdictions or banks expect management to be genuinely local; ask early.

Can I sell the company instead of the property? Usually yes, but tax and transfer rules for share sales differ from country to country.

How we help

We are a trilingual platform that finds properties and coordinates independent local lawyers and tax advisers who can assess whether a company structure fits your case. This article is informational and is not legal, tax or investment advice; rules change, so verify the current rules in each country involved before you act.