The 35% CGT and 5% withholding tax are both out of date.......................

I’ve just seen this thread and although somewhat out of date I thought I’d throw a bit more fat into the fire.
The use of a UK Company to buy property in Spain does indeed currently work but won’t for much longer.  There are changes in legislation going through in Spain at the moment to plug this loophole and HMRC are on to it anyway.
If you are a shareholder in a UK company and indeed you would be if you used a UK Company to buy the Spanish property then you are up a gum tree taxationwise in the UK because you cannot use a company to buy just one property here as this is seen as tax avoidance in the UK whether the property is here or Katmandu and regardless of the local tax rules applying. 
Anyway, it is a fair chance that you are UK tax domiciled anyway (not resident this is different to domicile) which means that regardless of anything clever you might have done or think you have done you are an owner of shares which contribute to your worldwide estate which when added to all your other assets, wherever they might be, is subject to taxation in the UK - and this measn IHT when you die.  So if your Spanish property shareholding is in excess of the nil rate bands applying to your death situation then you will be liable to inheriatnce tax in the UK regardless.  This will of course generally be less than you might have paid in Spain of course.

The bottom line therefore is if your Spanish property is all you own and it’s an itty bitty little place then yes your estate does end up with no IHT against it because its value or rather the value of the shareholding in your estate is less than the UK Nil Rate Band(s).

However as I say this is all academic because the loophole will soon be closed and everyone who thought they were being ever so clever avoiding tax will find themselves taxable again and then they’ll need my contact details.

The status of a UK company in Spain or anywhere in the EU is governed by EU rules and there is no proposed legislation to penalise any member country. A UK company in Spain must be treated the same as a Spanish Company. EU rules state that a EU Company can select in which jurisdiction it is to be taxed , This means that if you select the UK you are subject to UK Taxation.
This is far preferable than Spain. If the property is owned by a UK Company then no taxes are payable in Spain. No IHT,No Wealth tax No 25% rentals. This is not a loophole as you suggest but a commercial facility. With the UK Company operated as a trading company subject to HMRC rules, tax reliff can be obtained on all attributable expenses including Bank Mortgage interest, Council taxes, insurance and the like.
With regards to IHT no probate or ISD in Spain. As far as the UK is concerned Shares in a UK private trading limited company are exempt from IHT and if you sell the shares then there is only 10% capital gains as opposed to 18% in Spain and the UK on property.

Remember if you are UK Domiciled you would have to probate the estate in the UK adding the Spanish property to other UK assets and then pay IHT under the UK rules. You would then have to probate each recipient individually and they would pay the taxes in Spain, as they are 2 different taxes 1 on the estate and 1 on the recipient no treaty or offset exists so double taxation applies, a UK Company overcomes this problem.

I would be interested to know how you would deal with say a 300000€ property owned by UK Domiciled people. I await your reply!

What you say is correct insofar as it goes other than your assertion that the loophole is not a loophole and is not about to be plugged - but I’ll let that pass.  The rest of my hasty posting was about my concern for the fact that the UK liabiloties were not covered and rather than bore you with my own diatribe I though it would be useful to throw the thing at our tax lawyers; so their response to your posting as follows and puts the icing on the cake of my first post:

As you are aware Rex the shares in the UK company will be subject to UK IHT @ 40% because it is an investment company thus no Business Property Relief

Also if the property is sold this is liable to Corporation tax on Capital gains at the lower or higher rate depending on the amount but both of them are higher than the CGT rate for an individual......

The Company having paid tax (and any Spanish taxes and duties payable by a vendor on disposal) will then be sitting on cash

There are three means of extraction
1 Dividend
2 Bonus under PAYE
3 Liquidation
4 Trust based extraction

Only 3 pays CGT at 18%, 1 and 2 are taxable in the usual way and using 4 results in no tax at all and no tax ever again in the future, capital or income, personal or business.

I do hope you will inform all your clients of these facts and pass them our contact details so we can button things up for them.

As for your €300,000 property clients I would be pleased to send you the briefing document for the solution if you’d let me have your email address.

Over to you

Regards

Sounds Final!!,

However can i pose the question a different way,

How do you legally reduce liability to a minimum on a €300,000 property in Spain , either on Sale, Death, Inheritance, ( I suppose there are two conditions, Resident and non resident), I dont mean to Hijack the thread, I will repost or ask admin to move if not relevant.

Mike
You can eliminate all taxes in Spain by gifting your property to a UK private limited Company .

The previous contributor states that 40% IHT would be payable in the UK if the property is an Investment Company this is correct .

If the company is a UK private trading limited company then the company is exempt from IHT ,the key word is TRADING this is defined by HMRC and as long as the HMRC criteria is met then no IHT will be payable .

We provide the full service to our clients this includes the Company formation the gifting of the property to the Company and the preparation and filing of qualifying accounts in the UK, as we cannot advertise on this site unofficially you can contact me through the private section for more details