Investing in flats personally or through a company: which is better?

One of the questions property investors ask most often as their portfolio grows: does there come a point when it's worth setting up a company to manage the properties? The answer depends on the volume of rental income, on your marginal rate of IRPF (Spanish personal income tax) and on how much you're going to reinvest. Here's the analysis, without beating about the bush.

The main tax difference

As a persona física (an individual taxpayer, whether autónomo, i.e. self-employed, or a private person), rental income is taxed under IRPF at rates of 19% to 47% depending on your total taxable base (although with the reduction for letting a home, the effective base is smaller). As a sociedad limitada (SL, a Spanish limited company), profits are taxed at 25% under the Impuesto de Sociedades, Spain's corporation tax (in 2026, 19% on the first €50,000 and 21% on the rest if turnover is under €1M, and 23% if turnover is under €10M; the sociedad patrimonial, the property-holding company that lets without a full-time employee, pays 25%). The difference is significant if you have a high income.

When a company makes sense

A property investor benefits from a company for tax purposes when:

• Their rental income, added to their other income, puts them in the 37-47% IRPF bracket
• They intend to reinvest the profits (rather than take them out as dividends) to buy more assets
• They have more than 2-3 properties in the portfolio (the administrative burden is spread over more properties)

The key to the tax saving with a company lies in reinvestment: if the profits stay in the company and are reinvested, they're taxed at only 19-25%. If you take them out as dividends, you pay another 19-30% on that dividend, which can bring the total burden into line with that of an individual.

The real costs of having a company

Setting up an SL costs between €500 and €1,500 (notary, registry, gestoría, the agency that handles the paperwork). Annual upkeep includes: accounting and tax advice (€1,200-3,000/year), filing the accounts with the Registro Mercantil (the Companies Registry, €100-200) and, in some cases, an audit if you exceed certain thresholds. With a single property, these fixed costs can eat up the tax saving. With 3+ properties and rental income above €40,000/year, the balance is usually positive.

The "company for everything" trap

Some advisory firms sell the holding company structure as the universal solution. It isn't. If you have one investment flat that generates €8,000 net a year, paying €2,000 in company advisory fees to save €1,000 in tax makes no sense. The decision should be based on the real numbers of your situation, not on the tax fashion of the moment.

Before you decide: Read our complete tax guide for investors. To analyse the net yield of your assets, go to RadarPro.