The benefits of Polish wealth planning can also be utilised in the Spanish property market. The key lies in choosing the right structure.
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[This material has been prepared in collaboration with Juan Miguel Marín Herbert Marin, a solicitor at Lexland Abogados www.lexland.es.]
Spain remains one of the most attractive destinations for international property investment. Its housing market, investment opportunities and the desire to diversify family assets mean that an increasing number of people are considering buying property in our country.
Among these, a relatively new legal form is gaining particular significance: the Polish family foundation (family foundation), an instrument created to preserve, manage and pass on family assets across generations.
Introduced by the Polish Act of 26 January 2023, this scheme offers significant benefits in terms of estate planning, asset protection and taxation, which has attracted the interest of many families of entrepreneurs and investors.
But what happens when a Polish family foundation decides to invest outside Poland? Can it purchase a flat, a building or a portfolio of properties in Spain? Is it better to do so directly, or through a Spanish company?
The answer is: there are various ways to do this, but proper legal and tax planning from the outset can have a significant impact on the outcome.
A Polish family foundation enables the consolidation and management of a family’s assets within a legal framework that is independent of its founders and beneficiaries, thereby facilitating the preservation and transfer of those assets to future generations.
One of its main advantages is Poland’s favourable tax system, which provides for significant exemptions for certain types of income and permitted business activities, as well as benefits in terms of estate planning.
In certain circumstances, the tax rate on income earned and reinvested within a foundation may be very low or even zero, although payments to beneficiaries and certain transactions may be subject to tax.
It should be borne in mind, however, that tax relief granted in Poland does not automatically apply in Spain.
When a Polish family foundation invests in property situated in Spain, it must fulfil the tax obligations set out in Spanish legislation.
Consequently, where a foundation retains its tax residence in Poland and derives income from property in Spain without a permanent establishment, such income is, in principle, subject to non-resident income tax (IRNR), subject to the provisions of the double taxation agreement between Spain and Poland.
Furthermore, there is an important legal distinction: the Polish family foundation has no exact equivalent in the Spanish legal system.
Whilst Spanish foundations are characterised by their pursuit of objectives in the public interest, Polish family foundations primarily serve private purposes relating to the organisation, preservation and transfer of family wealth.
This difference does not prevent them from carrying out business activities in Spain, but it does require a thorough analysis of their legal status and a demonstration that they possess legal personality and legal capacity to the extent provided for under Polish law.
In practice, this means that before making a purchase, it is worth analysing the investment from both the Polish and Spanish perspectives. The fact that a particular income receives preferential treatment at foundation level in Poland does not necessarily determine how it will be taxed in Spain. Of particular importance here are the type of property, how it is used, the planned duration of the investment, and whether the property is intended to generate rental income.
A Polish family foundation can invest in the Spanish property market through various legal structures.
One option is for the foundation itself to purchase the property directly, with the foundation listed as the owner in the relevant notarised deed of sale and in the Spanish property register.
To this end, it is necessary to prove its existence, legal personality, capacity to act and be represented, and to obtain a Spanish tax identification number (NIF) as a foreign entity.
However, whilst this alternative is legally viable, it is not always the most advantageous from an organisational, operational and tax perspective.
Another option, which is particularly attractive for higher-value investments or for the purchase of several properties, is to set up a Spanish limited liability company (SL) whose sole shareholder is a Polish family foundation.
Under this structure, the foundation retains ownership of the shares, whilst the Spanish company acquires and manages the property assets.
This solution enables investment projects to be carried out through an entity that is fully integrated into the Spanish legal and economic system, thereby facilitating dealings with banks, notaries, public authorities and third parties. Furthermore, it provides a particularly suitable framework for centralising property management.
There is no single structure that is best for every investment. A direct purchase may result in a simpler ownership structure, whilst an SL (Sociedad Limitada – a Spanish limited liability company, equivalent to a Polish spółka z o.o.) may be more practical for a larger property portfolio, active management or planning further investments. Before making a decision, it is worth comparing not only the current tax treatment but also the costs of maintaining the structure, the method of financing, the planned distribution of profits and the implications of a future sale of the property or shares.
The ownership structure itself is just one aspect of the analysis. Before investing, it is necessary to determine what taxes and costs will arise on the purchase of the property, whilst owning it, should it be let, and upon its subsequent sale. In the case of a family foundation, it is also necessary to analyse how cash flows between the Spanish investment, the foundation and its beneficiaries will be treated in both countries.
It is also advisable to prepare in advance the foundation documents required in Spain, in particular those confirming its existence, the rules governing its representation and the authority of the person signing the documents. The scope of the required documents and formalities should be confirmed for the specific transaction.
In practice, the preparation of a transaction can be divided into several stages: selecting the investment structure, preparing the foundation’s documents and obtaining the required identification numbers, carrying out a legal and tax analysis of the selected property, signing the transaction documents, and organising the subsequent management of the property. If the investment is to comprise several assets, it is advisable to plan the structure before the first purchase.
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Yes. This is possible under the model described above, whereby a foundation acquires property directly, provided that its existence, legal personality, capacity to act and proper representation can be demonstrated, and the necessary formalities in Spain are completed.
Not always. Under the model outlined, it is possible for the foundation to make a direct purchase or to invest through a Spanish SL company. The choice should depend on the nature, value and purpose of the specific investment.
No. The tax advantages arising from Polish legislation do not automatically apply in Spain. The Spanish tax implications of the investment require a separate analysis.
It may be of particular interest for higher-value investments, the purchase of several properties, or where there is a need for centralised asset management. The final assessment should also take into account taxes, the costs of running the company and the exit strategy for the investment.
