Investment approach
Buying Premises Together With the Business: Structure and Taxes
A business with its walls is bought as a set of assets, as a single going concern or as a company. The structure determines the taxes and which of the seller's debts the buyer answers for.
A business together with its premises in Spain is bought in one of three ways: as separate assets, as a single going concern able to operate on its own (unidad económica autónoma, an autonomous economic unit), or as the whole company. The structure decides which taxes the buyer pays, what the buyer inherits from the seller and what can be re-registered, and the price makes sense only once the business's income has been separated from the walls' income.
Three structures and how they differ
| Structure | Taxes | What the buyer inherits |
|---|---|---|
| Separate assets: premises, equipment | IVA or ITP on each asset | Only what is in the contract; a risk of liability for taxes if the purchase continues the activity |
| Single going concern (unidad económica autónoma) | Outside IVA, no sujeción (art. 7.1 LIVA); ITP is possible for the real estate | Employees, tax liability |
| Purchase of a company (shares, participations) | A transfer of securities is as a general rule exempt from IVA and ITP, with caveats (art. 338 Ley 6/2023) | All the company's liabilities |
Under art. 7.1.º LIVA, the transfer of a set of assets that form an independent going concern in the seller's hands, able to run a business with its own means, is not subject to the tax. For this the buyer must intend to keep the unit's purpose. A simple transfer of property without an organisation of production does not qualify. Which tax regime applies to your deal is for an asesor fiscal (tax adviser) to determine.
ITP is possible on the real estate part where there is no IVA. In Catalonia, for properties above 600,000 €, a progressive scale of 10% to 13% applies; more in the article on progressive ITP.
On shares: when tax is still possible
Buying shares is usually exempt from IVA and ITP, but art. 338 Ley 6/2023 introduces a presumption of avoidance that can be rebutted. If the buyer takes control of a company at least 50% of whose assets consist of Spanish real estate not linked to a business activity, the deal is taxed as a purchase of real estate. According to the text of the rule, real estate on which the company's business operates does not count towards the 50%. Whether your case falls within it is for an asesor fiscal to check.
The seller's debts: what passes to you
- Taxes. Whoever becomes the new owner or operator of an activity is jointly liable for the previous owner's tax debts connected with that activity (art. 42.1.c LGT). This does not apply to buyers of separate assets unless their purchase allows the activity to continue.
- A way to limit liability. With the seller's consent, the buyer may ask the tax authority for a detailed statement of debts (certificación detallada): the authority must issue it within three months, and the buyer's liability is limited to what the statement shows (art. 175.2 LGT). If the statement is issued showing no debts, or is not issued in time, there is no liability. If no statement was requested, the liability covers penalties as well.
- Employees. A change of business owner does not end employment contracts, and the new employer takes over the rights and obligations of the former (art. 44 Estatuto de los Trabajadores). The former and the new employer are jointly liable for three years for wage debts arising before the deal.
- Buying a company. You buy all the liabilities: taxes, disputes, guarantees to customers.
How to separate the walls' income from the business's
An owner who runs a business in their own premises pays themselves no rent and no salary. So the profit the seller shows has to be normalised. Worked example, not a forecast: premises and business are sold for 1.6 M€, of which 1.2 M€ is the premises and 400,000 € the business.
| Line | Amount per year, € |
|---|---|
| Operating profit before rent, per the seller | 150,000 |
| Less market rent for the premises | 60,000 |
| Less a manager's salary instead of the owner | 40,000 |
| Normalised business profit | 50,000 |
Without normalisation the business "earns" 150,000 € on 400,000 €, which is 37.5%. After it, 50,000 € on 400,000 €, which is 12.5%. The difference explains why the price of the business and the price of the premises are calculated separately: the premises have their own calculation, as in the article on cap rate.
What to check before the deal
- Who owns the premises and the business: nota simple (land registry extract), and an extract from the Registro Mercantil (commercial register) for a company.
- The activity licence and whether it can be transferred to the new owner.
- Employment contracts, the applicable collective agreement, disputes.
- Accounts for 3 years and documents that support revenue: bank statements and tax returns.
- Contracts with suppliers and tenants, if part of the premises is let: the article on property with a tenant in place.
- The tax authority's statement of debts under art. 175.2 LGT.
Who this purchase does not suit
It does not suit you if you are not ready to run a business or hire a manager: you pay for both the walls and the operating risk. It does not suit you if the seller refuses to provide accounts for several years. It does not suit a buyer who wants clean income from the walls without sector risk: it is better to buy premises with a tenant.
You can check the valuation of the premises through the deal analysis, and DNPI's commercial line is described in the strategy.
Questions and answers
Which is better, buying assets or the company?
There is no universal answer. Buying assets usually leaves the buyer with fewer of the seller's obligations, but taxes are calculated on each asset, while buying the company carries over all liabilities. The choice is made together with an abogado and an asesor fiscal.
Is the purchase of a business together with premises subject to IVA?
If an independent going concern able to operate with its own means is transferred, it is not subject to IVA (art. 7.1 LIVA). ITP is then possible for the real estate part.
Is the buyer liable for the seller's tax debts?
If the buyer continues the activity, yes, jointly (art. 42.1.c LGT). Liability can be limited by a certificate from the tax authority under art. 175.2.
What happens to the business's employees?
Employment contracts stay in place, and the new owner takes over the rights and obligations of the former (art. 44 Estatuto de los Trabajadores).
