Investment approach
Cuentas en participación: a property project without a separate SL
A contract in which the investor puts money into the manager's business and shares the result; only the manager is liable to third parties. Rights, taxes and risks.
Cuentas en participación (a silent partnership or profit participation account) is a contract under which a trader takes in another person's contribution to their operations, and both share the result in the agreed proportion (art. 239 Código de Comercio). No separate company arises: the manager (gestor) acts in their own name and under their own responsibility, and the investor remains a "hidden" partner. For a property project it is an alternative to an SL, with a different allocation of rights, risks and taxes. Below are the general rules of the Código de Comercio and the tax treatment from open sources; this is not the structure of DNPI projects.
What does the Código de Comercio say about this contract?
There are only five articles, 239 to 243 (BOE).
- There are no formalities: the contract may be concluded orally or in writing, and is proved by any admissible means (art. 240).
- A joint trading name cannot be adopted for the participants, and credit is used only within the manager's own credit (art. 241).
- Third parties claim only against the manager, and the participants may not claim against the manager's counterparties unless the manager has formally assigned them rights (art. 242).
- The manager carries out the liquidation and presents a reasoned account of the results (art. 243).
Art. 239 speaks of "traders" (comerciantes). According to a summary of DGT ruling V1744-24 of 16.07.2024, the case it examined was a contract between an individual and a pharmacy owner, that is, not a property project; whether the form is admissible and what follows for your case is for the abogado to determine.
How does the contract differ from an SL?
| Parameter | SL | Cuentas en participación |
|---|---|---|
| Legal entity | Yes, arises on registration (art. 33 LSC) | No separate entity, the manager acts |
| Formalisation | Escritura pública and Registro Mercantil (art. 20 LSC) | No formalities (art. 240) |
| Who is liable to third parties | The company; the partners are not personally liable (art. 1 LSC) | The manager; the participant is not liable, but cannot sue the counterparties either (art. 242) |
| Investor's rights | Vote, information, rules of the law and the articles | Only what is written in the contract |
| Reporting of results | The company's annual accounts | The manager's account on liquidation (art. 243) |
| Tax on the investor's income | The company pays corporate income tax and the dividend is taxed separately | According to a summary of the DGT ruling, an individual participant's income is rendimientos del capital mobiliario (income from movable capital) |
How is the participant's income taxed?
According to the summary of ruling V1744-24 (16.07.2024), published by the DGT, amounts received by a resident participant under the contract are treated as income from capital under art. 25.2 Ley 35/2006. The base is the difference between what is received and what was contributed; for the manager, payments under the contract are accounted for as an expense or as a positive result of their business. I did not open the text of the ruling directly in the DGT database; the article uses a summary of it (Primera Lectura).
For ITPAJD (transfer and stamp duty) the contract is treated like a company (art. 22 TRLITPAJD), and the formation of companies and partners' contributions under operaciones societarias (corporate transactions) are exempt (art. 45.I.B.11). How this applies to a specific contract is checked by the asesor fiscal. For a non-resident the outcome depends on the double taxation treaty, and the asesor fiscal settles that question.
Worked example, not a forecast and not the terms of a DNPI project. The investor contributes 1 M€ to the manager, the result is divided in the proportion set in the contract, and after the property is sold the investor receives 1.2 M€.
| Item | Amount |
|---|---|
| Contribution | 1 M€ |
| Received on liquidation | 1.2 M€ |
| Income on the logic of ruling V1744-24 (before tax) | 200 000 € |
What risks does the investor face in this arrangement?
- The manager's counterparty risk. According to the summary of the same ruling, which cites a 1992 Tribunal Supremo decision, the contribution passes into the manager's assets, and under art. 241–242 you have no claim against third parties. What happens to the contribution if the manager fails to pay their debts or becomes insolvent, ask the abogado.
- No records. There is no register of participants and no articles. Rights and settlements rest on the contract and the evidence for it.
- Raising money from many people. If the manager gathers money from the public, the structure may fall under the rules on collective investment; see the article on the boundary of regulated activity.
- Legal characterisation. The name of the contract does not settle the matter: the court and the tax authority look at substance. A comparison of forms of joint ownership is in the article on joint investment.
Who is this arrangement not suited to?
It does not suit someone who wants their rights entered in a public register or a vote in decisions by law rather than by contract. It also does not suit large sums where the manager's financial position cannot be checked. And it does not suit anyone who needs the property in their own name: the property is registered to the manager, who acts in their own name (art. 241), and your right is a contractual claim.
The form of a project is set by the contract for the specific project. How to read participation terms is described in the article on questions for the lawyer about the contract, and ownership of the property in a joint project is covered in the article who owns the property.
Questions and answers
Is cuentas en participación a separate company?
No. No separate legal entity arises, and the manager acts towards third parties in their own name.
Does this contract need a notary?
The law requires no form: the contract may be concluded orally or in writing (art. 240). A written contract is usually used for evidence and tax purposes, and the wording is agreed with the abogado.
Who is liable to the bank and contractors?
The manager, in whose name the transactions are made. Under the text of art. 242 the participant is not liable to third parties, but cannot claim against them either.
How is the investor's income under this contract taxed?
According to the summary of DGT ruling V1744-24, the income of an individual participant resident in Spain is treated as income from capital: the difference between what is received and what was contributed. For a non-resident and for a corporate participant the rules differ, and the asesor fiscal checks them.
