Why UAE residents are asking
Spain remains one of the most popular second-home markets for families based in the UAE, from villas in Marbella and Sotogrande to apartments in Madrid, Barcelona and the Balearics. For globally mobile families the question is rarely whether to buy, but how to hold the asset.
Buying in your personal name is simple. It also means the property sits in your personal estate in Spain, Spanish succession procedures apply when you die, and passing the home to the next generation can take many months of paperwork in several countries. A growing number of buyers are asking whether a UAE foundation can hold the property instead.
How the structure works
The structure we see most often has three layers:
- A RAK ICC Foundation at the top. A foundation is a legal entity in its own right, with no shareholders. The founder sets out in the Charter and By-Laws who benefits and what happens on death or incapacity. Because the foundation does not die, the ownership below it carries on unchanged.
- A UAE holding company. The foundation owns 100% of a UAE company. For the tax treaty to help, this company must be incorporated and effectively managed in the UAE, with real substance, so that it can obtain a UAE Tax Residency Certificate. A brass-plate company will not do.
- The Spanish property. The UAE company owns the property directly, or owns a Spanish company (a Sociedad Limitada, or SL) that holds it. Title in the Spanish Land Registry is in the company's name, not any individual's.
The result is a clean separation between the family and the asset. A death, a new beneficiary or a change of council member is dealt with inside the foundation, so no new property transfer is needed in Spain.
What the UAE-Spain tax treaty does
Spain and the UAE signed a double tax treaty in 2006, in force since 2007 and updated by the OECD Multilateral Instrument. For a property-holding structure it matters in four practical ways:
- Lower withholding on dividends. Where a Spanish SL pays dividends to a UAE company that directly holds at least 10% of its capital, Spanish withholding is capped at 5%. In other cases the cap is 15%.
- Interest. Interest arising in Spain and beneficially owned by a UAE resident is taxable only in the UAE, so a shareholder loan from the UAE company can form part of the funding, subject to Spain's transfer pricing and interest limitation rules.
- UAE-side relief. UAE Corporate Tax provides a participation exemption for qualifying dividends from subsidiaries taxed at 9% or more abroad. A Spanish SL paying Spanish corporate tax will generally meet that test.
- Information exchange. The treaty allows the two tax authorities to exchange information, expressly including the founders, council members and beneficiaries of foundations.
An important limit. The treaty treats an individual as a UAE resident only if they are domiciled in the UAE and a UAE national. Most expatriate UAE residents therefore cannot claim treaty benefits personally. The benefits flow to a properly resident UAE company, which is why the holding company layer, and its substance, matters.
Both countries have also adopted the Multilateral Instrument's principal purpose test, so treaty benefits can be denied where obtaining them was one of the main purposes of an arrangement. Genuine management and a genuine family purpose are essential.
Spain's 3% special tax on foreign entities
Many guides still say that a foreign company owning Spanish property pays 3% of the cadastral value every year unless it files a disclosure of its owners. That reflects an older version of the law.
Today the special tax applies only to entities resident in a jurisdiction on Spain's list of non-cooperative jurisdictions. The UAE was removed from that list in February 2023, and the list update published in June 2026 did not add it back. A properly resident UAE company is therefore outside the 3% charge at present. The list is reviewed from time to time, so we check it every year for clients.
What the structure does not do
Being clear about the limits is what separates a sound structure from a problem waiting to happen.
| Issue | Owned personally (non-resident) | Owned through a UAE structure |
|---|---|---|
| Rental income | Taxed in Spain. Non-EU residents pay 24% on gross rent | Still taxed in Spain. A UAE company owning directly pays 24% on gross rent. A Spanish SL pays corporate tax on net profit |
| Sale of the property | Taxed in Spain at 19%, with 3% withheld by the buyer | Still taxed in Spain, including a sale of shares in a company whose value is mainly Spanish property |
| Wealth Tax and Solidarity Tax | Can apply above the allowances | Since December 2022 can apply to non-residents holding Spanish property through entities. How this applies to foundation interests is not yet settled |
| Death of the owner | Spanish succession procedure and inheritance tax on the property | The foundation continues to own the company, so the founder's death does not by itself transfer the Spanish property |
| Privacy | Owner named in the Land Registry | Company named in the Land Registry. Beneficial owners are still known to notaries and the authorities |
Two further points are worth stating plainly. First, foreign nationals can already choose the law of their nationality to govern their succession under the EU Succession Regulation, so Spanish forced heirship is often not the real problem for foreign owners. The bigger practical issues are delay, cost and complexity when an owner dies. Second, if the beneficiaries are, or become, Spanish tax residents, distributions from a foundation can be taxed in Spain as gifts.
Who it suits, and who it does not
Usually a good fit
- UAE residents who are not Spanish tax residents and are buying a new Spanish home.
- Families with property in several countries who want one succession vehicle rather than probate in each.
- Owners who want governance over a family asset, such as a council and guardian who can act if the founder cannot.
- Investors planning several Spanish properties who want to hold, finance and eventually sell through one well-run vehicle.
Usually not a good fit
- Spanish tax residents, or anyone planning to move to Spain.
- Owners of an existing Spanish home, where transfer costs outweigh the benefits.
- A single holiday home that will never be let, where the running costs of a company may outweigh the benefits.
- Anyone whose main aim is secrecy or avoiding Spanish tax. That is not what this structure does.
New purchase or existing home?
Timing matters more than anything else. When the foundation's company buys the property in the first place, it pays the normal purchase taxes and nothing more. Moving a property you already own is treated by Spain as a disposal, which can trigger capital gains tax, transfer tax or VAT, the municipal plusvalía, and notary and registry costs. For that reason the conversation is best had before you sign a reservation agreement, not after completion.
Setting it up, step by step
- Structure review with you and your Spanish lawyer or tax adviser, covering your residence, nationality, family and plans for the property.
- Establish the RAK ICC Foundation and draft the Charter and By-Laws, including what happens on death or incapacity.
- Incorporate the UAE holding company with the management and substance needed for UAE tax residency, and open its bank account.
- Where appropriate, incorporate a Spanish SL and obtain Spanish tax numbers.
- Complete the purchase in the name of the UAE company or the SL.
- Keep it compliant in both countries each year, including Spanish filings, UAE corporate tax registration and, where the conditions are met, an application for the foundation to be treated as a Qualifying Family Foundation.
Jersey Trust sets up RAK ICC Foundations for around AED 35,000 all in, subject to the complexity of what is required, with annual fees typically AED 12,000 to 15,000. We design and run the UAE side and work alongside your Spanish advisers on the Spanish side.
If you live in Dubai and own a Spanish home already, you may also find what happens to your Spanish home when you die useful.