Updated
GL-S-06
01 / In 30 seconds
The short answer
- What it is
- A company set up for one specific task or deal
- Why it is needed
- To separate the project’s risks and assets from the rest of the business
- Where it is used
- Real estate, investment projects, joint ventures, financing
- Advantage
- Transparency for investors and a clear perimeter for the deal
- Drawback
- Additional costs of setting it up and maintaining it
02 / In plain words
What SPV means
An SPV (special purpose vehicle) is a company set up for one specific task: buying a property, carrying out a project, arranging a joint investment, raising finance. Put simply: a separate legal entity acting as a container in which only this project lives and nothing else.
The main point is isolation. The project’s risks and obligations are enclosed within a separate company and do not affect the rest of the owner’s business, while investors see a clear perimeter: a specific asset, specific obligations, a transparent ownership structure. When exiting the project, selling a stake in such a company is often easier than breaking up the asset.
The flip side is cost and administration: each company requires registration, reporting, accounting and banking. There is also an important tax point: selling a stake in a company and selling the asset itself may be taxed differently, and differently in different countries. That is why the arrangement is designed with a tax adviser, not by analogy.
A case from practice
Partners bought a property together and structured the deal through a separate company: the stakes, rights and exit procedure were fixed at the start. When one of the partners decided to leave, the matter was settled by selling a stake rather than by disputes over dividing the property.
When an SPV is set up
- Buying a property
- A development project
- A joint investment with partners
- Raising external finance
- Ring-fencing a risky line of business
- Preparing an asset for sale
03 / What it covers
What is thought through when setting it up
Perimeter
- What goes into the company
- What obligations
- The structure’s lifespan
Taxes
- Taxation of the project’s income
- Selling a stake or the asset
- Profit repatriation
Ownership
- Participants’ stakes
- Rights on exit
- Decision-making procedure
Administration
- Reporting
- A bank account
- The cost of maintenance
04 / How it works
How an SPV is usually set up
Define the project’s perimeter
Check the tax arrangement
Register the company
Put the asset and financing in place
Run it and, on exit, sell it
05 / Key facts
What you need to know
01
One company — one project
02
Isolating risks works only if the affairs are kept clean
03
Selling a stake and selling the asset are taxed differently
04
Each structure requires administration
05
The bank checks the company’s purpose and beneficial owners
Common mistakes
- Mixing projects in one company
- Creating a structure without calculating the taxes
- Underestimating the cost of maintenance
- Not setting out the procedure for participants to exit
- Leaving empty companies after the project ends
06 / Expert advice
How to prepare in advance
Before setting it up, determine exactly what will be inside the company and for how long it is needed. The tax arrangement is checked for both exit scenarios: selling the asset and selling the stake. The cost of maintenance is built in from the start, and after the project ends the structure is closed — abandoned companies create problems in future checks.
What we do for you. When buying property abroad, we always work out whether to hold it in your own name or through a company: this determines the taxes, the exit procedure and whether the property will count under your programme’s requirements.
Robert HaasHead of Company Formation
07 / Questions
Frequently asked questions
A separate company set up for one specific project or deal, to separate its risks and assets from the rest of the business.
It isolates the project’s risks, gives investors a clear perimeter and simplifies exit: selling a stake is often easier than dividing an asset.
No. Each structure costs money and requires administration. For a small project the costs may outweigh the benefit.
Selling a stake in a company and selling the asset itself are taxed differently, and differently in different countries. The arrangement is calculated in advance.
It depends on the programme: some of them require the property to be held in the applicant’s own name. This is confirmed before the deal.
The structure is closed in the proper way. Abandoned companies with reporting arrears surface in future checks.
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