Legal Framekwork of the SOCIMI in Spain

The legal framework of the SOCIMI was created in Spain under Law 11/2009, of October 26, which regulates the Public Limited Investment Companies in the Real Estate Market. Likewise, it is mainly governed by the provisions of Royal Legislative Decree 1/2010, of July 2, which approves the consolidated text of Capital Companies Law 11/2009, of October 26, by which Public Limited Real Estate Market Investment Companies are regulated and by Royal Legislative Decree 4/2015, of October 23, by which the consolidated text of the Securities Market Law was approved.

Since its creation, the SOCIMI sought to promote the participation of citizens in the real estate market, establishing mechanisms that made said market accessible. However, despite guaranteeing a stable degree of profitability -through the mandatory distribution of benefits- and an adequate degree of liquidity -through negotiation in regulated markets-, it was not well received.

Consequently, in 2012, congress promoted a tax revolution, establishing a taxation scheme similar to that of its foreign counterparts: Sociétés d’Investissements Immobiliers Cotées (SIICs) in France, Immobilien-Aktiengesellschaft mit börsennotierten Anteilen (G-REITs) in Germany, and Anglo-Saxon Real Estate Investment Trusts (REITs), among others – with new features such as a zero percent Corporation Tax rate and the possibility of being listed on the Alternative Stock Market (MAB).

The SOCIMI, with its specific characteristics, has several distinctive features.

Distinctive Features of the SOCIMI

Firstly, the SOCIMI has the traits of a Public Limited Company, with a minimum legal capital for constitution of 5 million euros if it is listed on the Alternative Stock Market (MAB) and 6 million euros if it is listed on the continuous market.

In relation to the company name, it is mandatory for the following to expressly appear: Sociedad Cotizada de Inversión en el Mercado Inmobiliario, Sociedad Anónima, or its abbreviation, SOCIMI, SA.

The SOCIMI framework is aimed at the real estate market and, specifically, at companies directly or indirectly engaged in the leasing of urban real estate. Its purpose is not only the leasing of homes, but also the leasing of any other real estate of an urban nature, such as offices, shopping centres, warehouses, car parks, and plots of land.

Regarding the structure of the asset, the law establishes as an investment requirement that 80% of the value of the asset be invested in urban real estate destined for leasing, in land for the promotion of real estate destined for leasing (provided promotion starts within the three years following acquisition), and in shares in the capital or equity of other SOCIMIs or entities with similar corporate purpose.

Regarding the structure of income, 80% must come from the leasing of real estate, dividends, and/or profit shares that stem from the shares subject to compliance with the SOCIMI’s corporate purpose (1).

In addition, real estate must be owned by the company and must remain leased for at least three years. In the case of shares or equity interests, they must remain in the asset for at least three years from their acquisition or from the first tax period in which the tax framework is applied.

Failure to comply with the above requirements would not lead to the exclusion from the tax framework; instead, the general taxation system would have to be applied – with a Corporation Tax Rate of 25% (2) – for the income generated by the asset(s) affected in all tax periods in which the special framework would have been applicable.

In relation to the distribution of results -reimbursements/dividends-, SOCIMIs are obliged to make a distribution of liquid or in specie dividends from the previous year within six months, making payment the following month of 100% of the resulting profit from dividends in other SOCIMIs; 50% of profits derived from the transfer of real estate and shares subject to the corporate purpose; and, finally, 80% of the rest of the profits obtained, among which are the rents.

Foreign real estate investment entities may also invest in entities residing in Spain, taking advantage of the special tax framework applicable to the SOCIMI. However, in order to do so, they must meet the following requirements:

• Firstly, they must have the same corporate purpose as the SOCIMI
• Secondly, they must meet the mandatory, legal, or statutory profit distribution requirements
• Thirdly, they must comply with the requirements stipulated in relationship with the shareholding of their share capital.

Finally, we must mention the specific changes that were introduced with Law 16/2012 (3). In terms of the new regulations, the marked tax incentive stands out, approaching that of its international peers through a reduction in the corporate tax rate from 19% to 0% and a 95% exemption in terms of AJD Tax (Stamp Duties) and ITP Tax (Property Transfer Tax) in the purchase of homes to be rented and in terms of land for residential rental promotion (4).

The formal requirements are also significantly reduced, with the possibility of trading not only on the continuous market but also on the Alternative Stock Market (MAB).

It also allows for investment in a single property for lease, when previously a minimum of three investments were required.

Finally, it should be noted that, as of January 1, 2013, the debt limitation for these entities was abolished.

(1) Anon, (n.d.). [online] Available at: https://www.agenciatributaria.es/AEAT.internet/Inicio/_Segmentos_/Empresas_y_prof [Accessed April 26, 2019].
(2) Gil Castro, L. (2018). Taxation of SOCIMI: Main characteristics. [online] European Tax Advisory Institute. Available at: https://www.ineaf.es/tribuna/fiscalidad-de-las-socimi-caracteristicas-principales/ [Accessed April 26, 2019].
(3) Law 16/2012, of December 27, which adopts various tax measures aimed at consolidating public finances and boosting economic activity.
(4) P. Alarcos, A. (2018). The real advantages and myths about the taxes paid by the SOCIMI in Spain – GESTHA Trade Union of Technicians of the Ministry of Finance. [online] GESTHA Union of Technicians of the Ministry of Finance. Available at: http://www.gestha.es/index.php?seccion=actualidad&num=551/ [Accessed April 29, 2019].

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